NHPC, which had reported a muted set of numbers in the June 2024 quarter, has left analysts baffled over its future prospects. Following a mundane quarter, a couple of brokerage firms anticipate a sharp correction in the state-owned hydro power giant. However, some analysts remain positive on the stock, citing an in-line quarter for the PSU.
NHPC reported a marginal rise in its consolidated net profit of over 1.2 per cent on a year-on-year (YoY) basis to Rs 1,108.46 crore in June 2024 quarter. The state run hydropower player's revenue from operations dipped 2.3 per cent to Rs 2,694.2 crore for the quarter.
At the operating level, NHPC's Ebitda for the quarter dropped 2.8 per cent YoY to Rs 1,462.6 crore in the first quarter of current fiscal year, while Ebitda margins contracted marginally, roughly about 30 basis points to 54.3 per cent during April-June 2024 period.
NHPC’s Q1FY25 PAT was flattish on YoY basis and was supported by higher other income and regulatory deferral accounts. The company is planning to add capacity at 21 per cent CAGR over FY24-27E, but a large part of it is only expected in FY27E. Historically, there has been a delay and thus the timeline of the commissioning is to be watched, said Antique Stock Broking.
"We expect commissioning of Parbatti-2 in FY25E but earnings impact is only expected in FY26E as commissioning is likely to happen late FY25E. And we expect commissioning of Lower Subansiri over FY26-27E. We have modelled FY25E to be a flattish year for EPS growth," it added, while resuming coverage on NHPC with 'hold' rating and a target price of Rs 92 apiece.
Shares of NHPC gained marginally at the opening tick to Rs 99.80 on Friday, but declined 1.7 per cent from day's high at Rs 98.10. The total market capitalization of the company slipped below Rs 1 lakh crore mark. The stock had settled at Rs 98.80 in the previous trading session.
NHPC reported in-line 1QFY25 Ebitda of Rs 1,280 crore, down 8 per cent YoY, while PAT of Rs 1,020 crore was aided by provision write-back and higher rate regulated income, said Kotak Institutional Equities. The timelines for the commissioning of Subansiri and Parbati II have not been revised, and they are likely to be commissioned over the next two years, it said.
NHPC has also started work on three new renewable projects (290 MW), targeted to be commissioned by FY2026E. Valuations at 18 times P/E and 2.3 times P/B (FY2026E) factor in perfect execution, while slippages in the commissioning timelines have pushed back earnings growth, Kotak added with a 'sell' and revised fair value of Rs 68, suggesting a 32 per cent downside in the stock.
Shares of NHPC have surged more than 105 per cent from its 52-week low at Rs 48.48, hit in October 2023. The stock scaled its 52-week high of Rs 118.45 on July 15, 2024. The stock has surged more than 50 per cent in 2024 so far, but is down nearly 10 per cent in the last one month.
NHPC reported a subdued consolidated net revenue due to 3 per cent YoY less generation, due to low water level in reservoirs. Rs 140 crore and Rs 102 crore of expenses are on account of interest on arbitration award and other income due to write back of past provisions were one-offs during 1QFY25, said JM Financial.
All adjustments in respect of flash floods in river Teesta (October 23) were completed during 4QFY24. With significant hydro capacity addition expected by FY26/FY27 (800 MW Parbati-II, 2000MW Subansiri Lower, 120MW Rangit-IV, 624MW Kiru) and over 1000 MW Solar, the installed capacity with regulated return is set to grow almost 50 per cent by FY27, it said.
"We estimate revenue, Ebitda and PAT CAGR of 27 per cent, 38 per cent and 29 per cent, respectively over FY24-27E. India is prioritizing to enhance its hydropower due to its load following ability for grid balancing and pumped hydro storage in place, we continue to maintain 'biy' rating on the ‘only’ large utility with 100 per cent green energy portfolio with a target price of Rs 111," said JM.
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