Citigroup - National Thermal Power (NTPC.BO): FY07 - Good Year, But Could Have Been Better

• Recurring PAT up 18% YoY — NTPC reported its FY07 un-audited results at a press conference today. Recurring PAT at Rs65.6bn up 18% YoY was 5% below our estimate of Rs69.2bn. This was a disappointing given that after growing 19.5% YoY in the first 9mFY07, full-year numbers imply that 4QFY07 recurring PAT grew a tepid a 4–5%. We await the audited FY07 numbers for clarity.
• 5,710MW added in the Xth Plan — NTPC added 5,710MW in the Xth Plan period, acquired the 705MW Badarpur TPS, and took a 28.33% equity stake in Ratnagiri TPS. Slippages into the next plan include the 1,000MW Sipat II and 500MW of Kahalgaon Stage II, which is likely to be added in FY08E along with 660MW of Sipat I and 500MW of the SAIL Bhilai expansion.
• Capacity increasing 2x in 5 years and 3x in 10 years — We would not be unduly concerned with a weak 4QFY07 as NTPC aims to double its capacity by FY12E and triple capacity to 76GW by FY17E. Its capex is well funded with low current gearing of 0.45x, it has high current cash levels of Rs84.7bn, a strong credit rating and a high annual cash flow from operations of Rs175bn for FY07E-15E.
• Our top pick among the Indian electric utilities — NTPC is our top pick in the Indian Electric Utility space for its defensiveness (particularly for investors who are benchmarked against broad market indices), large market capitalization, regulated earnings stream and secular growth.

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