>UTILITIES (ICICI SECURITIES)

GOOD SHOW

We expect the I-Sec Utilities universe to post ~17.6% YoY revenue growth and ~19.6% YoY PAT growth in Q1FY10E. Revenue growth will be led by: i) 2,000MW YoY capacity addition by NTPC at Sipat (1,000MW) and Kahalgaon (1,000MW), ii) ~24% rise in NTPC’s fuel costs owing to increase in the price of domestic coal and use of imported coal and iii) ~420MW capacity addition by Tata Power (~190MW merchant, ~230MW regulated). We believe PAT will grow at a slightly higher rate of ~19.6% owing to: i) implementation of new Central Electricity Regulatory Commission (CERC) guidelines, which will boost NTPC’s PAT 6% over and above 9% coming from capacity addition and ii) ~Rs876mn incremental merchant revenues, which will directly boost Tata Power’s bottomline. We expect CESC’s revenues to increase ~5% YoY to Rs8.2bn in Q1FY10E led by ~4%
demand growth in Kolkata licence area. However, CESC’s PAT may dip ~13% YoY as increasing capex for Budge-Budge expansion would lower other income.

■ NTPC’s PAT to grow ~15% on 2,000MW capacity addition & new CERC guidelines. We expect NTPC’s Q1FY10E PAT to be ~Rs19.9bn (~Rs17.2bn in Q1FY09), led by ~24% revenue growth to ~Rs118bn (~Rs95bn in Q1FY09). We believe 9% of the PAT growth will come from 2,000MW capacity addition (1,000MW at Sipat, 1,000MW at Kahalgaon) in FY09, while 6% from implementation of new CERC guidelines. We expect NTPC to generate ~55bn KWhr in Q1FY10E (~51bn KWhr in Q1FY09, ~57bn KWhr in Q4FY09) as the company will start regular maintenance shutdown of its plants on a cyclical basis from June ’09.

■ Merchant component to boost Tata Power’s Q1FY10E PAT 71% YoY to Rs2.6bn. Tata Power has added ~420MW in the past 12 months, of which ~190MW may supply merchant power. Given that merchant power rate is at ~Rs8/unit, we expect Tata Power’s bottomline to be boosted ~Rs876mn owing to ~321mn merchant units generated from Trombay (100MW) and Haldia (90MW) plants. We believe higher realisation from merchant will boost Tata Power’s Q1FY10E PAT ~71% YoY to Rs2.6bn even as revenues may decline ~6% YoY to Rs19.1bn on ~28% dip in fuel costs with phased closure of oil-based unit 4.

■ Capacity addition on track for NTPC and Reliance Power. NTPC synchronised 500MW Unit 7 at Kahalgaon in June ’09, while Reliance Power (RPower) has likely completed all formalities for the financial closure of 300MW Butibori project that is expected to come up in FY12.

■ Top picks: NTPC (Buy) & CESC (Buy)

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