Results Review for NTPC, Shree Cement, V-Guard Industries, Sobha

  • Stock Market Analysis
  • Editors Pick

By Anuj Upadhyay

NTPC (NS: NTPC ): Generation/sales increased 3.0%/2.4% YoY to 79.9/73.9bn units in Q4FY22 on higher YoY base, led by improved demand. Coal PAF improved marginally in Q4 to 89.6%, vs 89.1% YoY, but coal PLF was down at 76.1%, vs 77.1% YoY. Under-recovery came in at INR4.5bn, vs INR6.0bn YoY, while surcharge income declined to INR1.6bn, vs INR6.2bn YoY. Consequently, after adjusting for one-offs, adj PAT increased 19% YoY to INR45.6bn, above our estimate. Overdue reduced to INR42.7bn vs INR56.6bn YoY and INR45bn QoQ. NTPC has 3.4GW of RES capacity under construction and 2.8GW under tendering stage. We have marginally tweaked our earnings estimates, factoring in FY22 numbers, and we expect PAT to grow at a 7.3% CAGR while generating INR279bn in FCF over FY22-24E. Management plans to monetise its renewable business in FY23, which will enhance the value proposition for stakeholders. We maintain BUY with a TP of INR 174/share, assigning a 1.2x BV to its regulated equity and a 1.5x BV to its equity investment in 8-GW of upcoming solar capacities. The stock is attractively valued at 0.9x/7.2x at consolidated FY24 P/BV and PE.

Shree Cements Ltd (NS: SHCM ): We maintain our REDUCE rating on Shree Cement, with a revised SOTP target price of INR 22,200/share. In Q4FY22, Shree’s performance disappointed as it missed ours/consensus EBITDA estimates by ~14/11% on lower-than-estimated pricing and higher-than-estimated input costs. While Shree’s standalone revenue rose 4% YoY, lower sales and high-cost inflation pulled down EBITDA/APAT by 23/16%. Unlike its peers, Shree’s unitary EBITDA slid 10% QoQ to INR 1,134 per MT (down 21% YoY).

V Guard Industries Ltd (NS: VGUA ): V-Guard delivered a beat on revenue, with 24% YoY growth (12% three-year CAGR), while EBITDA came in line. Electricals/consumer durable segments each clocked 32% YoY growth, with a three-year CAGR at 13/18%. The electronics segment (stabilizer, UPS, etc.) was up a mere 2% (three-year CAGR at 6%) despite the strong summer-driven demand. Similar to other cooling products, V-Guard’s products have also seen seasonal benefits beginning from the end of the quarter (March onwards). Both south and non-south delivered healthy revenue growth of 25/22% YoY. Gross margin, at 28.7%, remained under pressure (down 268/189bps YoY/QoQ) due to unfavorable segment mix and continued RM inflation. We build in 11/13% revenue CAGR over FY19-24/FY22-24, with an EBITDA margin

Sobha (NS: SOBH ): Sobha (SDL) reported the highest-ever annual presales of 4.9msf (+22% YoY), valued at INR 38.7bn. Bengaluru accounted for 68% of total presales volume (vs 67% in FY23). SDL expects the contribution from Bengaluru to come down to 55% over the next few years. The residential launch pipeline stands at 13.2msf, with 61% of launches planned for the Bengaluru market. SDL recorded the best-ever cash inflow of INR 12.9bn (+32%/+22% YoY/QoQ) on the back of the best-ever residential cash collection of INR 10.6bn. This resulted in an overall net debt reduction by 13% QoQ to INR 23.4bn. In FY22, SDL took an average price hike of 6% YoY and it expects a similar hike in FY23. On the back of this and increasing interest rate, it expects volume to remain flat in FY23, with presales value growth in the low double digits. Currently, ~80% of its customers opt for housing loans. We maintain BUY, with a reduced TP of INR 902/sh to factor in the rising cost of capital resulting in higher WACC.

NTPC

Capacity addition intact; retain BUY

Generation/sales increased 3.0%/2.4% YoY to 79.9/73.9bn units in Q4FY22 on a higher YoY base, led by improved demand. Coal PAF improved marginally in Q4 to 89.6%, vs 89.1% YoY, but coal PLF was down at 76.1%, vs 77.1% YoY. Under-recovery came in at INR4.5bn, vs INR6.0bn YoY, while surcharge income declined to INR1.6bn, vs INR6.2bn YoY. Consequently, after adjusting for one-offs, adj PAT increased 19% YoY to INR45.6bn, above our estimate. Overdue reduced to INR42.7bn vs INR56.6bn YoY and INR45bn QoQ. NTPC has 3.4GW of RES capacity under construction and 2.8GW under tendering stage. We have marginally tweaked our earnings estimates, factoring in FY22 numbers, and we expect PAT to grow at a 7.3% CAGR, while generating INR279bn in FCF over FY22-24E. Management plans to monetise its renewable business in FY23, which will enhance the value proposition for stakeholders. We maintain BUY with a TP of INR 174/share, assigning a 1.2x BV to its regulated equity and a 1.5x BV to its equity investment in 8-GW of upcoming solar capacities. The stock is attractively valued at 0.9x/7.2x at consolidated FY24 P/BV and PE.

Earnings above estimate: Energy sales increased 2.4% YoY to 73.9bn units in Q4FY22; however, realisation was up 10.3% YoY to INR4.2/unit due to rise in fuel prices. Coal PAF improved to 89.6%, vs 89.1% YoY, while gas PAF declined to 88%, vs 98.7% YoY. Coal/gas PLF, however, declined to 76.1%/0.9%, vs 77.1%/6.2% YoY. Accordingly, FY22 under-recovery came in at INR4.5bn, vs INR6.0bn YoY. Surcharge income also declined to INR1.6bn in Q4FY22 vs INR6.2bn YoY. PLF-based incentives came in at INR690mn in Q4FY22, vs INR450mn YoY. After adjusting for one-offs, PAT increased 19% YoY to INR45.6bn, above our estimate.

Capacity addition: For FY23E/FY24E, we expect NTPC to commercialise (CoD) 4.7GW/6.0GW. These projects will increase the regulated equity by 16.7% to INR822bn in FY24E vs. INR709bn in FY22. On the RES front, NTPC has 3.4GW of capacity under construction and 2.8GW under tendering stage with a CoD target of 2.5GW until FY24. Further, factoring in the current power supply crisis, the company has planned to add an incremental 6GW of coal capacity for a Capex of INR600bn. Discoms have already provided PPA consent for these projects on regulatory norms.

Maintain BUY: NTPC plans to add 60GW of RES capacity by FY32, and it has ~8GW under development stage. Along with strong Capex on the thermal front, this should drive earnings growth at 7.3% CAGR over FY22-24E and improve the RoE. Further, it plans to monetise its renewable business in FY23. We maintain BUY with a TP of INR 174/share (1.2x BV to regulated equity and a 1.5x BV to equity investment in 8GW of upcoming solar capacities). The stock is trading at a consolidated P/BV at 0.9x and PE at 6.8x.

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