30 May 2015
4QFY15 Results Update | Sector: Utilities
NHPC
BSE SENSEX
27,828
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val,INRm/Vol‘000
Free float (%)
Financials & Valuation (INR b)
Y/E Mar
Net Sales
EBITDA
Adj PAT
EPS (INR)
Gr (%)
BV/ShINR
RoE (%)
RoCE (%)
P/E (x)
P/BV (X)
2015
82.4
52.7
24.3
2.2
7.9
27.8
8.2
7.4
9.2
0.7
2016E 2017E
80.5
49.3
21.9
2.2
2.0
28.8
7.0
7.9
9.0
0.7
83.1
49.6
22.3
2.3
2.2
29.8
6.9
7.9
8.8
0.7
Estimate change
TP change
Rating change
S&P CNX
8,434
NHPC IN
11,070.7
30/18
00/2/-34
194/8461
14.0
CMP: INR20
TP: INR21
Neutral
Adjusted PAT in-line with estimate
4QFY15 adjusted PAT in-line with estimate:
During 4QFY15, NHPC reported
revenue of INR14.7b (up 31% YoY), higher than estimate INR12.5b. EBITDA stood
at INR8.7b vs estimate INR7.5b and reported PAT at INR6.4b, vs estimate INR2.8b.
Reported revenue and EBIDTA were aided by higher tax outgo (31%), vs our
estimate (16%). Also, the company has accrued the regulatory assets pertaining to
Subhanshri Lower project through P&L to the tune of INR5.2b, leading to higher
PAT. Adjusted for the same and prior period revenues, recurring PAT stood at
INR2.8b, in-line with our estimate.
Generation growth in-line with estimate:
During 4QFY15, the generation for
NHPC (standalone) stood at 2.9BUs, up 18% YoY and broadly in-line with our
estimate of 3.0BUs. Generation growth is led by contribution from recently
commissioned projects.
Capacity addition back-ended:
NHPC started work Teesta IV project in November
2014, while attempts to restart the work at Subhanshri Lower project have not
bear fruits. While total project under construction stands at 3.3GW, the
commissioning timelines are beyond FY17E, leading to no growth over FY15-17E.
NHPC has however announced CoD for 4
th
unit of Parabati III (130MW) effective
June 2014.
Re-iterate Neutral:
We expect NHPC to report consolidated net profit of INR22b
each in FY16E/17E. Stock trades at PER of 9x and 0.7x FY16E book. Re-iterate
neutral given lack of near term triggers, muted RoEs.
M.Cap. (INR b) / (USD b) 223.1/4.0
Nalin Bhatt
(NalinBhatt@MotilalOswal.com); +91 22 3982 5429
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

NHPC
4QFY15 adjusted PAT in-line with estimate
During
4QFY15,
NHPC reported revenue at INR14.7b, higher than estimate of
INR12.5b. Revenue was 17% higher than our estimate, led by higher tax/PBT
ratio at 31%, vs estimate of 16%.
EBITDA for the quarter stood at INR8.7b, vs INR3.8b loss YoY, and higher than
estimate INR7.5b. This is also owing to the same reasons as for higher revenue.
Reported interest cost was lower than estimate at INR2.8b (vs estimate of
INR3b). Depreciation for the quarter was in-line with estimate, but other income
was 29% lower than estimate at INR1.8b, vs estimate of INR2.5b.
Reported PAT stood at INR6.4b v estimate of INR2.8b. NHPC has accrued the
regulatory assets pertaining to Subhanshri Lower project through P&L to the
tune of INR5.2b, leading to higher PAT.
Adjusted for the same, the PAT stood at INR2.8b, in-line with estimate. Also, the
contribution of other income being lower indicates superior core performance,
led by better fixed charge recovery and incentives on projects.
Generation growth robust
During 4QFY15, the generation for NHPC (standalone) stood at 2.9BUs, up 18%
YoY and broadly in-line with our estimate of 3.0BUs. Generation growth is led by
contribution from recently commissioned projects.
Exhibit 1: Generation growth robust
Quarterly Generation (BUs)
15.4 14.8
11.0
9.3
-2.6
1.0
-2.2
-9.2
YoY Generation Gr (%)
10.0
8.9
-0.3
-12.0
24.5
18.2
18.1
14.3
2.4 4.3
-2.7 -2.1
3.3
4.0 3.9
-17.3
5.5 6.5 2.7 2.3 5.7 7.1 3.1 2.6 6.3 6.9 3.1 2.4 6.1 7.6 2.6 2.5 6.4 6.7 2.8 2.5 7.5 8.4 3.2 2.9
Source: CEA, MOSL
Capacity addition back-ended
NHPC started work Teesta IV project in November 2014, while attempt to
restart the work at Subhanshri Lower project has not bear fruits. While total
project under construction stands at 3.3GW, the commissioning timelines are
beyond FY17E, leading to no growth over FY15-17E. NHPC has however
announced CoD for 4
th
unit of Parabati III (130MW) effective June 2014.
There is a possibility that even Teesta IV project would slip beyond FY15 and
may be commissioned by 1QFY16E. Post this, Parbati II (800MW) and
Kishanganga (330MW) would be the only projects under construction, as work
on S. Lower remains uncertain (2GW). While management has guided for
commissioning of Kishanganga project in FY17E, the past track record indicates
otherwise. Parbati II and S. Lower are as it is targeted for commissioning in
FY19E, limiting any near term growth options.
2
30 May 2015

