1 July 2020
4QFY20 Results Update | Sector: Utilities
NHPC
Estimate change
TP change
Rating change
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CMP: INR20
TP: INR22 (+10%)
Neutral
Adj. profits improve on low base, higher generation
Capex run-rate increasing; maintain Neutral
NHPC’s results highlight the benefit of higher generation and the low base
of the previous year. Adjusted PAT rose to INR3.8b (v/s INR40m in 4QFY19).
The capex run-rate is expected to increase on account of investments in
new projects. However, their commissioning remains four to five years
away, implying FCF/RoEs would be dragged down in the near term.
Maintain
Neutral,
with TP of INR22/sh.
Profits rise on low base
NHPC’s standalone PAT increased sharply YoY to INR3.8b (adj. nos of
INR40m in 4QFY19) v/s our est. of INR3.5b. The YoY increase was attributed
to: 1) non-recognition of Subansiri income in the previous year, 2) higher
generation, and 3) higher other income, partly offset by the impact of
Survey & Investigation (S&I) expense. The slight beat on our estimate came
on account of higher other income, led by dividend from subs. On a
reported basis, PAT was 22% YoY lower at INR3.8b v/s reported PAT of
INR4.9b last year. The previous year, though, saw one-off gains related to
prior-period sales (INR4.8b).
Generation rose 8% YoY to 4.0BU in 4QFY20 on account of higher water
availability. Overall, plant availability factor was marginally lower at 73.7%
(v/s 74.1% in the previous year).
S/A other income was up 63% YoY to INR3.85b (v/s our est. of INR1.7b) led
by dividend from subs. Although, other expenses were up 81% YoY to
INR6.5b, led by an INR1.5b impact on account of S&I expense.
With the start of construction at the co.’s Lower Subansiri (2,000MW)
project (Oct’19), the co. has capitalized borrowing and administrative costs
for the same. This was not recognized in 4QFY19.
For FY20, consol. PAT was up 11% YoY to INR28.7b. CFO declined 8% YoY to
INR32.5b on account of stretched WC.
Management commentary: FY21 capex guidance increased to INR53b
NHPC noted it expects to incur capex of INR53b for FY21. A large part of this
pertains to the Subansiri, Parbati-II, Dibang, and Teesta-IV projects.
Construction works at the Subansiri project were impacted and suspended
for 20 days due to the nationwide lockdown. It has maintained its
commissioning timelines and expects completion by FY24.
Muted earnings growth; capex run-rate increasing
While the resumption of works at Lower Subansiri is a positive, progress on
the same needs to be monitored. In the past, agitation by locals has
impacted construction activities. Moreover, commissioning for 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, the key
earnings driver, would be muted over the next few years. We maintain
Neutral, with DCF-based TP of INR22/sh.
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
201.4 / 2.7
29 / 15
-5/-2/-9
143
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 (%)
7.0
0.6
8.1
7.5
-1.9
7.5
0.6
7.9
6.0
-0.7
6.9
0.6
7.6
6.5
-0.4
0.7
9.2
7.3
61.9
0.7
8.4
7.2
44.9
0.7
8.6
7.6
44.9
100.1 105.2 111.8
54.9
28.7
54.9
2.9
10.7
31.2
58.7
26.8
55.8
2.7
-6.7
32.7
63.9
29.1
57.2
2.9
8.3
34.3
Shareholding pattern (%)
As On
Mar-20 Dec-19
Promoter
71.0
73.1
DII
14.2
12.2
FII
4.7
4.7
Others
10.2
10.0
FII Includes depository receipts
Mar-19
73.3
11.6
4.9
10.2
;
Aniket Mittal – Research Analyst (Aniket.Mittal@MotilalOswal.com); +91 22 6129 1572
13 February 2020
1
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