Accumulate NHPC; target of Rs 22: PLilladher

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Accumulate NHPC; target of Rs 22: PLilladher

Prabhudas Lilladher is bullish on NHPC and has recommended accumulate rating on the stock with a target of Rs 22 in its January 27, 2012 research report.

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Prabhudas Lilladher is bullish on  NHPC and has recommended accumulate rating on the stock with a target of Rs 22 in its January 27, 2012 research report.

"NHPC, 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."

"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."

"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 Rs 24," says Prabhudas Lilladher research report. 

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