New Research Reports

6 September 2018 NHPCs consolidated PAT declined ~17% YoY to INR25b in FY18. It was impacted periods revenue reversal at Parbati-III U-IV plant; (b) lower other income due to lower treasury and lower late-payment surcharge income; and (c) lower Stripping out the other income, prior-period items, one-offs and shutdown impact, the standalone (S/A) generation PAT grew by a healthy 19% YoY (Exhibit 1) even as regulated equity remained unchanged. Core (i.e. generation business) RoE on regulated equity increased ~200bp YoY to ~15%. We calculate O&M; under-recovery reduced on lower cost (Exhibit 2) and with a normative annual increase in O&M; allowance. Standalone (S/A) debtor days continue to improve, down to 67 days in FY18 from 75 days in FY17, and with a peak of 141 days in FY13, releasing INR5.8b. But INR5.4b payment to a contractor under arbitration offset this benefit. Cash capex was INR15.3b while the rest was allocation of cost through P&L;.

NHPC achieved CoD of 330MW Kishanganga project in April'18, but Parbati II (4x200MW) capacity is now expected to be commercialized only by FY21E-22E. Final report on Subansiri by MoEF has been kept reserved as the NGT is yet to decide whether the project is to be appraised through the current committee or form a new committee. We have cut our earnings estimates by 8.6%/14.9% for FY19E/20E to factor in delay in the commercialization of Parbati II project. Accordingly, we cut our SOTP-based Target Price (TP) to Rs31 v/s Rs34.6 earlier. We...

4 June 2018 INR1.7b), boosted by late payment surcharge income of INR1.5b, but partly offset by 32% YoY decline in incentive income to INR1b. Generation declined 35% YoY to 2.16BU due to hydrology. For FY18, S/A PAT was down ~1% YoY to INR27.5b. Higher dividend income from subsidiaries was offset by revenue reversal at Parbati-III Unit-IV and shutdown at TLDP. O&M; under-recovery reduced by ~INR1b on lower employee and other expenses. S/A regulated equity increased 0.6% YoY to INR109b. Generation declined 1% YoY to 22.9BU in FY18. Consolidated PAT declined 17% to INR25b due to lower other income (less liquid surplus and lower later payment surcharge) and ~40% decline in PAT at NHDC subsidiary (~51% stake) due to lower generation. Kishanganga 330MW was commissioned in May 2018.

The under-recovery in O&M cost is more than INR5.5b. It would decline to less than INR2b when the O&M norms are reset in the next tariff regulations in FY20. The decline in under-recoveries will also be aided by reduction in number of employees (count has reduced from ~8,000 in FY17 to ~7,500 in FY18 and will decline to ~6,500). The revenue under-recovery of INR1.5b- 2b per year on four projects due to over-run in capital cost, which is pending approval, is also likely to be recovered by FY20. Of the four projects, three are in the first review stage of CEA, while one is in the second review stage of PIB. The final stage is approval by CCEA

NHPC Ltd Q3FY18 results comment Revenue fell by 24.02% to Rs. 1497.93 Cr in Q3FY18 when compared to the previous quarter. On the other hand, it increased by 14.47% when compared with Q3FY17.

NHPC's 3QFY18 underlying PAT grew 40% YoY to INR2.7b (ahead of our estimate of INR2b), led by higher incentive income, lower other expenses, and saving in interest cost. Underlying PAT is adjusted for (a) dividend income of INR2.4b from NHDC and (b) late payment surcharge of INR2.3b (gross tax). Generation was up 1% YoY to 3.4BU. PAF increased ~270bp YoY to 76.8%. Incentive income increased 59% YoY to INR1.1b. Interest cost saving of INR1.1b was achieved on repayment and refinancing of debt. Refinancing will generate annualized saving of INR340m, of which INR170m will be retained by NHPC

We have revised our estimate upward to factor in higher dividend income in 9MFY18 and accordingly upgrade our SOTP target price to Rs34.6 as we continue to expect a better project execution visibility for FY19E/20E. Maintain our BUY rating on attractive valuation....

Valuation: We expect that the company will have an impetus leading to strong growth in the medium to long term on account of strong pipeline in the next few years. Thus, on our valuation front, at CMP 38.7 , the company is trading at a P/E multiple of 11.2x and a EV/EBITDA multiple of 7.9x which is at a discount as compared to the industry P/E and industry EV/EBITDA of multiple of 28.2x and 15.9x respectively. After considering all these factors and high probability of strong growth...

Regulated equity to increase 35 %, despite Subhanshiri project being on hold NHPC is targeting commercialization of the 330MW Kishanganga project from January 2018 and the 800MW Parbati-II project from December 2018. These two projects will increase AES in capacity by 19 % and attributing regulated equity (ARE) by 35 %. The 2,000MW Subhanshiri project remains on hold for now. Under-recoveries to decline on natural attrition and approval of five tariff orders O&M under recoveries have peaked, in our view. Wage bill growth will be muted due to high natural attrition, while existing manpower can manage new projects. We expect approval of capex for the five projects over the next few years, which can boost recurring PAT by INR1.5b. Higher dividend payout is boosting RoE; room for even higher payout/buyback Capital allocation has improved with a payout of INR113b in four years. Debtor days have come down after the implementation of the UDAY scheme for DISCOMs. Net worth (NW) in non-core business has dropped from 51 % to 36 %, and RoE has improved from 8.7 % to 9.9 % over FY13-17. Another 32 % of NW can be paid out, which is not deployed in core business

NHPC Ltd Q2FY18 results comment Revenue decreased by 15.24% to Rs. 1971.42 Cr in Q2FY18 when compared to the previous quarter. Also, it fell by 16.51% when compared with Q2FY17.