NHPC: Not without Subansiri ::Kotak Sec, report

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Not without Subansiri. The continued stalemate over the Subansiri project prevents us from taking a constructive stance on NHPC that will likely continue to bear the brunt of high interest and administrative cost for the 2,000 MW stranded under-construction capacity. Earnings during the quarter were impacted by lower generation due to forced shutdown of Uri II since end-November. Maintain REDUCE rating and TP of `22.


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NHPC | Q3FY15 | Net profit hit by borrowing and admin cost for stuck projects | We dont have any formal rating on the stock. :: IndiaNivesh

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NHPC - Lower tariff realisation mars performance… :: ICICI Securities

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NHPC- Unclear Subanshri issue to act as overhang… :: ICICI Securities, PDF link

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NHPC Ltd.|Q2FY15 First Cut Analysis | Adjusted PAT in line our expectation-:: IndiaNivesh

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Expected addition muted NHPC:: CIMB

Expected addition muted

NHPC’s FY14 consolidated earnings were 19% below our estimate largely due

to lower-than-expected incentive income and higher deferred tax. NHPC

commissioned 807MW of capacity in FY14 and we expect 624MW to be added

in the next three years (Figure 5). While the stock is already trading below its

book value, we believe that its low ROE and issues with under-construction

projects are likely to keep the stock performance muted. Due to the recent

run-up, we downgrade NHPC to Reduce from Hold with a higher rolled-over

SOP-based target price. Key de-rating catalysts are continued delays in

capacity addition, delays in resolution of Subansiri issues and potential for an

equity reduction in other high-capital costs projects such as Chutak.

Results below expectations

NHPC’s standalone 4QFY14 loss of INR7bn was led by booking of Rs12.6bn

worth of borrowings and administrative costs for the stalled Subansiri and

TLDP-IV projects. During the quarter, the company received a one-time

dividend of Rs3.5bn from a subsidiary and an insurance claim of Rs840m for

the Dhauliganga project. It also booked a negative incentive income of Rs560m

on prior quarter adjustments. Excluding these, the profitability for the quarter

was sharply below our and consensus estimates.

Update on under-construction projects

NHPC has commissioned 807MW in FY14 and we expect 624MW to be added

in the next three years (figure 5). The 2GW Subansiri project has been stalled

for over two years due to local agitation and clarity on its construction timeline

is anticipated by the end of 1HFY15. We now expect it to be commissioned by

FY19. An additional provision of about Rs5bn-6bn may be required in FY15 if

the construction does not restart. The work on Parbati-II project has restarted

after it was awarded to Gammon-CMC JV and Valecha. We now expect it to be

commissioned by FY19. The tunnel work for Kishanganga is complete and it is

expected to come onstream in FY17.

Downgrade to Reduce

The stock is already trading below its book value, but we believe that its low

ROE and various issues with

stock performance muted.

NHPC Capacity addition fails to aid earnings :: Prabhudas Lilladher

! Q4FY13 Adjusted PAT down 40.3% YoY, FY13 PAT flat YoY: NHPC’s reported
revenue in Q4FY13 de-grew by 23.8% YoY, mainly on account of flat generation
growth (despite capacity addition from Chutak and Chamera 3rd Unit) and lower
incentives. The company has booked Rs3.6bn in OI and extraordinary heads on
account of cash received from DESU. Thus, adjusting to all these items, APAT
stood at Rs3.5bn, which is a de-growth of 40.3% YoY. PAF for FY13 is at around
85%.
! Targets 400MWs addition in FY14E: NHPC aims to commission Nimoo Bazgo
(45MWs), 2 units of TLDP 3 (66MWs) and Uri 2 (1 unit) Parbati III (260MWs) by
the end of FY14E. With the commission date of Uri 2 anticipated in June 2013,
the project has seen unforeseen slip-ups in the electro mechanical works.
Similarly for TLDP 4, since March 20, 2013, HEP is on a standstill on account of
stoppage of construction by HCC.
! Debtors – some respite: NHPC has realised close to Rs2.4bn from DESU and
interest thereon in Q4FY13. However, debtor position of Rs20bn is flat QoQ.
! Valuation and Recommendation: The stock is trading at a P/BV of 0.8x FY15E.
Further, pass-through of water cess in the tariff and receivables from various
SEBs continue to nullify the increase in ROE impact. However, capacity addition
and improvement in operational performance in a seasonally strong Q1-
Q2FY14E would be the key things to look forward to. We have downgraded our
numbers and TP based on lower capacity addition and incentives. We maintain
‘Accumulate’ on the stock.

