Hold NHPC; target of Rs 28: ICICIdirect.com

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Hold NHPC; target of Rs 28: ICICIdirect.com

ICICIdirect.com has recommended hold rating on NHPC with a target of Rs 28, in its August 11, 2011 research report.

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ICICIdirect.com has recommended hold rating on NHPC with a target of Rs 28, in its August 11, 2011 research report.

"NHPC, higher sales (due to higher other operating income and previous year sales of Rs 275 crore) , grossing up of sales at MAT rate, higher employee costs , lower depreciation and interest cost , were the key highlights of Q1 FY 12 NHPC results. While adjusted sales (Rs 1198 crore) were in line with estimates, adjusted EBITDA (Rs  876 crore) was lower than estimates (on account higher employee costs). Adjusted PAT came in Rs 596 crore . During the quarter the company generated 6284 MUs (+14%YoY, +233% QoQ). Sales realisation per unit stood at Rs 2.6/kwhr (net unit sales taken at 88% of gross generation). Valuation at 1.1x FY13 P/B with capacity addition of 515 MW in FY12, 697 MW in FY13 coupled with least fuel risk and lower leverage."

"In Q1 FY12, out of operating income of Rs 129 crore; Rs 89 crore was on account of interest on earlier tariff. Other expenditure (Rs316.5 crore) included provision of Rs 202 crore towards water cess in respect of power stations situated in J&K. Total provisions made in this regard stands at Rs 341 crore . Other income (Rs 237.9 crore) includes one time income of Rs 69 crore towards profit of a transfer of project. Depreciation declined 13% on YoY basis due change in rate (5.2% current v/s earlier rate of 10%). Interest cost declined 17% on YoY basis on account of prepayment of high cost debt of Chamera project."

"At the CMP of Rs 25.2, the stock is trading at P/E of 13.8x and 11.2x on FY12E and FY13E EPS, respectively. Similarly, on P/B multiple the stock is trading at 1.1x and 1.1x FY13E, respectively. Upgrade the stock from hold to Buy with target price of Rs 28," says ICICIdirect.com research report.

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