Motilal Oswal is bullish on NHPC has recommended buy rating on the stock with a target price of Rs 32 in its research report dated February 08, 2019.
Motilal Oswal's research report on NHPC
NHPC’s 3QFY19 standalone (S/A) PAT of INR1.8b (our est. of INR4b) declined from INR6.9b in 3QFY18, due to prior period employee pay revision charge of INR1.9b, lower other income, and lower regulatory reserve. On underlying basis the performance was steady. Generation increased 21% YoY to 4.2BU due to commissioning of Kishanganga and better water flow. Revenue increased 5% YoY to INR15.7b. Incentive income was 73% higher YoY to INR1.9b on higher plant availability. Other income was down 79% YoY to INR1.2b as base quarter benefited dividend income (INR2.4b) and late payment surcharge (INR1.7b). NHPC has stopped recognizing regulatory revenue against Lower Subhanshari since 2QFY19. The PAT drag on this account was ~INR1.3b. It has, however, started recognizing regulatory revenue for difference between accounting and tariff order depreciation for Kishanganga project. The benefit on this account was INR1.2b (including INR0.8b for prior quarters).
We expect consolidated PAT to grow at CAGR of ~7% over FY18-21E on lower under-recoveries and building resumption of work at Lower Subhanshari. Dividend yield is attractive at 5-6%. We value NHPC on DCF-basis at TP of INR32/share. Maintain Buy.
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