NHPC - Earnings robust; projects on track - ICICI Securities

Key takeaways from NHPC's Q3FY21 conference call: 1) Generation was lower YoY but PAF remains higher, 2) NHPC is on track with respect to the under construction of hydro projects, 3) company has an ambitious solar project pipeline consisting of several floating solar projects, 1.2GW project in UP and 2GW CPSE solar project (to be undertaken in trader mode), 4) receivables, which were Rs41.7bn at Q3FY21-end, have declined significantly to Rs27.8bn currently, helped especially by the disbursal of loans by PFC/REC to key states including UP and J&K, and 5) FY21/FY22 capex target is Rs54bn/Rs82bn. We maintain our BUY rating and DCF-based target price of Rs34 on NHPC.

- Generation lower but PAF remains higher: Generated 3,797MU in Q3FY21 vs 4,515MU in Q3FY20 (excluding infirm power from Parbati-II). 9MFY21 generation was down 4% to 21,262MU vs 22,152MU. Lower generation was due to shutdown of all units of Sewa-II for restoration works and lower water availability at many power stations. PAF in 9MFY21 was 88.59% vs 87.47% in 9MFY20. PAF for Q3FY21 was 83.11% vs 81.43% in Q3FY20.

Update on projects:

- Subansiri Lower: Work has resumed from 15th Oct'20. Target commissioning is by Aug'22 for one unit and by Aug'23 for all units. PPA for 130MW capacity remains pending, for which the company is in discussion with Delhi. Cumulative expenditure for the project is Rs128.6bn. Levelised tariff Rs5/unit.

- Parbati-II: Units-I & II were synchronised by Apr'20 and units-III & IV in Jul'20. Target completion of the balance tunnel work and commissioning of the project is by H2FY22 (2.3km of tunnel work is pending). Project cost is Rs100bn and Rs87bn spent till Dec'20. NHPC has applied for cost revision. Levelised tariff is Rs5.58/unit.

- Dibang - Forest clearance stage-II approval granted. Nearly Rs16bn worth of investment approval for pre-investment activities also granted. PIB memo has been given to the MoP.

- Jal Power Rangit: - NHPC had bid for Rs1.65bn for 120MW project, which had been approved by the NCLT Hyderabad bench. Total cost of the project is estimated at Rs9.43bn. Levelised tariff is Rs4.40/unit. Timeline for the completion of balance work is 42 months from CCEA approval.

- MoU signed with J&K government to install over 4.1GW: NHPC has signed an MoU with J&K government for the execution of five hydro projects totaling 4,134MW in the Union Territory - implementation of 850MW Ratle HEP through a JV, and execution of 930MW Kirthai-II HEP, 1,856MW Sawalkot HEP, 240MW Uri-I (stage-II) and 258MW Dulhasti (stage-II). Total investment in all the projects is estimated at Rs350bn and will ensure 24x7 power supply to all consumers in the state.

- Ratle project: Project cost of Rs52.8bn has been approved and tendering of packages is underway. Levelised tariff is Rs3.92/unit.

- MoU with Madhya Pradesh for Dugar HEP has been signed and the project capacity has been raised from 449MWto 500MW. As a result, design energy increases from 1510MU to 1700MU.

- For Tawang-II project, expenditure of Rs1.3bn till date has been provided for since the state government's response to go ahead with the project is not positive.

Solar power:

- Targeting 6-7GW (including floating solar projects), to be developed through both EPC and developer/trader modes.

- 2GW CPSE solar project, for which PPA and PSA have been signed, will be developed through developer/trader mode.

- NHPC has been allotted the States of Telangana, Odisha and J&K by MNRE for development of UMREPPs. It will develop 500MW of floating solar capacity across Odisha through JV with GEDCOL and 100MW of floating solar capacity in Telangana. UP and Rajasthan are also exploring floating solar projects.

- NHPC is under the process of development of 50MW floating solar in Kerala, 150MW in Odisha, 600MW in Rajasthan.

- NHPC is in discussion with Rajasthan for development of solar power under UMREPP for 1200MW.

- NHPC recognised Rs3.2bn of previous year sales on account of TLDP-IV tariff approval plus interest of Rs1.4bn for the same during the quarter. Approved capital cost for the project is Rs17bn (actual cost is Rs0.9bn higher).

- NHPC is in advanced stages to acquire the 2% stake of PTC India in Chenab Valley Power Projects Ltd.

During Q3FY21:

- Other income was higher due to higher late payment surcharges (Rs1.56bn vs Rs150mn).
- Employee cost was lower due to superannuation of employees, partly offset by allowances, promotions etc.
- Depreciation was lower due to completion of 12 years of Dulhasti project.
- Other expenses were higher due to provision for Tawang-II project (Rs1.3bn).
- Finance cost was lower due to repayment of loans.

Incentive earned in 9MFY21 (vs 9MFY20):

- Secondary energy - Rs697mn (vs Rs1,007mn)
- PAF-based Rs3.6bn (Rs3.46bn)
- Deviation charges Rs1,185mn (Rs879mn in Q1FY20)

- Capex during 9MFY21 was Rs22.7bn vs Rs28.6bn in 9MFY20

Shares of NHPC LTD. was last trading in BSE at Rs.25.25 as compared to the previous close of Rs. 25.25. The total number of shares traded during the day was 596349 in over 1230 trades.

The stock hit an intraday high of Rs. 25.85 and intraday low of 25.1. The net turnover during the day was Rs. 15153293.

Source : Equity Bulls

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