19 November 2019
2QFY20 Results Update | Sector: Utilities
NHPC
BSE SENSEX
40,470
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
11,940
NHPC IN
10,045
234.6 / 3.3
27 / 21
-5/-2/-24
114
26.7
CMP: INR23
TP: INR25(+7%)
Neutral
In-line; Work on Subansiri restarts
Capex run-rate increasing; Maintain Neutral
2QFY20 standalone PAT increased ~10% YoY to INR13.4b (v/s est. INR12.4b) on the
back of resumed income recognition for its Subansiri project (since 1QFY20).
Generation declined 5% YoY on lower water availability, shutdown at Chamera and
R&M activities at Baira Siul. Revenue rose 4% YoY to INR26.1b on recognition of
pay revision. Other income was up 6% YoY to INR5b (v/s
est.
INR4.2b). For 1HFY20,
PAT was up 14% YoY to INR22.2b.
Construction on NHPC’s Lower Subansiri (2,000MW) project has restarted from
Oct’19. Contracts for construction of the power house though are yet to be
awarded. NHPC expects the project to be completed by 2QFY24.
Parbati-II (800MW) continues to face geological challenges. Company expects
the project to be commissioned in FY22 (unchanged).
The final capital cost approval for the five projects is expected over the next
few months. This, we estimate would boost revenues by ~INR2-3b per annum.
Capex stood at INR16b for the quarter. Full-year guidance is at INR38b
(unchanged).
Financials & Valuations (INR b)
Y/E Mar
2019 2020E 2021E
Net Sales
89.8
97.6
98.7
EBITDA
50.0
56.1
55.8
PAT
26.0
30.4
30.2
EPS (INR)
2.6
3.0
3.0
Gr. (%)
5.9
17.1
-0.7
BV/Sh (INR)
30.7
32.2
33.8
RoE (%)
8.5
9.6
9.1
RoCE (%)
5.2
6.7
6.4
P/E (x)
9.0
7.7
7.8
P/BV (x)
0.8
0.7
0.7
Estimate change
TP change
Rating change
Earnings growth muted, capex run-rate increasing; Maintain Neutral
The recommencement of work at Lower Subansiri is a major positive. In the
past, however, agitation by locals had impacted construction activities.
Moreover, commissioning of the project is still some time away (FY24
according to management) and we await progress on the same. Capex run-
rate, on the other hand, is expected to increase as the company is investing/
exploring new projects. This should reduce FCF and drag RoEs in the near term.
NHPC’s regulated equity growth – key driver of earnings – will be muted over
the next few years as no new projects are being commissioned. We maintain
Neutral
with DCF-based TP of INR25/share.
FY20
2Q
3QE
26,054 16,747
4.4
6.6
15,780
6,467
3,857
4,050
2,521
2,495
4,992
1,079
1,024
494
15,418
1,495
0
0
15,418
1,495
2,023
227
13
15
13,395
1,268
13,395
1,268
9.9
-30.4
FY19
4QE
19,963
2.4
10,918
3,032
4,505
1,382
3,218
7,981
0
7,981
1,657
21
6,324
6,324
81,612
17.7
44,815
15,900
8,949
9,248
8,234
37,448
0
37,448
11,142
29.8
26,306
26,306
-4.6
FY20E
86,977
6.6
48,204
14,804
11,886
8,324
6,724
36,562
0
36,562
6,764
18.5
29,798
29,798
13.3
FY20
2QE
23,931
-4.1
14,938
4,050
2,342
4,245
1,962
14,753
0
14,753
2,388
16
12,365
12,365
1.5
Quarterly Performance (standalone) – INR m
Y/E March
Net Sales
YoY Change (%)
EBITDA
Depreciation
Interest
Other Income
Rate regulated activity
PBT before EO expense
Extra-Ord expense
PBT
Tax
Rate (%)
Reported PAT
Adj PAT
YoY Change (%)
1Q
21,290
-8.5
12,904
3,726
2,212
1,129
1,431
9,527
0
9,527
2,151
23
7,376
7,376
-14.5
FY19
2Q
3Q
24,950 15,714
26.5
4.9
15,966
5,958
4,044
4,016
2,283
2,226
4,716
1,199
575
1,775
14,930
2,690
0
0
14,930
2,690
2,745
868
18
32
12,185
1,822
12,185
1,822
19.6
-73.5
4Q
19,503
71.5
9,832
4,115
2,228
2,359
917
6,765
0
6,765
1,842
27
4,923
4,923
159.9
1Q
24,213
13.7
15,040
3,866
2,366
872
1,989
11,668
0
11,668
2,857
24
8,811
8,811
19.5
Note: The quarterly numbers do not add up to the full year due to adj. in prior quarter numbers
Aniket Mittal – Research Analyst
(aniket.mittal@motilaloswal.com); 91 22 71985585
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
NHPC
Conference call takeaways
Lower Subansiri
Management has noted that work on Subansiri project has resumed and the
project is expected to be completed by 2QFY24.
