Nava Bharat Ventures' Q1FY19 results (Outperformer) - Second consecutive good quarter
Q1FY19 result highlights
- Maamba power plant operated at availability of 86% in Q1FY19 (vs normative of 80%). As a result, Maamba reported sales of USD54m and adjusted profit of USD17m in Q1FY19. Reported profit was USD13m owing to notional credit loss booked in Q1FY19 pertaining to receivables (INDAS accounting). Maamba power plant is operating at full availability since Jan 2018.
- Maamba receivables have risen to USD116m at end of June 2018. The receivables are likely to be paid once the Government of Zambia/ZESCO is able to secure medium term financing. Note that, the current cash flow is sufficient to meet the debt repayment and operational expenses.
- NBEIL, operating coal based power plant of 150MW, reported a PLF of 67% in Q1FY19 (vs 60% in FY18). Power was sold at exchanges in the quarter. The power plant reported marginal loss due to compression in dark spread and low PLF.
- Net generation at NBVL’s standalone business was 276MU in Q1FY19, flat yoy. NBVL used its captive power to produce ferroalloys (vs outside sale of power) due to favourable economics for ferroalloys.
- Adjusting for notional credit loss, consolidated EBITDA/PAT was Rs3.0bn/Rs1.0bn (est of Rs2.9bn/Rs852m) in Q1FY19.
Key positives: Maamba operating at full availability, favourable economics for ferroalloys; looking to sell all idle assets and land of 260 acres
Key negatives: Losses at EBIT level in Sugar business of Rs33m
Impact on financials: We maintain our earnings estimates
Valuations & view
NBVL’s earnings hs received earnings boost over the past 2 quarters with its pithead Maamba power plant starting commercial operations. With a cost-plus PPA and inbuilt escalation clauses, the Maamba plant is likely to earn >22% RoE in USD terms (22% in Q4FY18). We estimate NBVL’s earnings to increase by 45% CAGR over FY18-20E (FY19E profit – Rs4.3bn, FY20E profit at Rs5.2bn), driven by the commercialization of the Maamba plant. The stock is trading at attractive 5.9x FY19E consolidated earnings and 0.8x FY19E P/B. We reiterate our Outperformer rating on the stock with a target price of Rs195/share.
Nava Bharat Ventures Limited is engaged in power generation, mining, ferro alloys and agri-business. The Company's segments include Ferro Alloys, Power and Sugar. The Company's power plants in Andhra Pradesh, Telangana and Odisha have a total power generating capacity of approximately 440 megawatt. The Company manufactures Manganese Alloys and Chromium Alloys with a total installed capacity of approximately 200,000 tons per annum. The Company's sugar plant, distillery, ethanol plant and cogeneration plant is located in Samalkot, Andhra Pradesh. In Zambia, it is engaged in the integrated coal mining and power generation activity. In Tanzania, the Company is engaged in commercial agro-based investments. In Laos, it is engaged in the development of hydro-electric power project. The Company has presence in India, Southeast Asia and Africa. The Company's subsidiaries include Nava Bharat Energy India Limited, Nava Bharat Sugar and Bio Fuels Limited and Nava Bharat Projects Limited.
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