NTPC reported Q1FY17 results wherein operationally the performance seems to be better than estimates on the sales and EBIDTA front. The company adopted Ind AS accounting in Q1FY17. Net sales after adjustments of prior period sales, electricity duty and income tax adjustments came in ahead of our estimates of | 18881.5 crore vs. our estimate of | 18353.8 crore.EBITDA at | 5243.2 crore came in above our estimate of | 5208.4 crore mainly on account of lower fuel costs and higher-thanexpected revenues. EBITDA margins came in at 27.8% in Q1FY17.
Valuation: With strong capacity addition targets in FY17E-18E, they expect NTPC’s capacity to reach 52888 MW in FY18E from 45500 MW in FY16. Coupled with this strong focus on renewables, capacity addition in the next five to 10 year, NTPC offers the best play to ride the ongoing solar power boom and recovery in the conventional power sector. Also, it commands relatively a strong balance sheet profile and has enough room to achieve its set milestones, going ahead. We upgrade the target multiple and now value the company at 1.5x its FY18E ABV to arrive at a fair value of | 188.