NHPC
Valuation and view
Growth in capacity addition limited in near term:
NHPC’s 3.3GW of projects
under construction are unlikely to be commissioned till FY17E and thus, offer no
growth over FY15-17E. We expect Teesta IV commissioning by end FY15E, which
may get delayed to FY16E.
CWIP, high receivable dents capital productivity:
CWIP on the books stands at
INR155b+ as at FY15E, while we receivable stands at INR29b (growth from FY14
levels of INR24b). As large part of capital is stuck in CWIP and receivable, the
contribution to earnings remains limited. In addition, NHPC has cash and cash
equivalent of INR53b. Given that project commissioning is delayed, CWIP would
persist as also cash accretion. Recovery of debtors is key monitorable in near
term.
Earnings growth, return ratios remain muted:
We expect NHPC to report flat
earnings over FY15-17E. Thus, RoE for NHPC is expected to remain range bound
at 7.0-8.0%. As we expect dividend payout to increase, dividend yield on the
stock (FY16E at ~4%) provides comfort.
Re-iterate Neutral:
We expect NHPC to report consolidated net profit of INR22b
each in FY16E/17E. Stock trades at PER of 9x and 0.7x FY16E book. Re-iterate
neutral given lack of near term triggers, muted RoEs.
Exhibit 3: PB band
Exhibit 2: PER band
26
22
18
14
10
6
12.0
9.0
P/E (x)
5 Yrs Avg(x)
2.1
1.7
1.3
0.9
0.5
P/B (x)
5 Yrs Avg(x)
ROE (%)
8.4
8.0
0.9
0.7
7.6
7.2
6.8
Source: MOSL
30 May 2015
3

NHPC
Story in charts
Exhibit 4: Capacity addition to remain muted (MW)
Installed Capacity
Yearly Capacity Addition
5,287 5,287 5,287
275
0
6,993
6,369 6,663 6,663
807
294
0
330
58
68
68
68
71
77
86
100
102
105
8,993 9,793
2,000
800
4.5
-
0.2
Exhibit 5: Growth in RAB thus constrained
RAB (INR b)
16.9
12.5
7.7
2.3
2.7
Growth (%)
16.1
120
FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY19E
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E
Exhibit 6: PAT growth remains subdued (INR b)
25.7
Adjusted PAT
28.4
17.4
4.8
(6.5)
13
13
17
20
25
24
27
13.1
1.2
(8.2)
27
25
25
2.2
Growth
Flattish PAT growth
beyond FY15E
Exhibit 7: Return ratios too thus remain low (%)
RoE
10.0
8.5
6.7
6.8
7.5
6.4 7.0
7.0
8.0
7.0
7.7
8.5
8.4
8.8
7.9
7.4
8.2
7.0
7.9
RoCE
6.9
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E
Exhibit 8: Receivable very high (days)
Debtor days
107
80
56
40
119
128
119
129
117
113
Exhibit 9: Yield provides downside comfort though (%)
Yield
3.5
2.7
3.0
3.0
3.2
4.0
4.3
1.3
1.4
1.5
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E
Source: MOSL, Company
30 May 2015
4

