Buy NHPC; target of Rs 26: Emkay

Emkay Global Financial Services is bullish on NHPC and has recommended buy rating on the stock with a target of Rs 26 in its October 31, 2012 research report.

“NHPC’s 2Q13 APAT came slightly lower than our estimate of Rs7.6bn. Reported Pat stood at Rs7.8bn whereas APAT arrived at Rs7.4bn after adjusting for – 1) Rs790mn of previous year sales, 2) Rs25mn of prior period adjustments and 3) Rs205mn of cost impact of Chutak. APAT grew by 14.1%yoy and 14.3%qoq led by (1) commissioning of 231MW Chamera-III in Jun/July’12, (2) higher other income (incld other operating income) of Rs3.1bn, up 72%yoy and 29%qoq and (2) higher PLF of 87% vs. 85% in 2Q12 led to higher generation based incentives. Gross generation during the quarter grew by ~8% to 7.6BU. RoE was grossed up at MAT rate in 2Q13 - to review this in 4Q13. On balance sheet, we highlight increase in debtors from Rs20.5bn (156days of TTM sales) at the end of FY12 to Rs26.1bn (178days of TTM sales).”
 
“NHPC 1H13 EPS stands at Rs1.1 vs. Rs1.0 in 1H12. We have done fine tuning of our estimates factoring in disclosures as per annual report. Consequently our FY13E/FY14E earnings estimate now stands at Rs1.9/Rs2.1 respectively. Our estimates have factored in 471MW commissioning in FY13E and 511MW in FY14E. This will drive up the regulated equity by 16% and 20% for FY13E/FY14E respectively.”

“NHPC’s has outperformed NTPC and PGCIL in last 3 months with 18% absolute performance. Despite this, we continue to prefer NHPC given 1) ROE adjusted valuation discount still high at 35% and 2) upside triggers. The upside triggers are lined up in NHPC - 1) against no commissioning in 2yrs, commissioned 231MW Chamera III & every 3-6mths commissioning lined up and (2) high probability of CERC allowing 1% higher ROE. We retain our buy recommendation on the stock with price taget of Rs26/share,” says   Emkay Global Financial Services research report.

Institutional holding more than 40% in Indian cos

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