Q2 Results: NTPC’s Profit Beats Estimates Despite Adverse Industry Climate

NTPC Ltd.’s quarterly profit beat analysts’ estimates on the back of higher other income even as coal supplies fell due to the extended monsoon.

The state-run power generator’s net profit rose 28 percent year-on-year to Rs 3,262 crore, it said in an exchange filing. That compares with the Rs 2,546-crore consensus estimate of analysts tracked by Bloomberg.

Revenue rose 2.3 percent over the previous year to Rs 22,765 crore in the three-month period, matching the estimate of Rs 23,288.3 crore.

Operating profit rose 13.5 percent over the previous year to Rs 6,346 crore. Other income rose nearly four times to Rs 894 crore a year ago, according to the filing.

NTPC’s earnings come at a time when prolonged rains have weighed on coal production even as the nation’s biggest power utility continues to build capacity. NTPC added 2,180 megawatts of power generation capacity in 2018-19, taking its total installed capacity to 55 GW, it said in its annual report for the previous fiscal. It generated 61.6 billion units in the quarter despite commercialising 2GW capacity in the past 12 months.

“NTPC’s Q2 FY20 earnings may be subdued owing to lower coal stocks at its pithead plants, given muted supply by Coal India,” JM Financial Institutional Securities Ltd. said in a note. “However, NTPC is planning to import around 2-2.5 million tonnes of coal even for its pit-head stations, etc., to avoid plant availability under-recovery in Q3 FY20.”

Coal India Ltd.’s supply to power plants fell due to torrential rains. Apart from impacting power plant utilisation levels, insufficient coal can affect fuel availability at power plants.

Yet, analysts remain bullish on the power utility compared with its peers. NTPC has a signed a fuel supply agreement with Coal India for 169 million tonnes of coal per year. And since it buys fuel in large quantities, its cost of coal acquisition is Rs 3.4 per unit compared with Rs 4-5 a unit for private peers, according to Elara Securities.

And FY20 will mark the beginning of the reversal of capital work in progress ratio—a measure of costs incurred on building assets, according to Antique Stock Broking. That will be led by more capacity going onstream, helping the company increase its return on equity in the coming years.