Nava Bharat Ventures' Q2FY20 results (Outperformer) - Delay in liquidation of receivables
Q2FY20 result highlights
- PLF of Mamamba power plant was 79% in Q2FY20 (vs 74% in Q2FY19) while plant availability was 80% (vs 97% in Q2FY19). Sales of Maamba Collieries Limited (MCL – SPV operating the power plant) declined by 9.3% yoy to USD54m led by lower availability (PAF) of the power plant.
- EBITDA declined sharply by 23%yoy to USD36m, owing to lower PAF and provision of notional expected credit loss of USD5.8m against receivables. As a result, Maamba reported a profit of USD13m (vs USD18m Q2FY19). Adjusted PAT is USD19m.
- The receivables increased to USD230m at end of Sep 2019. The receivables are expected to be liquidated once the Government of Zambia/ZESCO is able to secure medium term financing. Note that ZESCO has been exploring options to liquidate the receivables of all the IPP’s.
- 150MW coal based IPP (operating under a subsidiary – NBEIL), reported a PLF of 33% (97MU vs 84MU in Q2FY19). Subsidiary reported losses of Rs116m (vs Rs129m). Standalone power plants operated at a PLF of 63%. It sold 96MU on merchant basis (vs 97MU in Q2FY19). Merchant off take was low from standalone power plants and 150MW power plant (NBEIL) on account of low power demand during Q2.
- Adjusting for provisions of Rs351m, the adjusted EBITDA for the quarter declined by 18% yoy to Rs2.9 bn. As a result, consolidated adj. PAT was Rs1.0bn (vs est of Rs970m) in Q2FY20.
Key positives: None
Key negatives: Delay in liquidation of receivables
Impact on financials: We maintain our earnings estimates.
Valuations & view
NBVL earnings have increased with commercialisation of its pithead Maamba power plants. However, the realisation of Maamba receivables has been impacted adversely on account of poor financial health of ZESCO. We expect the resolution of the Maamba receivables issue (by ZESCO accessing medium term liquidity) to drive the stock performance. The stock is trading at attractive 3x FY20E consolidated earnings and 0.3x FY20E P/B. We reiterate our Outperformer rating on the stock with a revised target price of Rs155/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.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.