Nava Bharat Ventures' Q4FY18 results (Outperformer) - Strong quarter; Maamba operating at full throttle
Q4FY18 result highlights
- Maamba power plant operated at higher than normative availability of 80% in Q4FY18, the first quarter since the power plant became operational. As a result, Maamba power operation reported sales of USD60m and profit of USD15m in Q4FY18 and US$18mn in FY18. Maamba power plant is operating at full availability since Jan 2018.
- NBEIL, operating coal based power plant of 150MW, reported a PLF of 73%/60% in Q4FY18/FY18 (vs 70%/51% in Q4FY17/FY17), led by power being sold in short term PPA’s. FY18 revenue and profit was Rs3bn and Rs27m.
- Net generation at NBVL’s standalone business was 287MU/1086MU in Q4FY18/FY18, an increase of 14%/8% yoy. NBVL used its captive power to produce ferroalloys (vs outside sale of power) due to favourable economics for ferroalloys.
- Ferroalloys production was 45,110/163,353 ton in Q4FY18/FY18, 20%/+18% yoy. The ferroalloys reported EBIT of Rs270m/746m in Ferro alloys division in Q4FY18/FY18. Standalone power division reported EBIT of Rs704m.
- During the quarter, Nava Bharat received Rs620m penalty income from DISCOMS for lower off take than minimum requirement under earlier power purchase agreements for Indian Power plant.
- Adjusting for one time income, consolidated EBITDA/PAT was Rs3.5bn/Rs1.3bn (est of Rs2.8bn/Rs737m) in Q4FY18. Consolidated EBITDA/PAT for FY18 was Rs8bn/Rs2.4bn.
Key positives: Maamba operating at full availability, favourable economics for ferroalloys
Key negatives: Losses at EBIT level in Sugar business of Rs116m
Impact on financials: We maintain our earnings estimates
Valuations & view
NBVL’s earnings have received a boost in Q4FY18 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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