16 February 2021
3QFY21 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
253.6 / 3.5
26 / 15
-4/-15/-19
164
CMP: INR25
TP: INR26 (+3%)
Neutral
Profits boosted by tariff order gains
Capex run-rate increasing; maintain Neutral
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 (%)
8.8
0.8
9.0
5.9
-1.5
8.8
0.8
8.4
4.8
1.1
8.4
0.7
8.4
5.1
-3.3
0.7
9.2
7.3
77.8
0.7
9.0
6.5
41.7
0.8
8.9
6.7
43.4
100.1 106.9 112.5
54.9
28.7
54.9
2.9
10.7
31.2
61.3
28.9
57.3
2.9
0.5
32.7
65.4
30.1
58.1
3.0
4.3
34.3
NHPC’s results highlight the benefit of cost approval for its TLDP-IV project,
resulting in the doubling of profits on a YoY basis. Adjusted for one-offs, S/A
PAT declined 9% YoY to INR3.7b on lower generation.
The capex run-rate is expected to increase on account of investments in
new projects. However, their commissioning remains 4–5 years away –
implying FCF/RoEs would be dragged down in the near term. Maintain
Neutral,
with TP of INR26/sh.
NHPC’s 3QFY21 standalone adjusted PAT declined 9% YoY at INR3.7b (v/s
est. INR3.3b) on lower generation, partly offset by higher other income.
Profits have been adjusted for a) INR5.7b gains on the tariff order for Teesta
IV, b) an INR1.34b provision related to the Tawang-II project, and c)
damages related to Sewa. Reported profits doubled YoY to INR8.1b (v/s
INR4b in the previous year). Other income rose to INR1.6b (v/s INR0.6b in
3QFY20).
Generation at NHPC’s standalone plants is estimated to have declined ~17%
YoY to 3.7BU in 3QFY21 (based on CEA data).
Incentives were down 16% YoY to INR1.6b on account of lower PAF and
secondary energy incentives. PAF incentives for the quarter were down 18%
YoY to INR0.8b; secondary energy incentives were down 27% YoY to
INR0.5b. Deviation income, on the other hand, rose 14% YoY to INR0.4b.
NHPC noted it expects to incur capex of INR54b for FY21. Furthermore, it
expects FY22 capex to increase to INR81b. This includes ~INR20b related to
solar projects.
It has maintained its commissioning timelines for Subansiri and expects this
to be completed by FY24. The co. expects the Parbati project to be
commissioned by 2HFY22.
Trade receivables declined to INR42b at the end of 3QFY21, from INR50b at
the end of 2QFY21. They have since declined further to INR28b (thus far).
The resumption of works at Lower Subansiri remains a positive, but
progress on the same needs to be monitored. In the past, agitation by locals
has impacted construction activity. Moreover, the commissioning of the
project is still some time away (FY24 as per the management).
The capex run-rate, on the other hand, is expected to increase as the
company invests in / explores new projects – which would reduce FCF and
drag down RoEs in the near term. NHPC’s regulated equity growth – a key
driver of earnings – would be muted over the next few years. We maintain
Neutral, with DCF-based TP of INR26/sh.
Profits boosted by TLDP-IV order
Management commentary
Shareholding pattern (%)
As On
Dec-20 Sep-20
Promoter
71.0
71.0
DII
14.5
14.4
FII
4.0
4.3
Others
10.6
10.4
FII Includes depository receipts
Dec-19
73.1
12.2
4.7
10.0
Capex run-rate to remain drag on RoEs
;
Aniket Mittal – Research Analyst
(Aniket.Mittal@MotilalOswal.com)
13 February 2020
1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.