1 September 2020
1QFY21 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
218.5 / 3
29 / 15
3/4/-11
157
CMP: INR22
TP: INR23 (+6%)
Neutral
Impact of rebate flowing through
Capex run-rate increasing; Maintain Neutral
NHPC’s 1QFY21 results highlight the impact of INR1.85b rebate to DISCOMs.
Accordingly, reported standalone PAT dropped 18% YoY to INR7.2b (in-line).
Capex run-rate should increase on account of investment in new projects.
However, their commissioning remains 4-5 years away, which implies a drag
in FCF/RoEs in the near-term. Maintain
Neutral
with TP of INR23/share.
Standalone (S/A) PAT declined 18% YoY to INR7.2b (v/s est. INR6.8b) due to
the impact of rebate (INR1.85b).
We note the rebate amount has been
accounted by the company as an exception (v/s the built-in numbers),
leading to the apparent difference on an adjusted basis.
Generation declined 5% YoY to 8.1BU in 1QFY21 due to the shutdown of 2
Chamera units and lower water availability. Overall, plant availability factor
(PAF) was broadly flat YoY at 91.0 %.
Incentives were up 14% YoY to INR1.8b on higher PAF incentive and
deviation income.
Interest costs were lower at INR1.5b (v/s INR2.4b in the previous year) due
to capitalization of borrowing costs for Subansiri. Depreciation was also
lower due to the completion of 12 years for Dulhasti.
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 (%)
7.6
0.7
8.4
6.9
-1.7
7.6
0.7
7.9
5.5
0.7
7.5
0.6
7.8
6.0
0.0
0.7
9.2
7.3
61.9
0.7
8.4
7.2
44.9
0.7
8.6
7.6
44.9
100.1 107.1 111.8
54.9
28.7
54.9
2.9
10.7
31.2
60.6
28.7
56.6
2.9
-0.2
33.1
64.0
29.2
57.2
2.9
1.6
34.7
Profits impacted as impact rebate flows through
Shareholding pattern (%)
As On
Jun-20 Mar-20
Promoter
71.0
71.0
DII
14.2
14.2
FII
4.5
4.7
Others
10.4
10.2
FII Includes depository receipts
Jun-19
73.3
11.6
4.9
10.1
Management commentary highlights – FY21 capex guidance of INR53b intact
NHPC expects to incur capex of INR53b in FY21. Further, it expects capex in
FY22/FY23 to rise to INR76b/INR81b at the group level.
It has maintained its commissioning timelines for Subansiri and expects it to
be completed by FY24. NHPC is also planning to complete the linkage of
nala
work by Oct’20, thereby increasing discharge of water for Parbati-II.
Trade receivables rose to INR46.7b in 1QFY21 (v/s INR38.2b in FY20). Major
receivables were from Jammu & Kashmir (J&K), Uttar Pradesh, Punjab, and
West Bengal. Since 1QFY21, this number has decreased and current trade
receivables stand at INR44.2b. NHPC expects to receive INR18b from the
PFC-REC scheme on completion of certain formalities for J&K.
Earnings growth muted; Capex run-rate increasing
While work restarting at Lower Subansiri is a positive, 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 (FY24 as per its management).
Capex run-rate, on the other hand, is expected to increase as the company
is investing/exploring new projects, which is expected to reduce FCF and
drag RoEs in the near term. NHPC’s regulated equity growth – a key driver
of earnings – should remain muted over the next few years. We maintain
Neutral
with a DCF-based TP of INR23/share.
;
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.