MOSL: NHPC (Neutral)-Profits improve off a low base
NHPC: Profits improve off a low base
(NHPC IN, Mkt Cap USD3.4b, CMP INR24, TP INR25, 3% Upside, Neutral)
Capex run-rate increasing; Maintain Neutral
- NHPC’s results highlight the benefit of higher generation and the low base of the previous year. Reported PAT grew to INR4b from INR1.8b in 3QFY19.
- Capex run-rate is expected to increase on account of investment in new projects. However, their commissioning remains 4-5 years away, implying potential drag on near-term FCF/RoE. Neutral with a TP of INR25.
Profits increase off a low base
- NHPC’s standalone PAT more than doubled YoY to INR4.0b (from INR1.8b in 3QFY19; in line with our estimate of INR4.0b) off a low base. The previous year included the impact of regularization of pay scales (INR1.9b).
- Generation was up ~7% YoY at 4.5BU led by higher water availability. Plant availability factor was higher at 81.4% (v/s 79.5% in previous year).
- Revenue grew 14% YoY to INR18b due to recognition of pay revision and higher generation. Other income declined 46% YoY to INR0.65b (our estimate: INR1.1b).
- With the start of construction at Lower Subansiri (2,000MW) project (Oct’19), the company has capitalized borrowing and administrative costs for the same. Previously, NHPC used to create RDA balances for the same.
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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