The tender for Power house is yet to be awarded and company is in the process
of finalizing the same.
Parbati- II
The project requires a tunnel of 31km, of this, 2.5km is yet to be completed and
faces geological challenges.
NHPC expects the project to be commissioned in FY22.
Teesta VI
Company expects the project to be completed in 5 years’ time. The project
requires construction of two tunnels, which will take time given the difficult
geographical conditions.
Tender for appointing contractors has been floated.
Company would continue as 100% subsidiary of NHPC.
Pilot Scheme-II
According to management, there is uncertainty on pilot scheme-II.
Prices on the ST market have declined. Company is in discussion with MoP and
PFC, if prices can be rediscovered.
Others
Incentive income:
For 1HFY20, PLF incentive stood at INR2.5b, DSM incentive
stood at INR0.5b, while Secondary Energy income stood at INR0.4b.
PAF during the quarter was down from 92.9% in 2QFY19 to 90% in 2QFY20 due
to R&M shutdown at Baira Siul power plant and shutdown at Chamera plant.
19 November 2019
2
 Motilal Oswal Financial Services
NHPC
Financials and Valuations
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
Income Statement
2014
74,159
15.8
43,833
59.1
14,994
28,839
11,802
13,221
-4,972
25,286
8,954
35.4
4,144
12,188
17,160
-27.7
2014
110,707
171,753
282,460
30,657
193,090
9,344
515,551
404,868
108,975
295,892
149,240
0
168,879
798
24,224
74,162
69,695
98,461
70,419
515,551
2015
82,441
11.2
57,382
69.6
17,153
40,230
12,728
9,132
550
37,184
9,203
24.8
3,067
24,914
24,364
42.0
2015
110,707
196,868
307,575
33,257
187,245
9,886
537,963
405,761
126,600
279,161
163,775
7,633
163,551
906
29,052
71,975
61,618
76,158
87,393
537,963
2016
83,540
1.3
53,727
64.3
14,320
39,407
11,182
10,924
0
39,149
10,003
25.5
3,130
26,017
26,017
6.8
2016
110,707
205,720
316,427
31,681
199,382
15,136
562,627
342,331
116,191
226,140
167,416
5,999
228,446
928
19,045
72,847
135,626
65,375
163,071
562,627
2017
86,231
3.2
55,621
64.5
14,618
41,004
10,734
15,038
0
45,307
10,531
23.2
4,482
30,294
30,294
16.4
2017
102,593
187,555
290,148
33,822
192,267
16,653
532,891
353,055
130,784
222,271
175,876
10,200
193,424
1,008
18,540
34,725
139,152
68,881
124,544
532,891
2018
77,512
-10.1
49,380
63.7
14,791
34,589
9,226
11,014
0
36,376
8,629
23.7
2,709
25,039
25,039
-17.3
2018
102,593
197,586
300,179
29,349
186,021
17,109
532,658
255,977
44,204
211,772
190,871
11,248
189,985
1,047
13,460
33,191
142,287
71,219
118,767
532,658
2019
89,829
15.9
58,433
65.0
16,580
41,854
8,951
8,639
0
41,542
13,236
31.9
2,349
25,956
25,956
3.7
2019
100,450
207,528
307,978
28,685
190,658
47,207
574,528
310,216
60,450
249,766
150,368
12,829
254,292
1,252
28,380
22,453
202,207
92,727
161,565
574,528
2020E
97,574
8.6
62,807
64.4
15,356
47,451
11,886
6,862
0
42,426
8,427
19.9
3,609
30,391
30,391
17.1
2020E
100,450
223,454
323,904
27,769
194,534
47,207
593,414
310,216
75,806
234,411
177,054
12,828
261,848
1,252
30,704
20,960
208,932
92,727
169,121
593,414
(INR Million)
2021E
98,682
1.1
62,548
63.4
15,356
47,193
11,749
6,567
0
42,010
8,335
19.8
3,490
30,185
30,185
-0.7
Balance Sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Minority Interest
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Net Current Assets
Total Assets
(INR Million)
2021E
100,450
239,174
339,624
26,735
208,839
47,207
622,404
310,216
91,161
219,055
213,441
12,827
269,808
1,252
31,095
21,806
215,656
92,727
177,081
622,404
19 November 2019
3
 Motilal Oswal Financial Services
NHPC
Financials and Valuations
