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Capacity additions soon
CHANGE
Current stock price does not factor in any capacity addition
NHPC’s stock has outperformed MSCI India by 15% over the last six
months following significant under-performance in 2010, which we
believe more than priced in poor execution by the company. The stock is
still at a 13% discount to our worst-case fair value estimate of INR28,
reflecting pessimism on NHPC’s execution capability.
CATALYST
We expect capacity additions in the near term to rerate the stock
Over the next six months, we expect 678MW of capacity addition (13% of
existing capacity), with 231MW Chamera III and 44MW Chutak starting
operations as early as next month. While this is lower than our previous
estimate, we expect it to re-rate the stock. NHPC is a regulated hydro
power producer, so it has low fuel-price risk.
VALUATION
Retain BUY with a revised TP of INR30
Based on project delays, we reduce our P/BV-based target price by 6.3%
to INR30, from INR32. To arrive at our TP, we split NHPC’s FY12E BVPS of
INR22.7 into: 1) regulated equity of INR7.7/share, which we value at 2x
P/BV, and 2) INR15/share of equity invested in Capital Work in Progress
(CWIP), cash and other items, which we value at 1x.
KEY : NHPC’s installed capacity in GW growth
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Capacity additions soon
CHANGE
Current stock price does not factor in any capacity addition
NHPC’s stock has outperformed MSCI India by 15% over the last six
months following significant under-performance in 2010, which we
believe more than priced in poor execution by the company. The stock is
still at a 13% discount to our worst-case fair value estimate of INR28,
reflecting pessimism on NHPC’s execution capability.
CATALYST
We expect capacity additions in the near term to rerate the stock
Over the next six months, we expect 678MW of capacity addition (13% of
existing capacity), with 231MW Chamera III and 44MW Chutak starting
operations as early as next month. While this is lower than our previous
estimate, we expect it to re-rate the stock. NHPC is a regulated hydro
power producer, so it has low fuel-price risk.
VALUATION
Retain BUY with a revised TP of INR30
Based on project delays, we reduce our P/BV-based target price by 6.3%
to INR30, from INR32. To arrive at our TP, we split NHPC’s FY12E BVPS of
INR22.7 into: 1) regulated equity of INR7.7/share, which we value at 2x
P/BV, and 2) INR15/share of equity invested in Capital Work in Progress
(CWIP), cash and other items, which we value at 1x.
KEY : NHPC’s installed capacity in GW growth
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