NHPC - 1QFY2013 Result Update - Motilal Oswal

1QFY13 Result better than expected: NHPC adjusted PAT for 1QFY13 stood at INR6.5b v/s our estimate of INR5.7b. Higher PAT is led by 1) Higher incentive income where-in UI income stood at INR440 (v/s INR330 m YoY) and PAF stood at INR630m boosted by higher PAF at 94% v/s 90% YoY, 2) Higher Other Income at INR2.4b (v/s our est of INR2.2b) and 3) Lower taxes at 21% v/s our est. of 25%, owing to tax adjustment related to earlier years.

- Operational performance impacted: During 1QFY13, the generation for NHPC (Standalone) stood at 6.1BUs, down 2% YoY. Out of its 12 power plant , NHPC reported generation growth from only 3 plants. Average PLFs for the plants stood at 74.5% v/s 76.2% YoY. Lower generation at its plants is led by lack of snow fed water and delayed monsoon. During the quarter NHPC commissioned U-I of Chamera, while it commissioned U-II and III during 1st week of July.

- Projects facing delays: NHPC has targeted to commission 1.2GW (Including 520MW Parbatti-III) in FY13 and YTDFY13 it has commissioned 231MW Chamera. Management highlighted Chutak and Nimo Bazgo ready for commissioning but need to demonstrate full load, which is partly impacted due to transmission line delays. We understand local agitation has impacted commissioning of Uri -II while Kishanganga project is caught in controversy between India and Pakistan.

- Valuations and view: We marginally upgrade our earnings for FY13/14 by 5%/2% respectively to factor in 1) Higher incentive income, 2) Higher other income during the quarter. We expect to NHPC to report PAT of INR22.1b in FY13 (v/s INR21.1b earlier) and INR24.7b in FY14 (v/s INR24.3b earlier). Stock trades at PER of 9.2x and 8.3x and P/BV of 0.7x each on FY13E and FY14E basis. Re-iterate Neutral, despite 1x P/BV valuations given Subdued RoE of 7-8% (a large part of net worth deployed in cash/CWIP) and delayed capacity addition.

Source : Equity Bulls

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