Technicals: Ranbaxy, Thermax, NHPC, Gujarat Fluorochem, Kalpataru Power, Kolte-Patil Developers : Business Line

1QFY13 Results : NHPC performance above estimate :: Motilal Oswal

1QFY13 Results : NHPC performance above estimate
Incentive and other income boosted PAT
 1QFY13 Result better than expected: NHPC adjusted PAT for 1QFY13 stood at
INR6.5b v/s our estimate of INR5.7b. Higher PAT is led by 1) Higher incentive income
where-in UI income stood at INR440 (v/s INR330 m YoY) and PAF stood at INR630m
boosted by higher PAF at 94% v/s 90% YoY, 2) Higher Other Income at INR2.4b (v/s
our est of INR2.2b) and 3) Lower taxes at 21% v/s our est. of 25%, owing to tax
adjustment related to earlier years.
 Operational performance impacted: During 1QFY13, the generation for NHPC
(Standalone) stood at 6.1BUs, down 2% YoY. Out of its 12 power plant , NHPC
reported generation growth from only 3 plants. Average PLFs for the plants stood
at 74.5% v/s 76.2% YoY. Lower generation at its plants is led by lack of snow fed
water and delayed monsoon. During the quarter NHPC commissioned U-I of
Chamera, while it commissioned U-II and III during 1st week of July.
 Projects facing delays: NHPC has targeted to commission 1.2GW (Including 520MW
Parbatti-III) in FY13 and YTDFY13 it has commissioned 231MW Chamera.
Management highlighted Chutak and Nimo Bazgo ready for commissioning but
need to demonstrate full load, which is partly impacted due to transmission line
delays. We understand local agitation has impacted commissioning of Uri -II while
Kishanganga project is caught in controversy between India and Pakistan.
 Valuations and view: We marginally upgrade our earnings for FY13/14 by 5%/2%
respectively to factor in 1) Higher incentive income, 2) Higher other income during
the quarter. We expect to NHPC to report PAT of INR22.1b in FY13 (v/s INR21.1b
earlier) and INR24.7b in FY14 (v/s INR24.3b earlier). Re-iterate Neutral, despite 1x
P/BV valuations given Subdued RoE of 7-8% (a large part of net worth deployed in
cash/CWIP) and delayed capacity addition.

NHPC-Results stable... though debtors show signs of alarm: Prabhudas Lilladher,

􀂄 Adjusted PAT up 6.6%: NHPC’s reported revenue de-grew by 3.3% YoY, whereas
on adjusted basis, revenue was up by 1.7% in Q1FY13 at Rs14.2bn. Sales
included recoverable water cess of Rs2bn. While the reported PAT de-grew by
15.3% YoY, adjusted PAT was up by 6.6%. Incentives stood at Rs1.1bn in Q1FY13.
Generation was down YoY by 2.2% at 16.2bn. PAF for the quarter stood at 93.8%
as against 90.3% in Q1FY12.

technicals: M & M, Chennai Petro, United Spirits, Dishman Pharma, Wire & Wireless, NHPC, :: Business Line

NHPC: Tariff finalization boosts earnings; project delay still a concern: Quant

 NHPC (NHPC IN) reported an adjusted PAT of Rs23.7 bn in FY12 vs Rs21.4 bn y-y. Reported PAT of Rs27.7 bn in FY12 was higher on the back of tariff finalization of the projects.
 In FY12, tariff on a number of power projects was finalized, thereby leading to an increase in sales. Prior period sales stood at Rs4.7 bn. Overall sales of Rs58.7 bn also included water cess of Rs6.9 bn. Other income of Rs8.5 bn was higher by ~20% y-y, due to higher interest earnings from deposits and interest from beneficiaries on delayed finalization of tariff.
 While earnings improved, we maintain our negative view on the stock, given the delay in project commissioning and also due to inherent risks faced by the hydro sector. While NHPC has guided for 1,212 MW of commissioning in FY13, our estimate stands at ~650 MW for FY13 while the rest would slip to FY14.
 We increase our FY13 EPS estimate by ~16.1% to Rs2.0 and introduce our FY14 EPS estimate of Rs2.2. We lower our PT to Rs19.9 from Rs20.6 based on a DCF method. Although there is an increase in FY13E EPS, our delayed commissioning expectation of projects implies lower price target. We reiterate our REDUCE rating on the stock.

