MOSL: NHPC (Buy)-One-offs and lower other income drags performance-Under-recoveries dragging earnings
NHPC: One-offs and lower other income drags performance; Under-recoveries dragging earnings; attractive dividend yield; Buy
(NHPC IN, Mkt Cap USD3.3b, CMP INR24, TP INR32, 36% Upside, Buy)
- NHPC’s 3QFY19 standalone (S/A) PAT of INR1.8b (our est. of INR4b) declined from INR6.9b in 3QFY18, due to prior period employee pay revision charge of INR1.9b, lower other income, and lower regulatory reserve. On underlying basis the performance was steady.
- Generation increased 21% YoY to 4.2BU due to commissioning of Kishanganga and better water flow. Revenue increased 5% YoY to INR15.7b.
- Incentive income was 73% higher YoY to INR1.9b on higher plant availability.
- Other income was down 79% YoY to INR1.2b as base quarter benefited dividend income (INR2.4b) and late payment surcharge (INR1.7b).
- NHPC has stopped recognizing regulatory revenue against Lower Subhanshari since 2QFY19. The PAT drag on this account was ~INR1.3b. It has, however, started recognizing regulatory revenue for difference between accounting and tariff order depreciation for Kishanganga project. The benefit on this account was INR1.2b (including INR0.8b for prior quarters).
NHPC Limited is engaged in electricity generation. The Company is engaged in electric power generation by hydroelectric power plants. The Company is also engaged in contracts, project management and consultancy works. Its power stations include Bairasiul, Salal, Chamera-I, Tanakpur, Dhauliganga, Rangit and Loktak. Its focuses on Teesta Low Dam-IV Hydroelectric Project (160 megawatt), West Bengal; Kishanganga Hydroelectric Project (330 megawatt), Jammu and Kashmir; Parbati- II Hydroelectric Project (800 megawatt), Himachal Pradesh, and Subansiri Lower Hydroelectric Project (2,000 megawatt), Assam/Arunachal Pradesh. It provides consultancy services in various fields of hydropower, including river basin studies, survey works, design and engineering, geological studies, geotechnical studies, hydraulic transient studies, hydrological studies, contract management, construction management, equipment planning, underground construction, testing, commissioning, and operation and maintenance.
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