NHPC ::Emkay: Top Buys

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TP : Rs34
Investment Rationale
§ Adj. Core ROE of 21% in FY11 - Including by Rs2.8bn revenue recognition in 1QFY12, related to FY10 and
FY11
§ Grossing up to be at full tax rate for FY12 vs. MAT in 1Q12 - 4Q profits to be higher by about Rs3bn
§ Previous yr sales likely to continue with water cess approval likely in 3Q and two tariff orders likely in FY12 itself
§ Regulatory trigger - CERC contemplating an increase in hydro returns. Consultation paper on the same likely to
be out very shortly
§ Commissioning pick up; as against 120MW in past two years, next five years to witness quantum jump - 515MW
in FY12, 697MW in FY13, 960MW in FY14, 1000MW in FY15 and 1000MW in FY16
§ Likely reduction in working capital driven by issue of tariff orders - about Rs15bn to be realized
Valuations
§ About 25-30% cheaper on ROE adjusted valuations compared with NTPC and PGCIL
§ Fair value of Rs34/Share without regulatory trigger and conservative commissioning targets
§ Only risk present is execution - a significant part of under construction capacity already passed through this
stage

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Emkay: Top Buys and Sells