NHPC Ltd - Steady earnings buoyed by surcharge income - ICICI Securities

NHPC has reported good earnings in Q4FY21. Standalone reported PAT was up 5.6% at Rs4bn, mainly due to higher surcharge income. However, adjusted PAT was up 21.2% YoY at Rs4.6bn (one-time provision of Rs0.6bn). Standalone reported revenue/EBITDA was Rs13.4bn / Rs4.3bn, down 30% / 22.5% YoY respectively. The quarter's performance takes the company's FY21 adjusted EPS to Rs3.2 (up 7.5% YoY) which, considering the company had provided Rs1.9bn rebate on fixed costs in Q1FY21, is a significant achievement. NHPC has also declared a final dividend of Rs0.35/sh, taking the total dividend to Rs1.6/sh (implying 6% yield at CMP). We maintain BUY on the stock, but slightly increase our target price to Rs35 (earlier Rs34). We will update with more details after the post-result call to be held next week

- Weak quarterly operational performance supported by higher surcharge income: NHPC's standalone hydro generation declined 25% YoY at 2,946MUs for Q4FY21 due to low water flow at most of its plants. However, higher late payment surcharge (at Rs3.3bn) helped increase 'other income' by 13% YoY. On standalone basis, reported PAT came in at Rs4bn, up 5.6% YoY. However, adjusted PAT was up 21.2% YoY at Rs4.6bn. Company made a provision of Rs0.6bn (post-tax) for Parbati-III and Tawang-II projects during the quarter. Standalone revenue/EBIITDA for the quarter declined 30%/ 22.5% at Rs13.4bn/Rs4.3bn respectively, due to lower generation. Consolidated reported PAT (attributable to the company) for Q4FY21 was up 171% at Rs4.3bn.

- FY21 adjusted EPS 7.5% YoY higher at Rs3.2: The quarter's performance takes the company's FY21 adjusted profit to Rs32bn and EPS to Rs3.2 (rise of 7.5% YoY) which, considering the company had provided Rs1.9bn rebate on fixed costs in Q1FY21, is a significant achievement. Consolidated reported PAT for FY21 was up 7.1% YoY at Rs35.9bn.

- Final dividend of Rs0.35 takes FY21 total dividend to Rs1.6: NHPC has declared a final dividend of Rs0.35/sh taking the total FY21 dividend to Rs1.6/sh, implying 6% yield at CMP. NHPC follows the GoI-mandated dividend policy (higher of 5% of net worth or 30% of PAT), which will continue to be >Rs1.5/sh p.a. going forward.

- Receivables decline further: On account of receipt through the PFC / REC Aatmanirbhar scheme as well as pending payments from states, NHPC's receivables reduced to Rs32bn at FY21-end, which is 36% lower from the Q2FY21-end level of Rs50bn and 16% lower than FY20-end level.

- 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 7.6x P/E and 0.8x P/B on FY23E basis. Its dividend yield is >6%. We maintain our BUY rating, but slightly increase our DCF-based target price to Rs35 (earlier Rs34), incorporating higher 'other income'.

Shares of NHPC LTD. was last trading in BSE at Rs.26.85 as compared to the previous close of Rs. 27.05. The total number of shares traded during the day was 52060860 in over 4723 trades.

The stock hit an intraday high of Rs. 27.5 and intraday low of 26.4. The net turnover during the day was Rs. 1407984497.

Source : Equity Bulls

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