11 November 2020
2QFY21 Results Update | Sector: Utilities
NHPC
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
NHPC IN
10,045
210.9 / 2.8
29 / 15
-5/-33/-18
163
CMP: INR21
TP: INR23 (+10%)
Neutral
Lower other income offsets modest generation growth
Capex run-rate increasing; Maintain Neutral
NHPC’s 2QFY21 results highlight the steady nature of its business.
Standalone (S/A) PAT declined 3% YoY to INR7.2b (in-line) due to slightly
lower other income.
Capex run-rate is expected to increase on account of investment in new
projects. However, their commissioning remains 4-5 years away, implying
FCF/RoEs dragging in the near term. Maintain
Neutral
with TP of INR23.
Profits in line as lower other income offsets modest generation growth
NHPC’s S/A PAT declined 3% YoY to INR13.0b (v/s est. INR13.3b) on account
of lower other income. Other income was down 15% YoY to INR4.3b.
Generation was up 4% YoY to 9.4BU in 2QFY21 based on data available at
CEA. Overall, plant availability factor (PAF) was higher at 91.65% (v/s
90.03% in 2QFY20).
Incentives were up 11% YoY to INR2.0b on account of higher PAF incentive
and deviation income. PAF incentives for the quarter were up 21% YoY to
INR1.4b. Deviation income rose 31% YoY to INR0.45b while secondary
energy incentive was down 37% YoY to INR0.2b.
Interest costs were lower at INR1.5b (v/s INR2.5b in the previous year) due
to capitalization of borrowing costs for Subansiri. Depreciation also was
lower due to the completion of 12 years for Dulhasti.
Trade receivables rose to INR50.1b in 2QFY21 (v/s INR38.2b at end-FY20).
Of these, over-dues (>45 days) stand at INR37.2b (v/s INR31.6b at end-
FY20). Major receivables are from the states of J&K, Uttar Pradesh, Punjab,
and West Bengal. Our interaction with NHPC indicates that the company
has started receiving money from the PFC-REC led ‘Atmanirbhar’ scheme.
The company has received a total amount of INR9b so far.
Unit 1 of Baira Sul (3x60MW) has been commissioned after the completion
of R&M works. Our interaction with the company indicates the remaining
two units would commission in a phased manner post R&M by Mar’21.
Earnings growth muted; Capex run-rate increasing
Restart of works at Lower Subansiri is a positive, but progress on the same
needs to be watched. In the past, agitation by locals has impacted
construction activities. Moreover, commissioning for the project is still
some time away (according to management by FY24).
Capex run-rate, on the other hand, is expected to increase as the company
is investing/exploring new projects, which will reduce FCF and drag RoEs in
the near term. NHPC’s regulated equity growth – a key earnings driver – will
be muted over the next few years. We maintain Neutral with DCF-based TP
of INR23/share.
Financials & Valuations (INR b)
Y/E MARCH
2020 2021E 2022E
Sales
EBITDA
Adj. PAT
EBITDA Margin (%)
Cons. Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
Ratios
Net D:E
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA(x)
Div. Yield (%)
FCF Yield (%)
7.3
0.7
8.3
7.1
-1.8
7.2
0.6
7.6
5.7
1.1
7.3
0.6
7.6
6.2
0.4
0.7
9.2
7.3
77.8
0.7
9.1
6.7
40.9
0.7
8.5
6.7
45.0
100.1 107.6 112.4
54.9
28.7
54.9
2.9
10.7
31.2
61.9
29.5
57.6
2.9
2.6
33.1
65.3
29.1
58.1
2.9
-1.5
34.7
Shareholding pattern (%)
As On
Sep-20 Jun-20
Promoter
71.0
71.0
DII
14.4
14.2
FII
4.3
4.5
Others
10.4
10.4
FII Includes depository receipts
Sep-19
73.3
12.0
4.5
10.1
;
Aniket Mittal – Research Analyst
(Aniket.Mittal@MotilalOswal.com)
13 February 2020
1
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Investors are advised to refer through important disclosures made at the last page of the Research Report.