Nava Bharat Ventures' Q1FY20 results (Outperformer) - Another steady quarter for Zambian operations
Q1FY20 result highlights
- Maamba power plant operated at PLF of 81% in Q1FY20 (69% in Q1FY19) and PAF of 81% (vs normative PAF of 80%). As a result, Maamba reported sales of USD57m and adjusted profit of USD17m in Q1FY20 (vs USD11m). Reported profit was USD11m owing to MTM losses booked on interest rate swap. Maamba power plant is operating at full availability since Jan 201 8.
- Maamba receivables have risen to USD194m at end of June 2019. The receivables are likely to be paid once the Government of Zambia/ZESCO is able to secure medium term financing. ZESCO was looking to raise USD500m to liquidate the receivables of the power plants. 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 72% in Q1FY20 (vs 50% in FY19). Power was sold at exchanges and short term bilateral markets in the quarter. The power plant reported marginal profit of Rs468m
- Net generation at NBVL’s standalone business was 2MU 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 MTM losses of Rs379m, consolidated EBITDA/PAT was Rs3.5bn/Rs1.3bn (est of Rs3bn/Rs951m) in Q1FY20.
Key positives: Maamba operating at 81% availability; supply of entire domestic power capacity from Telangana power plants commenced from July 2019 till March 20 (at Rs5.48/unit)
Key negatives: Increase in receivables from USD165m to USD194m at end of June 2019
Impact on financials: We maintain our earnings estimates
Valuations & view
NBVL has received earnings boost in 1Q FY 20 on a yoy basis with its pithead Maamba power plant operating at 81% for the quarter. We expect the resolution of the Maamba receivables issue by ZESCO accessing medium term liquidity coupled with reduction in equity share capital by 8% will drive the stock performance. The stock is trading at attractive 3.5x FY20E consolidated earnings and 0.4x FY20E 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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