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Adjusted RoE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
Ratios
2014
1.6
2.9
25.5
0.3
22.6
14.9
8.0
0.9
0.0
9.3
1.3
6.1
6.4
0.0
0.1
119
4
0.4
2015
2.2
3.8
27.8
0.6
32.8
11.0
6.4
0.9
0.0
8.0
2.5
7.9
6.5
0.0
0.2
129
4
0.3
2016
2.4
3.6
28.6
1.3
67.6
10.7
6.9
0.9
0.0
9.1
5.2
8.2
6.2
0.0
0.1
83
4
0.4
2017
3.0
4.4
28.3
2.5
98.9
9.9
6.7
1.0
0.0
10.2
8.4
10.0
7.0
0.0
0.2
78
4
0.5
2018
2.4
3.9
29.3
1.2
55.1
9.6
6.0
0.8
0.0
10.0
5.2
8.5
5.6
0.0
0.1
63
5
0.5
2019
2.6
4.2
30.7
1.0
44.3
9.0
5.5
0.8
0.0
8.6
4.3
8.5
5.2
0.0
0.2
115
5
0.5
2020E
3.0
4.6
32.2
1.2
47.6
7.7
5.1
0.7
0.0
7.8
5.1
9.6
6.7
0.0
0.2
115
5
0.5
2021E
3.0
4.5
33.8
1.2
47.9
7.8
5.2
0.7
0.0
8.0
5.1
9.1
6.4
0.0
0.2
115
5
0.5
Cash Flow Statement
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2014
43,833
-35,311
1,909
-7,942
0
2,489
-22,499
-20,010
0
11,746
-10,754
-23,679
4,494
-16,195
23,571
-11,809
-20,074
94,235
74,162
2015
57,382
-26,357
-5,631
-8,092
0
17,302
-17,260
42
0
9,580
-7,680
0
-196
-16,544
4,931
-11,809
-2,187
74,162
71,975
2016
53,727
-36,000
11,134
-8,718
0
20,143
-21,470
-1,326
0
14,007
-7,462
0
-6,184
-15,020
9,395
-11,809
872
71,975
72,847
2017
55,621
-19,022
35,873
-10,808
0
61,664
-15,870
45,794
0
-2,775
-18,645
-26,259
-8,364
-13,912
-32,607
-81,141
-38,122
72,847
34,725
2018
49,380
3,490
6,409
-8,301
0
50,978
-15,673
35,306
0
1,790
-13,883
0
43,550
-11,440
-70,739
-38,629
-1,534
34,725
33,191
2019
58,433
-2,155
-12,044
-8,772
0
35,463
-10,853
24,610
0
-9,200
-20,053
-6,062
25,880
-12,151
-33,815
-26,148
-10,738
33,191
22,453
2020E
62,807
0
-2,324
-8,427
0
52,056
-26,686
25,369
0
137
-26,549
0
3,876
-11,886
-18,989
-26,999
-1,492
22,453
20,960
(INR Million)
2021E
62,548
0
-390
-8,335
0
53,823
-36,387
17,436
0
-158
-36,545
0
14,305
-11,749
-18,989
-16,433
846
20,960
21,806
19 November 2019
4
 Motilal Oswal Financial Services
NHPC
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
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Specific Disclosures
1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOSL has not received any compensation or other benefits from third party in connection with the research report
10 MOSL has not engaged in market making activity for the subject company
19 November 2019
5
 Motilal Oswal Financial Services
NHPC
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The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
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This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in
nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for
informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing
in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this
document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views
expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and
should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make
modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from
time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to
perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,
directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in
all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost
revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such
misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person
accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;
Website
www.motilaloswal.com.CIN
no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
19 November 2019
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