NTPC rating: Maintain ‘buy’ with unchanged target price of Rs 165

NTPC‘s standalone adjusted profit in Q1FY21 was Rs 27.1 billion (down 7.8% y-o-y), but adjusting one-time rebate on fixed charges to discoms of Rs 8 billion (pre-tax), adjusted profit increased 14.8% y-o-y to Rs 33.7 billion. Being the first full quarter post the acquisition of THDC & NEEPCO, NTPC’s adjusted consolidated profit increased 21.3% to Rs 38.5 billion.

The company’s core RoE remained strong at 19.5%, but fixed cost under- recovery was at Rs 2.3 billion (Rs 1.2 billion in Q1FY20). On Q1FY21 consolidated profit basis, annualised EPS comes to Rs 15.4, Q1FY21-end RoE at 12.5% (pre-exception) and book value/share at Rs 124. Thus, NTPC is on course to achieve the FY21E target EPS of Rs 12.3/Rs 14.5 for standalone/consolidated entity (ex-rebate offered). Core earnings remain strong, which will be further strengthened by the robust commissioning pipeline and green initiatives. Maintain ‘buy’ with an unchanged target price of Rs 165.

Standalone revenue for the quarter was at Rs 234 billion, down 3.1% y-o-y, while Ebitda was at Rs 77.5 billion, up 20%. Reported standalone PAT for Q1FY21 was Rs 24.7 billion, down 5.1% y-o-y, while adjusted standalone PAT was Rs 27.1 billion, down 7.8% y-o-y. However, considering the rebate provided to discoms on fixed charges as a one-time expense, adjusted standalone PAT was Rs 33.7 billion, up 14.8% y-o-y. Adjusted consolidated PAT including THDC & NEEPCO was up 21.3% YoY at Rs 38.5 billion.

Earnings were impacted by, Rs 8 billion (of Rs 13.6 billion announced) of rebate to discoms (provided only to states which met the stipulated conditions; balance Rs 5.5 billion (pre-tax) will be provided as and when the states meet the conditions), Rs 2.5 billion donation to PM CARES fund, Coal GCV-related adjustments of Rs 4.6 billion and 4) previous year sales of Rs 4.3 billion (post tax).