NHPC Buy Namaste India conference highlights :Deutsche Bank

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We hosted the management of NHPC in our Access India conference. Key
takeaways from the meetings are-
** Capacity addition on-track for FY13: 313MW (231 MW of Chamera,
22MW of Chutak and 60MW of Uri II) is likely to be added by March 2012.
TLD-IV would be commissioned by March 2013. All the units of TLD III will
be commissioned by Aug 2012 to Sep 2012, Uri II by April 2012, TDL IV by
March 2012, Nimoo Bazgo by April-Sep 2012. While U#1 of Parbati III will
start by Jan 2013, full commercialization would depend on water-flow from
Parbati II, which has been delayed due to technical and contractual issues.
** For its large 2GW Subansiri project, company has spent INR55bn out of
INR100bn which has been delayed due to local protests. In the 12th Plan,
NHPC has a target of adding capacity to the tune of 4,189MW.
** While J&K Govt intends to take back NHPC's older projects in the state
at depreciated cost, NHPC believes the ownership is with them as per
agreements and PPAs have been signed with 6-7 other states.
** CERC has allowed recovery of water cess from beneficiaries. Regulator
continues to allow not only geological surprises but also cost overruns due
to human intervention (like strikes) as a pass-through.
** The company has downsized its pipeline of projects to 11GW from
16GW mainly due to transfer of few projects to the private sector and denial
of environmental clearance for Kotli Bahl (INR800 mn survey and investigation
expenses written-off in 3QFY12). All other pipeline projects are expected
to receive clearances with no major obstacles, including the new thermal
JV projects with Orissa govt. For Tipaimukh (1500MW), some clearances
are in place. Projects which are awaiting sanction such as Kotli Bhel Stage
IA (195MW), Teesta IV (520MW), Tawang I (600MW), Tawang II (800MW)
have got approvals except CEA and Public Investment Board clearances.
** With respect to current regulations, the management hinted that CERC
regulations are pro-hydro, but they need to think from IRR perspective rather
than only ROE to improve further participation in hydro sector.
** Most good hydro sites have been taken by either States or allocated to
private sector for upfront royalty. NHPC has been developing projects at
difficult sites like Leh (J&K) earlier and has expertise in designing/planning
such projects in harsh conditions.
We have a Buy rating with INR28/sh target price

NHPC report:: Motilal oswal,

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 Adjusted PAT in-line with estimates: NHPC reported 3QFY12 PAT of INR2.2b. Adjusted for several extraordinary/
exceptional items, PAT stood at INR2.7b (up 51% YoY), in-line with our estimates. During 3QFY12, NHPC's
(standalone) generation stood at 3.1BUs, up 2% YoY. Barring Loktak, all other NHPC projects reported degrowth
in generation and average PLF stood at 38% v/s 37% YoY. Incentives income comprising of UI, Secondary
Energy and PAF stood at INR770m v/s INR1.57b in 2QFY12 and INR1.8b in 1QFY12.
 Capacity addition target lowered: NHPC has lowered its capacity addition targets for FY12 and FY13 to 313MW
(v/s earlier guidance of 515MW) and 673MW (v/s 1.1GW earlier), respectively. It is facing (1) regulatory and
administrative bottlenecks for some of its projects in J&K (Uri, Chutak , Nimoo Bazgoo) and Arunachal Pradesh
(Subhansri Lower), and (2) environment issues at Kotle Bel. This, in our view, has further diminished visibility
on capacity addition ramp-up, which is already delayed significantly.
 Receivable issue continues: NHPC is also facing delays in receivables, and 33% of its debtors (i.e. INR9b) are
60 days old. The SEBs/discoms not paying NHPC on time include Punjab, Jaipur and Reliance Infrastructure,
and account for 95% of the receivables over 60 days.
 Cut earnings Estimates: We cut our FY12/FY13 estimates to factor in capacity delays, and expect NHPC to
report PAT of INR17.2b in FY12 (down 1% YoY) and INR23b in FY13 (up 31% YoY). Stock trades at P/E of 13x FY12E
and 10x FY13E, and P/BV of 0.9x (both years). Re-iterate Neutral.

