Nava Bharat Ventures' Q3FY18 results (Outperformer) - Maamba operating at full throttle
Q3FY18 result highlights
- During Q3FY18, one unit of Maamba power plant was shut on account of plant maintenance undertaken by the company (as grid to evacuate 300MW was likely to be ready by December 17). As a result, availability and PLF for power plants was 53%. As a result, Maamba power operation reported a loss. The Maamba power plant is operating at full availability from January 2018.
- NBEIL, operating coal based power plant of 150MW, reported a PLF of 63% (vs 54% in Q3FY17), an improvement in operating metrics as power was sold in short term PPA’s. However, gross spread declined due to decline in realisation and increase in coal prices
- Net generation at NBVL’s standalone business was 242MU in Q3FY18, an increase of 8% yoy. Captive off take has risen by 18% yoy as NBVL has used power to produce ferroalloys (vs outside sale of power) due to favourable economics for ferroalloys.
- Recent strengthening in ferroalloys prices bodes well for captive ferroalloy operations. The ferroalloys reported EBIT of Rs262m in Ferro alloys division while sugar division reported a loss of Rs11m for Q3FY18.
- As a result, Consolidated EBITDA/PAT for the Q3FY18 was Rs1.7bn/Rs227m (EBITDA increase of 426% yoy, vs estimate of Rs2.0bn).
Key positives: Maamba operating at full throttle; Rise in power tariff in Zambia for end customers
Key negatives: Low availability for Maamba power plant
Impact on financials: We have revised our earnings downwards for FY18E by 9% to account for planned maintenance shutdown of Maamba power
Valuations & view
NBVL’s earnings is expected to receive a boost with its pithead Maamba power plant commercialized. With a cost-plus PPA and protected by inbuilt escalation clauses, the Maamba plant is likely to earn >22% RoE in USD terms from 4QFY18E onwards. We estimate NBVL’s earnings to increase by 94% CAGR over FY17-20E (FY19E profit – Rs4.5bn), driven by the commercialization of the Maamba plant. The stock is trading at attractive 6.5x 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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