We maintain that NTPC should be able to achieve a 17%+ operating return on regulated equity (RoRE) under the new tariff regulations. At the current market price, the stock trades at FY17F 1.2x P/B (BVPS: R110) and 11.2x P/E (EPS: Rs 11.6); the implied target FY17F P/B multiple for the stock is 1.6x (BVPS: Rs 110).
As per latest available data from the Central Electricity Authority (CEA), the tentative monthly generation report for October 2015 shows utilisation (plant load factor [PLF]) of NTPC’s overall wholly-owned capacity (gas + coal) in October was 75% (vs 73.6% in Sep-2015 and 74.3% in Oct-2014).
For October, NTPC’s wholly owned coal-fired PLF stood at 80.4% vs. 78.7% in Sep-2015 and 79.4% in Oct-2014 (Figure 2). Notably, PLF for Barh-II (660MW) scaled a new high of 84.5% (up from 78.7% in Sep- 2015), posting a six-month sequential uptrend in PLF, possibly aided by increased demand on account of the state elections in Bihar.
‘Mauda-I (1000MW) saw a sequential dip in PLF to 42% (vs. 59% in Sep-2015) due to sluggish demand and annual maintenance for a part of the month.
PLF of gas-fired capacity stood at 30% vs 32% in Sep-2015 and 33% in Oct-2014. We believe that increased generation based on regasified liquid natural gas (RLNG) secured in the recent e-auction could not fructify in October as well, pending some clarification on the requisite tax waivers issued by the government of Uttar Pradesh.