Stock Review: NTPC

State-run NTPC, India's largest power utility, remains focused on insulating itself from fuel risk and getting the required regulatory clearances for its upcoming projects before embarking upon aggressive capacity expansion.

The company secured most of its coal needs for the fiscal from captive mines and Coal India, SCCL and ECL.

It will import about 15% of the coal required. The company requires 164 million tonne of coal in the current fiscal and plans to meet any shortfall through e-auctions.

About 83% of the current capacity runs on coal and the rest on gas. The company said gas availability is more uncertain than coal because of lower domestic availability.

In April-June, the company posted net profit of . 213 crore, up 13% from a year ago on net sales of . 14,500 crore, up 11%. Operating profit rose 10% to . 320 crore.

Plant load factor for coal plants declined to 87% in June quarter from 90% a year ago as State Electricity Boards (SEBs) did not buy power as earlier committed. However, overall plant availability factor remained steady at 90%, indicating that the company had enough fuel.
During the quarter, fuel expense was about 86% of total expense, same as last year. The company's average realisation per unit rose to . 2.8 from . 2.5 last year.

The company is planning to nearly double its capacity by FY17. Its current capacity is 34,854 MW. It has more than 14,000 MW under construction and will add 4,320 MW by the end the current fiscal. The company, with a low debt-equity ratio, is in a comfortable position to fund its capacity expansion.

In the past one year, the stock posted a return of 5%, outperforming 22% decline in ET Power Index. Given the current situation in the industry, where other power utilities are facing fuel risk and low prices, NTPC provides higher earnings visibility vis-à-vis its peers. At the current market price of . 181, the stock is trading at a price-to-book value of 2.2 and timely commissioning of projects can boost the share.