NHPC
Financials and valuations
Income Statement
Y/E March
Net Sales
Change (%)
Total Expenditure
EBITDA
Margin (%)
Depreciation
EBIT
Interest on Power bonds
Interest
Other Income - Rec.
Extraordinary
Profit before Tax
Tax
Tax Rate (%)
Reported PAT
EO (Expense) / Income
Adjusted PAT
Change (%)
Margin (%)
Less: Mionrity Interest
Net Profit
2010
52,273
50.4
9,971
41,301
79.0
12,827
28,474
0
7,394
6,473
11
27,564
4,766
17.3
22,798
-6,050
16,726
25.7
32.0
1020
15,706
2011
51,436
-1.6
13,798
35,751
69.5
11,665
24,086
1,239
6,159
6,566
6,831
32,562
7,934
24.4
24,628
-4,993
19,635
17.4
38.2
1466
18,169
2012
69,203
34.5
19,835
48,116
69.5
11,500
36,616
1,021
5,739
11,298
316
43,513
9,477
21.8
34,036
-8,833
25,203
28.4
36.4
3170
22,033
2013
64,021
-7.5
19,827
41,809
65.3
12,131
29,678
0
5,962
12,152
2,400
38,267
10,223
26.7
28,044
-4,482
23,562
-6.5
36.8
2832
20,731
-5.9%
2013
123,007
180,743
303,750
23,102
6,241
13,799
188,059
188,059
534,951
329,392
94,019
235,373
199,618
14,471
173,899
642
22,401
79,765
71,092
88,410
38,346
50,064
85,489
534,951
2014
74,159
15.8
26,746
43,833
59.1
14,994
28,839
0
11,802
13,221
4,972
35,230
8,954
25.4
26,276
10,317
26,649
13.1
35.9
4144
22,505
2015
82,441
11.2
27,537
52,713
63.9
17,153
35,560
0
12,728
9,132
-5,220
26,745
9,203
34.4
17,542
-1,021
26,960
1.2
32.7
2683
24,277
(INR Million)
2016E
80,462
-2.4
29,554
49,264
61.2
17,211
32,053
0
9,165
10,933
0
33,820
9,060
26.8
24,760
0
24,760
-8.2
30.8
2838
21,922
2017E
83,063
3.2
31,745
49,608
59.7
18,003
31,604
0
8,427
11,513
0
34,691
9,385
27.1
25,306
0
25,306
2.2
30.5
2998
22,308
Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Deferred liabilities
Advance Against Depriciation
Long Term Loan
Total Loans
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Investments
Curr. Assets
Inventory
Account Receivables
Cash and Bank Balance
Others
Curr. Liability & Prov.
CL
Provisions
Net Current Assets
Appl. of Funds
E: MOSL Estimates
2010
123,007
128,065
251,072
15,895
2,521
15,398
163,515
163,515
448,402
280,117
57,101
223,016
128,659
33,455
98,390
483
15,338
61,895
20,673
47,347
22,470
24,877
51,043
448,402
2011
123,007
142,263
265,271
17,357
2,774
14,641
167,716
167,716
467,851
296,087
68,780
227,306
160,084
18,335
136,099
392
5,702
67,513
62,493
73,973
24,586
49,387
62,126
467,851
2012
123,007
163,430
286,438
20,349
3,504
14,327
195,622
195,622
520,239
302,107
80,280
221,826
193,987
16,559
170,515
496
22,471
77,953
69,595
82,647
25,392
57,255
87,868
520,239
2014
110,707
171,753
282,460
30,657
9,344
13,298
193,090
193,090
528,848
404,868
108,975
295,892
149,240
12,734
156,146
798
24,224
61,428
69,695
85,163
38,855
46,308
70,983
528,848
2015
110,707
196,868
307,575
33,257
9,886
0
187,245
187,245
537,963
412,476
125,838
286,638
156,298
10,198
179,545
906
29,052
69,410
80,176
94,716
49,171
45,546
84,828
537,963
(INR Million)
2016E
110,707
208,385
319,091
36,095
9,782
0
179,453
179,453
544,421
412,476
143,049
269,427
174,516
13,793
188,233
944
25,851
77,855
83,583
101,548
48,317
53,231
86,685
544,421
2017E
110,707
219,552
330,258
39,093
9,782
0
165,593
165,593
544,726
448,896
161,053
287,843
156,233
13,379
191,941
978
25,759
79,147
86,058
104,671
49,399
55,272
87,270
544,726
30 May 2015
5

