Nava Bharat Ventures' Q3FY20 results (Outperformer) - Tariff hike to improvecash flow of Zambia power plant
Q3FY20 result highlights
- Maamba power plant reported a PLF of 55% (vs 85% in Q3FY19) and a plant availability factor of 55% (vs 88% in Q3FY19). The decline in plant performance was primarily on account of major maintenance undertaken in Dec’19. As a result, Maamba Collieries Limited (MCL – SPV operating the power plant) reported a revenue of USD42m (-30% yoy) and a PAT of USD4m (-57% yoy)
- The receivable outstanding from Zambia DISCOM is USD232m at the end of December 2019. Zambian regulatory authority has allowed the state-owned DISCOM (ZESCO) for a tariff hike of 113% in the month of December 2019. We expect the cash flow situation of Maamba to improve in few months and speed up in liquidation of the outstanding receivables.
- Lower power demand during the quarter has affected domestic power operations. As a result, merchant sales from the standalone and NBEIL (subsidiary operating 150MW coal based power plant in Telangana) declined to 41MU (vs 108MU) and 47MU (vs 121MU) respectively. The subsidiary reported a loss of 87m (vs profit of 25m in Q3FY19) primarily due to low power demand by Telangana DISCOM under PPA.
- On a consolidated basis, the Revenue/EBITDA for the quarter came in at Rs5.4bn/Rs2.1bn, lower than our estimate of Rs7.7bn/2.7bn respectively. Miss is on account of major maintenance shutdown. As a result, adj. PAT came in lower at Rs400m (vs our est of Rs913m).
Key positives: Approval of 113% hike in Tariff rate by Zambian Regulator.
Key negatives: Delay in liquidation of receivables.
Impact on financials: Revised our earnings estimate downwards by 14%/3% in FY20E/FY21E to account for major maintenance activity in Maamba Power Plant and low demand for power from Telangana DISCOM; Introduce FY22E 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 FY21E consolidated earnings and 0.3x FY21E P/B. We reiterate our Outperformer rating on the stock with a 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.