Nava Bharat Ventures' Q4FY19 results (Outperformer) - Maamba - A good year of operations
Q4FY19 result highlights
- Maama Power plant PAF/PLF for Q4FY19 was 77%/72% while PAF/PLF for FY19 was 87%/75%, improvement of 1750/1250 bps yoy. As a result, Maamba power operation reported sales/Adjusted PAT of USD51m/USD7.8m in Q4FY19 and sales/adjusted PAT of USD222m/USD50m (vs USD123m/USD18m). Profit has been adjusted for notional loss in MTM interest rate swap in Q4FY19/FY19 of USD4.5/5.8m.
- Note that power plant is being operated by Maamba Collieries Ltd (MCL). NBVL has 65% stake in MCL. Receivables for Zambian power plant have increased by USD80m during the year to USD160m. Receivables issues are expected to be resolved in next two quarters.
- NBEIL, operating coal based power plant of 150MW, reported a PLF of 59%/49% in Q4FY19/FY19 (vs 73%/60% in Q4FY18/FY18). It broke even in FY19. The power plant has tied up power with Telangana from July 2019 to March 2020 at a rate of Rs4.98/unit.
- Standalone profit (captive power plants and ferro alloys business) reported a EBITDA and profit of Rs2.4bn/Rs1.7bn.Adjusting for notional loss in Q4FY19/FY19 in MCL, consolidated EBITDA/PAT was Rs3.4bn/1.1bnbn (est of Rs3.6bn/Rs1.1bnm) in Q4FY19. Consolidated PAT for FY19 was Rs4.2bn.
- Equity share capital will reduce by 8% in FY20 with (a) 7% by extinguishment of treasury shares (b) 1% by buyback through open market
Key positives: Maamba operating at 87% in FY19, Power tie up of 185MW at a rate of Rs4.96/unit from July 2019 to March 2020
Key negatives: Rise in receivables to USD160m
Impact on financials: We maintain our earnings estimates for FY20/FY21E; EPS has increased by 8% due to extinguishment of treasury shares
Valuations & view
NBVL has received earnings boost in FY19 with its pithead Maamba power plant operating for full year. With a cost-plus PPA and inbuilt escalation clauses, the Maamba plant is likely to earn >22% RoE in USD terms. We expect the resolution of the receivables issue and 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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