BUY CMP 19.00 Target Price 25.00 NHPC LIMITED Result Update: Q1 FY14 SEPTEMBER 20 th 2013 ISIN: INE848E01016 Index Details Stock Data Sector Power BSE Code 533098 Face Value 10.00 52wk. High / Low (Rs.) 29.40/14.80 Volume (2wk. Avg.) 1370000 Market Cap (Rs. in mn.) 233714.06 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY13A FY14E FY15E Net Sales 53066.40 61026.36 67129.00 EBITDA 43167.90 48756.92 53757.88 Net Profit 23482.20 24842.43 28036.25 EPS 1.91 2.02 2.28 P/E 9.95 9.41 8.34 Shareholding Pattern (%) 1 Year Comparative Graph SYNOPSIS NHPC Ltd, together with its subsidiaries, engages in the generation and sale of electricity in India. During the quarter, the robust growth of Net Profit is increased by 7.48% to Rs. 7199.30 million. Revenue for the quarter rose by 13.89% to Rs. 16193.70 million from Rs. 14218.30 million, when compared with the prior year period. EBITDA is increased by 14.81% to Rs. 13192.60 mn against Rs. 11490.60 mn in the corresponding period of previous year. NHPC and Uttar Pradesh New and Renewable Development Agency have signed a MOU for formation of JVC for implementation of 50 MW Solar Power Project at Tehsil Kalpi, District Jalaun, UP. NHPC has signed MoU with Ministry of Power, Government of India for generation target of 22300 MU and 3 projects have been targeted to be commissioned during 2013-14. NHPC LTD S&P BSE SENSEX NHPC is plans to add over 10,000 MW of hydropower capacity by the end of XII plan (year 2017). Net Sales and Operating Profit of the company are expected to grow at a CAGR of 4% and 5% over 2012 to 2015E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) NHPC Ltd 19.00 233714.06 1.91 9.95 0.84 7.00 CESC Ltd 334.05 41958.00 49.52 6.72 0.65 70.00 Neyveli Lignite Corporation Ltd 56.75 95210.00 8.64 6.57 0.79 28.00 JSW Energy Ltd 45.45 74622.50 6.73 6.76 1.21 5.00
QUARTERLY HIGHLIGHTS (STANDALONE) Results updates- Q1 FY14, NHPC Limited, together with its subsidiaries, engages in the generation and sale of electricity in India. It owns and operates 16 hydroelectric power stations with an installed capacity of approximately 5,747 MW, reported its financial results for the quarter ended 30 th June, 2013. Months Jun-13 Jun-12 % Change Net Sales 16193.70 14218.30 13.89 PAT 7199.30 6698.10 7.48 EPS 0.59 0.54 7.48 EBITDA 13192.60 11490.60 14.81 The company s net profit jumps to Rs. 7199.30 million against Rs. 6698.10 million in the corresponding quarter ending of previous year, an increase of 7.48%. Revenue for the quarter rose by 13.89% to Rs. 16193.70 million from Rs. 14218.30 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 0.59 a share during the quarter, registering 7.48% increase over previous year period. Profit before interest, depreciation and tax is Rs. 13192.60 millions as against Rs. 11490.60 millions in the corresponding period of the previous year. Break up of Expenditure Break up of Expenditure Value in Rs. Million Q1 FY14 Q1 FY13 Employee Benefit Expenses 2318.40 2114.90 Depreciation & Amortization Expense 2760.00 2220.60 Other Expenses 3168.20 3063.90 Total Expenditure 8246.60 7399.40
Latest Updates NHPC Limited and Uttar Pradesh New and Renewable Development Agency have signed a Memorandum of Understanding (MOU) for formation of JVC for implementation of 50 MW Solar Power Project at Tehsil Kalpi, District Jalaun, Uttar Pradesh. During 12 th Plan, 1702 MW capacity would be added from the ongoing construction projects. Apart from that, the construction of other projects, which are under various stages of Govt. clearances, would takeoff during the 12 th Plan. NHPC has signed Memorandum of Understanding (MOU) on 25th March, 2013 with Ministry of Power, Government of India for the year 2013-14. In the signed MOU for NHPC, generation target under excellent rating has been set as 22300 MU as against last year target of 20550 MU. Under project implementation parameters, 3 projects have been targeted to be commissioned during 2013-14. COMPANY PROFILE NHPC Limited (Formerly known as National Hydroelectric Power Corporation Ltd.), A Govt. of India Enterprise, was incorporated in the year 1975 with an authorized capital of Rs. 2000 million and with an objective to plan, promote and organize an integrated and efficient development of hydroelectric power in all aspects. Later on NHPC expanded its objects to include development of power in all its aspects through conventional and nonconventional sources in India and abroad. At present, NHPC is a Mini Ratna Category-I Enterprise of the Govt. of India with an authorized share capital of Rs. 1,50,000 Million. Initially, on incorporation, NHPC took over the execution of Salal Stage-I, Bairasiul and Loktak Hydro-electric Projects from Central Hydroelectric Project Construction and Control Board. At present the total installed capacity of the Company is 5747 MW consisting of 16 operating Power Stations of NHPC Ltd with an installed capacity of 4227 MW and 2 Power Stations of its subsidiary i.e. NHDC Ltd with an installed capacity of 1520MW.
