Retain buy on NTPC even as generation slips for Q1: HSBC

As per the monthly generation data released by CEA (central electricity authority) NTPC saw a 7% y-o-y decline in generation for Q1FY16. NTPC generated 22% of the power generated by all power plants in India during Q1FY16.

Meanwhile, there was a 12% y-o-y increase in generation by the private generation companies post a 20% increase in their generation capacity during Q1FY16. Thus there was a 670 bps y-o-y decline in the plant load factor (PLF) for NTPC coal stations and 400 bps y-o-y decline in PLF for the private thermal stations including both coal as well as gas stations during the same period.

Coal India production increased by 12% and off take increased by 8.3%. The coal supply to power station improved in this quarter as the coal off take rose sharply in Q1FY16 (April-June) by 9.9MT, an increase of 8.3% YoY. At the same time, production increased by 13MT, increase of 12% y-o-y.

We expect 3-5% earnings decline in Q1FY16. We expect the company to see a 3-5% earnings decline in Q1FY16 due to lower generation.

We are not changing our earnings estimates as we have only three months generation data for FY16. We retain our buy rating on NTPC with an unchanged target price of Rs 174.

NTPC Limited