NHPC - Results loaded with negative surprises ::Prabhudas Lilladher,

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􀂄 Adjusted sales flat YoY: Revenues from operations at Rs7.7bn (PLe: Rs7bn) for
Q3FY11, flat YoY, was on account of underutilisation of operating capacities,
with generation down by 5.8% YoY. The company has included items in
revenues to the tune of Rs1.1bn, mainly arising out of water cess billing and
recovery of tariffs and interest on that amount. Expenditure also had major
extraordinary items of Rs800m pertaining to provisions created for Kotli Bhel
Stage-1&2 projects, as these projects have less chances of getting approved by
MOEF.
􀂄 Adjusted PAT up 16.8%: Adjusted PAT stands at Rs2.6bn (PLe: Rs2.4bn) as
against reported PAT of Rs2.1bn (grossed up at MAT rate).
􀂄 Fails to reach the target of 500MWs commissioning in FY12E: NHPC’s Chutak
HEP Unit 1 will now get commissioned by March 2012 instead of November
2011, mainly due to bad weather conditions. Chamera and Uri 2 will now get
now commissioned by June 2013 instead of March 2012, mainly due to nonavailability
of load from Discoms and bad weather conditions. The company has
plans to add close to 822MWs in FY13E. Cash stands at Rs40bn. Regulated
equity stands at Rs71bn. Also, the company will take a hit on P/L as Parbati 2 is
delayed which will affect the COD of Parbati 3. NHPC will book the capitalisation
cost from FY13E on Parbati 3, whereas the tariffs will be booked when the full
plant achieves COD in FY16E.
􀂄 Valuation and Recommendation: NHPC currently has been lagging behind in
terms of capacity addition which will lead to a flat generation growth in FY12E.
We have changed our estimates to factor in capacity delays and adverse effect
of Parbati 3 capitalisation into FY13E and beyond numbers. We have, thus,
reduced our target price and believe that the stock is fairly priced with negative
bias. The stock is trading at a P/BV of 0.9x FY13E/14E. We maintain
‘Accumulate’ just because it is the safest play (non-fossil fuel) in the Power
Sector, but lower our target price from Rs24.

Buy NHPC; Target : Rs 28 ::ICICI Securities

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V a l u e   p l a y ;   c a p a c i t y   a d d i t i o n   a   d a m p e n e r …
The company reported sales of | 882 crore much higher than our
estimate of | 666 crore. Sales included | 70.7 crore as water cess.
Adjusted sales came in at | 770 crore. Adjusted profit for the company in
Q2FY12 was | 265 crore vs. our estimate of | 255 crore. During the
quarter, the company generated 2892 million units (MUs) (down 11%
YoY, down 1% YoY). Sales realisation per unit stood at | 3.4/kwhr (net
unit sales taken at 88% of gross generation). At the CMP of | 20, the stock
is trading at an inexpensive valuation of 0.9x FY13 P/BV. Since lack of
capacity addition is the key overhang for the company, our earnings have
factored  no  capacity  addition  in  FY12  and  ~  822  MW  in  FY13  (these
include 515 MW that slipped in FY12). We maintain our BUY rating with a
target price of | 28. However, investors will have to be patient enough for
earning meaningful returns on the stock.
ƒ Other key highlights for the quarter
In Q3FY12, other expenditure included | 80 crore incurred for the
Kotli Bhel project (which is yet  to receive environment clearance)
and | 20 crore towards relocation expenses. Other income for the
quarter came in at | 203 crore (up 12% QoQ, 22% YoY). Of these,
| 31 crore was towards interest from beneficiary states, which has
risen on finalisation of tariff.
V a l u a t i o n
At the CMP of | 20, the stock is trading at P/E of 11.1x and 9.5x on FY12E
and FY13E EPS, respectively. Similarly, on P/BV multiples, the stock is
trading at 1.0x and 0.9x FY12E and FY13E, respectively. We maintain our
BUY rating on the stock with a target price of | 28. NHPC has least fuel
risk in an environment where fuel security can materially impact earnings
and valuation of power utilities.

NHPC (Maintain HOLD) - 3QFY12 - Result Update (IFIN)

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3QFY12 accounting policy changes drag profit

Accounting policy changes: NHPC revised its policy of capitalisation of corporate office, regional office, survey expenses and general overhead expenses, due to which Rs 1bn was charged as revenue expenses. According to the management, Rs 0.8bn are non-recurring and represent expenses on Kotli Bhel project’s survey that would be capitalised on receipt of MoEF’s approval and the balance Rs 0.2 bn would be recurring expenses. The above changes would not entail any change in tariffs/cash flow and hence are not a concern. 

Impact of prior-period and non-recurring items: After adjusting for impact of prior-period and non-recurring items, like-to-like PAT for 3QFY12 improved 62% YoY to Rs 2.6 bn vs. PAT of Rs 1.6 bn in 3QFY11 and RPAT of 2.1 bn in 3QFY12.