Projects As on date NHPC Limited has become the largest organization for hydropower development in India, with capabilities to undertake all the activities from conceptualization to commissioning in relation to setting up of hydro projects. NHPC Limited is also planning to take Wind and Tidal wave projects in the country. NHPC Limited is presently engaged in the construction of 6 hydroelectric projects with an installed capacity of 4050 MW are in progress out of which two projects of 760 MW viz. Uri-II and Parbati-III are in advanced stages of completion. NHPC Limited has drawn up a massive plan to add over 10,000 MW of hydropower capacity by the end of XII plan (year 2017).
FINANCIAL HIGHLIGHT (STANDALONE) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March31, 2012-2015E FY12A FY13A FY14E FY15E SOURCES OF FUNDS (Rs.in.mn) Shareholder's Funds Share Capital 123007.40 123007.40 123007.40 123007.40 Reserves and Surplus 140527.90 155397.60 180240.03 208276.28 1. Sub Total - Net worth 263535.30 278405.00 303247.43 331283.68 Non Current Liabilities Long term borrowings 162728.00 174175.20 181142.21 188387.90 Deferred Tax Liabilities 2040.40 4606.90 3961.93 3605.36 Other Long term liabilities 19518.00 17056.90 16033.49 15552.48 Long Term Provisions 11874.50 7219.20 7580.16 7959.17 2. Sub Total - Non Current Liabilities 196160.90 203058.20 208717.79 215504.91 Current Liabilities Short Term Borrowings 1800.00 0.00 0.00 0.00 Trade Payables 2189.50 1794.10 1578.81 1405.14 Other Current Liabilities 28012.60 27666.00 28495.98 29065.90 Short Term Provisions 35899.30 34126.70 34809.23 35505.42 3. Sub Total - Current Liabilities 67901.40 63586.80 64884.02 65976.46 Total Liabilities (1+2+3) 527597.60 545050.00 576849.24 612765.04 APPLICATION OF FUNDS Non-Current Assets Fixed Assets Tangible assets 156541.40 173117.40 186966.79 200054.47 Intangible assets 7141.80 7282.20 7573.49 7800.69 Capital Work in Progress 193497.40 197090.40 205117.98 217203.57 a) Sub Total - Fixed Assets 357180.60 377490.00 399658.26 425058.73 b) Non-current investments 24991.40 24006.10 24486.22 24975.95 c) Long Term loans and advances 14286.20 12387.40 11644.16 12109.92 d) Other non-current assets 11819.30 9443.70 8121.58 8933.74 1. Sub Total - Non Current Assets 408277.50 423327.20 443910.22 471078.34 Current Assets Current Investment 2507.40 2507.40 2632.77 2738.08 Inventories 438.10 570.70 684.84 780.72 Trade receivables 20521.80 20490.50 21515.03 22805.93 Cash and Bank Balances 60039.70 56160.10 60652.91 63079.02 Short-terms loans & advances 19002.60 20995.60 22675.25 24035.76 Other current assets 16810.50 20998.50 24778.23 28247.18 2. Sub Total - Current Assets 119320.10 121722.80 132939.02 141686.69 Total Assets (1+2) 527597.60 545050.00 576849.24 612765.04
Annual Profit & Loss Statement for the period of 2012 to 2015E Value(Rs.in.mn) FY12A FY13A FY14E FY15E Description 12m 12m 12m 12m Net Sales 59194.80 53066.40 61026.36 67129.00 Other Income 8024.00 9927.80 10920.58 11466.61 Total Income 67218.80 62994.20 71946.94 78595.61 Expenditure -20417.40-19826.30-23190.02-24837.73 Operating Profit 46801.40 43167.90 48756.92 53757.88 Interest -3381.00-3853.80-4354.79-4877.37 Gross profit 43420.40 39314.10 44402.13 48880.51 Depreciation -8938.60-9692.90-10371.40-10993.69 Exceptional Items 688.60 2400.10 0.00 0.00 Profit Before Tax 35170.40 32021.30 34030.73 37886.82 Tax -7452.70-8539.10-9188.30-9850.57 Net Profit 27717.70 23482.20 24842.43 28036.25 Equity capital 123007.40 123007.40 123007.40 123007.40 Reserves 140527.90 155397.60 180240.03 208276.28 Face value 10.00 10.00 10.00 10.00 EPS 2.25 1.91 2.02 2.28 Quarterly Profit & Loss Statement for the period of 31 st Dec, 2012 to 30 th Sep, 2013E Value(Rs.in.mn) 31-Dec-12 31-Mar-13 30-Jun-13 30-Sep-13E Description 3m 3m 3m 3m Net sales 10103.70 10993.80 16193.70 18946.63 Other income 1890.20 3156.40 2485.50 2361.23 Total Income 11993.90 14150.20 18679.20 21307.85 Expenditure -3971.70-4943.40-5486.60-6062.92 Operating profit 8022.20 9206.80 13192.60 15244.93 Interest -989.10-1020.00-1160.30-1311.14 Gross profit 7033.10 8186.80 12032.30 13933.79 Depreciation -2389.60-2546.40-2760.00-2980.80 Exceptional Items 0.00 2400.10 0.00 0.00 Profit Before Tax 4643.50 8040.50 9272.30 10952.99 Tax -1525.80-2207.90-2073.00-2990.17 Net Profit 3117.70 5832.60 7199.30 7962.83 Equity capital 123007.40 123007.40 123007.40 123007.40 Face value 10.00 10.00 10.00 10.00 EPS 0.25 0.47 0.59 0.65
