NHPC - Good earnings buoyed by one-time gains - ICICI Securities

NHPC Ltd. has reported an excellent set of numbers in Q3FY21. Standalone reported revenue/EBITDA/PAT for the quarter was Rs20.9bn/Rs11.8bn/Rs8.1bn, up 16.6%/27%/100.2% YoY, respectively. However, adjusted standalone PAT was Rs4.6bn, up 13.4% YoY. The quarter's performance takes the company's 9MFY21 reported/adjusted EPS to Rs2.8/Rs2.6 (up 7.8%/0.3% YoY), which, considering the company had provided Rs1.9bn rebate on fixed cost in Q1FY21, is a significant achievement. NHPC has also declared an interim dividend of Rs1.25/sh (implying 5.1% dividend yield at CMP). We maintain our BUY rating and DCF-based target price of Rs34 on NHPC. We will update with more details after the post-result call (to be held) next week

- Excellent Q3FY21 numbers result in YoY growth: On standalone basis, revenue for the quarter increased 16.6% to Rs20.9bn, while EBITDA was up 27% at Rs11.8bn, aided by reduction in employee expense. Reported PAT came in at Rs8.1bn, up 100.2% YoY. However, adjusted PAT was Rs4.6bn, up 13.4% YoY. There were two one-time items in the quarter - i) provision of Rs1.3bn for Tawang-II due to implementation uncertainty, and ii) Rs5.7bn (Rs4.3bn current and previous years' sales and Rs1.4bn interest thereof) revenue recognition on account of tariff and cost finalisation of TLDP-IV (amount recognised from commissioning in Mar'16 since billing was being done on provisional tariff till tariff and cost approval in Jan'21). Growth in PAT was aided by an increase in other income to Rs2bn (vs Rs649mn in Q3FY21) due to higher late payment surcharges.

- 9MFY21 adjusted EPS up 0.3% YoY at Rs2.6: The quarter's performance takes the company's 9MFY21 reported/adjusted EPS to Rs2.8/Rs2.6 (up 7.8%/0.3% YoY), which, considering the company had provided Rs1.9bn rebate on fixed cost in Q1FY21, is a significant achievement. Consolidated reported PAT for Q3FY21 is up 70% to Rs8.7bn, while for 9MFY20, it is up 3.7% YoY at Rs28.3bn.

- Declares good dividend of Rs1.25/share: NHPC has declared an interim dividend of Rs1.25/share, which implies 5.1% dividend yield at CMP. The company follows the GoI mandated dividend policy (higher of 5% of net worth or 30% of PAT), which translates to >Rs1.5/sh p.a.

- Receivables decline: During Q3FY21, receivables on account of PFC/REC scheme (~Rs12bn-13bn, primarily for J&K and UP) and others helped reduce the overall receivables by ~35% from Q2FY21-end levels of Rs50bn. NHPC has also received Rs7.34bn from PFC on account of dues pending from J&K UT through the PFC/REC scheme, under UDAY limit relaxation in Jan'21.

- Valuations remain attractive: NHPC is the only 'completely green' PSU generating company as well as the largest in the country. The stock is trading at 7.1x P/E and 0.7x P/B on FY23E basis. Its dividend yield is >6%. We maintain our BUY rating and target price of Rs34, valuing the stock on DCF basis.

Shares of NHPC LTD. was last trading in BSE at Rs.25.25 as compared to the previous close of Rs. 25.05. The total number of shares traded during the day was 442595 in over 1161 trades.

The stock hit an intraday high of Rs. 25.5 and intraday low of 25.05. The net turnover during the day was Rs. 11157439.

Source : Equity Bulls

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