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2Q not as good as expected
RESULTS REVIEW
Sales beat, but EPS misses on higher costs and taxes
NHPC’s 2QFY12 standalone adjusted sales of INR17.2b was 5.6% above our
estimate. However adjusted EBITDA of INR11.9b missed our estimate by
7.5% on higher operating expenses. Recurring EPS of INR0.62 missed our
estimate by 11.7% on EBITDA miss and a higher effective tax rate (24.8%
vs our expectation of 20%).
SUMMARY
NHPC allowed to pass on cess on water as expected
The Jammu and Kashmir (J&K) government had imposed a tax on water
consumed by NHPC’s hydro power plants located in J&K. As we expected,
the CERC allowed NHPC to pass on this water tax to the consumers.
Consequently, in 2QFY12, NHPC recorded sales of INR4.64b pertaining to
1HY12 water taxes it had already expensed.
VALUATION
Retain BUY with TP of INR30
We arrive at our P/BV-based TP of INR30 by splitting 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) and other items, which we value at 1x. Near-term catalysts
include capacity addition of 678MW (13% of existing capacity) over the
next six months, which should rerate the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
2Q not as good as expected
RESULTS REVIEW
Sales beat, but EPS misses on higher costs and taxes
NHPC’s 2QFY12 standalone adjusted sales of INR17.2b was 5.6% above our
estimate. However adjusted EBITDA of INR11.9b missed our estimate by
7.5% on higher operating expenses. Recurring EPS of INR0.62 missed our
estimate by 11.7% on EBITDA miss and a higher effective tax rate (24.8%
vs our expectation of 20%).
SUMMARY
NHPC allowed to pass on cess on water as expected
The Jammu and Kashmir (J&K) government had imposed a tax on water
consumed by NHPC’s hydro power plants located in J&K. As we expected,
the CERC allowed NHPC to pass on this water tax to the consumers.
Consequently, in 2QFY12, NHPC recorded sales of INR4.64b pertaining to
1HY12 water taxes it had already expensed.
VALUATION
Retain BUY with TP of INR30
We arrive at our P/BV-based TP of INR30 by splitting 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) and other items, which we value at 1x. Near-term catalysts
include capacity addition of 678MW (13% of existing capacity) over the
next six months, which should rerate the stock.
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