Ratio Analysis Particulars FY12A FY13A FY14E FY15E EPS (Rs.) 2.25 1.91 2.02 2.28 EBITDA Margin (%) 79.06% 81.35% 79.89% 80.08% PBT Margin (%) 59.41% 60.34% 55.76% 56.44% PAT Margin (%) 46.82% 44.25% 40.71% 41.76% P/E Ratio (x) 8.43 9.95 9.41 8.34 ROE (%) 10.52% 8.43% 8.19% 8.46% ROCE (%) 13.02% 11.68% 12.21% 12.46% Debt Equity Ratio 0.62 0.63 0.60 0.57 EV/EBITDA (x) 7.23 8.15 7.26 6.68 Book Value (Rs.) 21.42 22.63 24.65 26.93 P/BV 0.89 0.84 0.77 0.71 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs.19.00, the stock P/E ratio is estimated 9.41 x FY14E and 8.34 x FY15E respectively. Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs. 2.02 and Rs. 2.28 respectively. Net Sales and Operating Profit of the company are expected to grow at a CAGR of 4% and 5% over 2012 to 2015E respectively. On the basis of EV/EBITDA, the stock trades at 7.26 x for FY14E and 6.68 x for FY15E. Price to Book Value of the stock is expected to be at 0.77 x and 0.71 x respectively for FY14E and FY15E. We recommend BUY in this particular scrip with a target price of Rs.25.00 for Medium to Long term investment. INDUSTRY OVERVIEW Power or electricity is one of the most critical components of infrastructure affecting economic growth and wellbeing of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy. The Indian power sector is one of the most diversified sectors in the world. Power in India is generated from commercial sources like coal, lignite, natural gas, oil, hydro and nuclear power as well as other viable nonconventional sources like wind, solar, agriculture and domestic waste. The demand for electricity in the country
has been growing at a rapid rate and is expected to increase further in the years to come. In order to meet the increasing requirement of electricity, massive addition to the installed generating capacity in the country is required. With countries across the globe fast taking to the use of renewable energy resources, India has progressed well in adapting to both solar and wind energy on a large scale. Many states in the country like Gujarat and Madhya Pradesh have contributed tremendously in their support to use of renewable energy. Market Size India is the fifth largest producer and consumer of electricity in the world after the US, China, Japan and Russia. It has a market potential of 2 billion (US$ 2.66 billion) for setting up high-voltage transmission lines by 2018, as per Alstom. The high-voltage direct current (HVDC) market is estimated at 50 billion (US$ 66.44 billion) in the next 10 years, and Alstom is targetting a 20 per cent market share. India is set to become a global manufacturing hub with investments across the value chain. About 82 gigawatt (GW) worth of generation capacity is set to be added during FY11-FY15; future investments will benefit from strong demand fundamentals, policy support, and increasing government focus on infrastructure. Investments The investment climate is very positive in the power sector. Due to surge in the sector, the power sector has witnessed higher investment flows than envisaged. The power ministry has set a target for adding 76,000 megawatt (MW) of electricity capacity in the 12th Plan and 93,000 MW in the 13th Five-Year Plan (2017-2022). The industry attracted foreign direct investment (FDI) worth Rs 36,200.05 crore (US$ 6.10 billion) during April 2000 to April 2013. Some