NHPC
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS (Adjusted)
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
Adjusted RoE
Working Capital Ratios
Debtor (Days)
Inventory (Days)
Leverage Ratio (x)
Current Ratio
Debt/Equity
Cash Flow Statement
Y/E March
Oper. Profit/(Loss) bef. Tax
Interest
Depreciation
Direct Taxes Paid
(Inc)/Dec in WC
CF fr. Oper. incl EO exp.
(inc)/dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from Investments
Issue of Shares
(Inc)/Dec in Debt
Dividend Paid
Interest
Others
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
2010
1.4
2.3
20.4
0.5
34.6
2011
1.6
2.4
21.6
0.6
34.8
2012
1.8
2.7
23.3
0.7
29.4
2013
1.7
2.7
24.7
0.6
30.8
2014
2.0
3.4
25.5
0.3
14.8
2015
2.2
3.7
27.8
0.8
56.2
2016E
2.2
3.5
28.8
0.8
42.0
2017E
2.3
3.6
29.8
0.9
44.0
2.7
12.6
8.3
0.93
6.8
9.7
3.0
11.2
7.4
0.87
5.3
7.6
3.5
12.0
7.5
0.82
5.6
8.5
3.0
9.9
5.9
0.79
4.8
8.1
1.5
9.2
5.4
0.7
4.1
6.5
3.8
9.0
5.7
0.7
4.0
6.6
4.0
8.8
5.5
0.7
3.7
6.2
4.3
7.0
8.5
7.5
7.0
8.5
7.6
8.0
10.0
9.1
7.0
8.4
8.0
7.7
8.8
9.1
8.2
7.4
9.1
7.0
7.9
7.9
6.9
7.9
7.8
107
3
40
3
119
3
128
4
119
4
129
4
117
4
113
4
2.1
0.4
1.8
0.4
2.1
0.4
2.0
0.4
1.8
0.5
1.9
0.4
1.9
0.3
1.8
0.3
(INR Million)
2017E
34,691
8,427
18,003
-9,385
706
52,443
-18,137
34,306
414
-17,722
0
-13,860
-11,141
-8,427
0
-33,428
1,292
77,855
79,147
2010
27,564
7,394
12,827
-4,766
-535
42,484
-31,771
10,713
-15,552
-47,323
45,578
14,206
-7,889
-7,394
-3,835
40,666
35,827
26,069
61,895
2011
32,562
6,159
11,665
-7,934
-5,466
36,987
-59,624
-22,637
15,121
-44,503
4,606
4,201
-8,577
-6,159
19,063
13,134
5,618
61,895
67,513
2012
43,513
5,739
11,500
-9,477
-15,301
35,974
-39,923
-3,949
1,776
-38,147
9,142
27,906
-10,007
-5,739
-8,688
12,614
10,440
67,513
77,953
2013
38,267
5,962
12,131
-10,223
4,191
50,328
-32,917
17,411
2,088
-30,829
5,216
-7,563
-8,635
-5,962
-744
-17,687
1,811
77,953
79,765
2014
35,230
11,802
14,994
-8,954
-3,831
49,242
-25,097
24,144
1,737
-23,360
-39,909
5,031
-3,886
-11,802
6,348
-44,218
-18,337
79,765
61,428
2015
26,745
12,728
17,153
-9,203
-5,863
41,559
-14,667
26,891
2,536
-12,131
10,689
-5,846
-9,850
-12,728
-3,710
-21,445
7,982
61,428
69,410
2016E
33,820
9,165
17,211
-9,060
6,588
57,724
-18,218
39,507
-3,596
-21,813
0
-7,792
-10,405
-9,165
-104
-27,467
8,445
69,410
77,855
30 May 2015
6

NHPC
Corporate profile: NHPC
Company description
NHPC, GOI enterprise is a hydro power generator in
India with regulated business model and installed
capacity of 6GW. Company has project pipeline
with 3.3GW of projects under construction stage,
7.2GW of projects under clearance and survey
stage.
Exhibit 8: Sensex rebased
32
28
24
20
16
May-14
Aug-14
Nov-14
Feb-15
May-15
NHPC Ltd
Sensex - Rebased
Exhibit 11: Shareholding pattern (%)
Mar-15
Promoter
DII
FII
Others
86.0
4.3
1.9
7.8
Dec-14
86.0
3.9
2.0
8.2
Mar-14
86.0
3.8
1.7
8.6
Exhibit 12: Top holders
Holder Name
Life Insurance Corporation Of India
% Holding
3.0
Note: FII Includes depository receipts
Exhibit 13: Top management
Name
R S T Sai
Designation
Chairman & Managing Director
Exhibit 14: Directors
Name
R S T Sai
Ashoke K Dutta*
Atul Kumar Garg*
Shantikam Hazarika*
R S Mina
*Independent
Name
J K Sharma
D P Bhargava
Arun Kumar Verma
K N Garg
Exhibit 15: Auditors
Name
Gupta Gupta & Associates
Ray & Ray
S N Dhawan & Co
S N Nanda & Co
Singhi & Co
Tiwari & Associates
Bahadur Murao & Co
Chandra Wadhwa & Co
K L Jaisingh & Co
Krishan Singh Berk
R J Goel & Co
Ravi Sahni & Co
S C Mohanty & Associates
Type
Statutory
Statutory
Statutory
Statutory
Statutory
Statutory
Cost Auditor
Cost Auditor
Cost Auditor
Cost Auditor
Cost Auditor
Cost Auditor
Cost Auditor
Exhibit 16: MOSL forecast v/s consensus
EPS
(INR)
FY16
FY17
MOSL
forecast
3.5
3.6
Consensus
forecast
2.1
2.2
Variation
(%)
68.3
68.5
30 May 2015
7

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