NTPC’s April and May 2019 PAF data has seen considerable improvement of 570 bps to over 92.8% YTD — the best in the past 6 years. This is important as Rs 8 bn (7% of PAT) under-recovery in FY19 can be reversed in FY20, and confirms adherence to quarterly PAF norms from next year despite peak summer season demand.
Domestic coal production rose and demand met by hydro/nuclear, leading to a comfortable inventory of 30 days as against 15 days in the past few years. Next key test will be second summer season in Sep-Nov period.
NTPC is well placed to deliver over 15% EPS CAGR v. 5% in past 3 years, leading to 370 bps RoE expansion to >14% on (1) reduced coal under-recovery, (2) debtors days back to normal 35 in Mar’19, (3) 10% CAGR capacity addition over 3 years, (4) favourable regulatory outcome from April 2019, contributing `700-800 crore additional profits in FY20E.