Uri I and Salal project update: Backed by MoP, NHPC has ruled out any scope of transferring its projects in J&K state. An event in the form of withdrawal of J&K’s demand for project transfer and/or capacity addition estimated would be key triggers for the stock to outperform.

Capacity addition highlights: While the NHPC management has maintained its capacity addition estimates, we maintain our view and expect NHPC (standalone) to add capacity of 275 MW in FY12, 937 MW in FY13, 660 MW in FY14 and 2300 MW in FY15. Accordingly, NHPC is estimated to benefit from incremental units sold of 9% in FY13 and 10% in FY14.

Valuations and Recommendation: NHPC share price has under- performed the Sensex by 18% in the last 12 months, but have outperformed it by 10% in the last 1 month. At CMP, NHPC trades at PB(x) of 0.9xFY13E. We have valued NHPC using DCF and arrived at a target price of Rs. 23.5. We maintain our HOLD rating. At our target price, NHPC would trade at P/B(x) of 1.1x/ FY12E/FY13E.

QUERY CORNER - Bajaj Holdings, Archies, Sonata , Dhoot Industrial, NHPC, Karuturi , JSW Energy, Sundaram Brake :: Business Line

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I bought Sundaram Brake Linings at Rs 255 and Bajaj Holdings at Rs 820. Can I average them now? Let me know the medium- and long-term view on these stocks. Can I ever exit these stocks with profit?

Vedavyas L. Pai

Sundaram Brake Linings (Rs 169.5): Sundaram Brake Linings is one of the stocks that has not given up too much ground in 2011. It spent the whole of last year vacillating between Rs 140 and Rs 200.

The zone between Rs 140 and Rs 170 is quite significant from a long-term perspective. As long as the stock trades above this range, there remains the chance of move higher to Rs 200, Rs 230 or Rs 285 in the months ahead.

You can consider averaging at current level with stop at Rs 130. That said, it will be best to divest your holding on a decline below Rs 125, since next target is Rs 88.

Long-term trend will turn positive only once the stock moves above Rs 280. Else the stock can remain shackled within Rs 100-300 range. Long-term target on a break-out are Rs 340 and Rs 395.

NHPC: Uncertainties priced, attractive even on extant earnings ::Kotak Securities

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NHPC (NHPC)
Utilities
Uncertainties priced, attractive even on extant earnings. NHPC has been at the
receiving end of news flows regarding (1) a potential buy-back of power projects by
Jammu & Kashmir and (2) stoppage of work at Subansiri Lower, a 2,000 MW project.
We note that the CMP sufficiently factors the risk of both these eventualities (to which
we would ascribe low probabilities), and the stock looks extremely attractive on extant
earnings, offering (1) dividend yield of >3%, (2) 0.8X P/B and (3) 9X on FY2013E.

Buy NHPC; Target :Rs 28 ::ICICI Securities,

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M e e t s   e x p e c t a t i o n s …
The company reported sales of | 1981 crore much higher than our
estimate of | 1279 crore due to inclusion of water cess of | 463 crore paid
by the company to the J&K government and other operating income of |
123 crore as interest from beneficiary states. Adjusted profit for the
company in Q2FY12 was | 729 crore vs. our estimate of | 698 crore
primarily due to higher incentives on a YoY basis. During the quarter, the
company generated 7088 MUs (up  12% QoQ, down 1% YoY). Sales
realisation per unit stood at | 2.23/kwhr (net unit sales taken at 88% of
gross generation). Valuation is at 1.1x FY13 P/BV with capacity addition of
515 MW in FY12 and 697 MW in FY13. We maintain our BUY rating with a
target price of | 28. NHPC has least fuel risk in an environment where fuel
security can materially impact earnings and valuation of power utilities.
Delay in capacity addition (as in 2000 MW Subanshri lower and 800 MW
Parbati) is the key risk for the stock.
ƒ Other key highlights for the quarter
In Q2FY12, out of operating income of | 151 crore, | 123 crore was
due to interest from beneficiary states. Other expenditure (| 325.6
crore) included expenditure of | 202 crore towards water cess with
respect to power stations situated in J&K. Total expenditure booked
by the company in this regard for H1FY12 is | 407 crore.
Depreciation declined 16.5% YoY due to a change in rate (5.2%
current vs. earlier rate of 10%).
V a l u a t i o n
At the CMP of | 25.2, the stock is trading at P/E of 12.6x and 11.5x on
FY12E and FY13E EPS, respectively. Similarly, on P/BV multiple, the stock
is trading at 1.1x and 1.1x FY12E  and FY13E, respectively. We maintain
our BUY rating on the stock with a target price of | 28.