ValuePickr Forum

NTPC - Thermal Power

Attached monthly bar chart of NTPC shows a possible change in trend from downtrend to uptrend.

All comments put up on the chart.

disc: bought as a technical bet.


Hitesh Bhai,

Just seen the post. Assuming the odds are favourable as per the technical formation and someone wants to buy min 2000 shares. In that case which of the three options are best and why?

  1. Buy 2000 shares with SL as given by you.

  2. Buy 1 lot future October with SL placed at same point.

  3. Buy call option for October or November. Or write Put Option. (Complicated and avoidable for lay investor, in my opinion).

I feel, option 2 is better for persons who have strong conviction on chart formation. If not, then why not?

If yes, then is it advisable to double the bet? And reduce SL by half?

For buying 1 lot you need to pay margin of about Rs. 37K max and keep another Rs. 20 K for SL margin? Whereas buying 2000 NTPC would cost about Rs. 2.86 L based on today’s price.

Just curious to get a detailed response…

Thanks

Aveek,

I dont go into all these complicated calculations.

If I am confident about buying a particular stock I go ahead and buy the amount I wish to allocate for my portfolio. And my buying is in delivery.

Each individual has his own method of doing things so to each his own.

Rep by Kulamani Biswal, Director Finance, N.N.Misra, Director (Operations) and S C Pandey, Director Projects. Key takeaways of con call by Capital mkt;

Adjusted PAT for the quarter ended Sep 2014 declined by 22% to Rs 1805 crore compared to Rs 2304 crore in the corresponding previous period.Regulated equity as end of Sep 2014 stood at Rs 35207.6 crore.

The company has issued NIT for acquisition of strategic stake in coal mines overseas as it feels this is the right time. Sharp fall in bottom-line for the quarter is largely on account of lower incentives as it is now linked to PLF and reduction in marginal contribution.The thermal coal plant PLF for Q2FY15was lower 2.69% points largely an account of scheduled plant maintenance.

The company is well on course to import of 21 million tonne of coal in 2014-15. It has imported coal to the tune of 8.17 MT in H1FY15 compared to 7.5 MT in the corresponding previous period. Further it has already contracted coal imports for about 7 MT and another 5MT is under evaluation. Moreover NIT has been issued for another 5 MT. Since the domestic supply was higher in H1FY15 the imports were pushed back.Under recovery of fixed cost in H1FY15 is lower than that of corresponding previous period. The company will end current fiscal with zero under recovery.

Barh stage II â Not declared commercial yet and it is between synchronization and commercial declaration. The commercial declaration will happen very soon in early Nov 2014.

Mauda â No schedule has been given as per the merit order of rating. It is not an issue this fiscal.Incentive in Q2FY15 was about Rs 40 crore.

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Interesting article on Power sector Companies.

Disc: NTPC in watchlist

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NTPC is a recent add to my PF because of
(1) recent win of 470MW solar project - they plan to take their renewable portfolio from 17% of the total capacity to ~40% in the next 10 years. PE multiple will expand from current multiple of 7-8 to 14-16 (given low interest rates this should be the multple for any company that offers an perpetual annuity of cash flows)
(2) On track to an EPS of 14 this year, which itself will take the price to 110 if market remains stable
(3) Power demand to keep rising in the next 2 years as impact of global stimuli hits the economies taking discretionary spendings and industrial activity to higher than pre-covid levels (more washing machines / dishwashers, fans, more industrial activity = more power consumption)

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These power companies used to trade maybe two times book or more around a decade back and maybe PE of 15 plus…why has derating happened even though EPS has grown just fine? Is it because of slow down of growth or state discom health or something else? What expectation of street was not met that these got derated…I mean what was street expecting of them a decade back? Thanks

PSUs used to have huge scale which was said to be a competitive edge. Over the years they have proven it’s not.
Market expects only the private sector to perform well going ahead.

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Well in case of power generator and distribution…they still have same scale competitive edge. Maybe not anymore in petroleum products, oil, telecom etc. For power, there maybe some other reason for derating as practically no private sector exists in power generation comparable to PSUs

markets also expected HDFC bank to have a lot of unsecured loan defaults come October 2020.
This is a contrarian call and already you can see the PE and PB multiple at multi year low (6x and 1x) and not in sync with the growth NTPC has been posting.