of the major investments made into the Indian power sector are as follows: Jakson Power Solutions plans to invest Rs 750 crore (US$ 126.46 million) in providing solar energy solutions across India in the next three to four years. The company has so far invested Rs 200 crore on its 20 MW solar power plant set up near Jodhpur Crompton Greaves (CG) has won a contract worth 3.5 million (US$ 4.65 million) for the design, engineering, supply, installation and commissioning of a wind-power farm substation at the 75 MW Seine Rive Gauche Nord wind farm in France Tata Power Solar has won a 50 MW solar project from NTPC. The new plant at Rajgarh in Madhya Pradesh (MP) is expected to double NTPC's solar capacity Indian Metals & Ferro Alloys (IMFA) has commissioned the second unit of its 2x60 MW captive power plant (CPP) at Choudwar, Odisha
The US Agency for International Development (USAID) and US-based institutional investor Northern Lights Capital Group plan to invest US$ 100 million in India's clean energy sector via Nereus Capital Tata Power has commissioned a 1 MW geothermal pilot plant in Australia, in association with Geodynamics Government Initiatives The Government of India s decision to allow foreign direct investment (FDI) through automatic route in power exchanges while retaining the cap at 49 per cent will open up opportunities for overseas players to participate in the growth and development of the Indian power sector. The Government has approved a scheme for the financial restructuring of DISCOMS to restore the health of the power sector. Under the Union Budget 2013-14, the government plans to construct a transmission system from Srinagar to Leh at an investment of Rs 1,840 crore (US$ 310.26 million). Some of the initiatives taken by the Government of India to boost the power sector are: A 50 kilowatt peak (KWp) and a 100 KWp solar photovoltaic power plants were inaugurated in Chandigarh by Dr Farooq Abdullah, Union Minister for New and Renewable Energy, Government of India. The power plants incurred a cost of Rs 2.33 crore (US$ 392,884.24) India and Turkey have agreed to enhance their cooperation in the field of renewable energy. Dr Farooq Abdullah, Union Minister for New and Renewable Energy, Government of India, has visited Turkey along with a high level delegation to explore greater opportunities for cooperation and collaboration between the two countries The Cabinet Committee on Economic Affairs (CCEA) has approved five mechanisms for supply of coal to power producers. Under the mechanism, Coal India Ltd (CIL) will sign Fuel Supply Agreements (FSA) for a total capacity of 78,000 MW The first 363.3 MW unit of ONGC Tripura Power Company at Palatana, Tripura, was commissioned by Mr Pranab Mukherjee, the President of India To give a boost to its efforts to bring down the cost of solar power in India, Ministry of New and Renewable Energy (MNRE) plans to roll out large MW size solar power projects, in the order of 500 MW and above Road Ahead The Government of India has initiated several reform measures to create a favourable environment for the newly added generating capacity in the country. The policies and reforms have put in place a highly liberal framework for generation of power in the country. The government is also adopting constructive steps towards
implementing large-scale solar power projects and is poised to position itself as one of the world s major solar producer. Renewable energy is fast emerging as a major source of power. Wind energy is the largest source of renewable energy in India; it accounts for an estimated 87 per cent of total installed capacity in renewable energy. The country aims to increase the importance of wind power even further; there are plans to double wind power generation capacity to 20 GW by 2022. Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.
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