BRIEF SUMMARY OF WISE MONEY RESEARCH REPORT ON NHPC SHARE
INVESTMENT RATIONALE: NHPC share plays an important role in implementing the Government of India (GoI currently holds 70.95% in NHPC) planned capacity addition in the hydel power sector.
CMP: Rs 29.95
Target Price: Rs 37
Upside: 23%
The strategic importance of NHPC share is also evident from the long-term loans extended by the GoI at concessional rates for some hydropower projects of the company located in J&K.
Currently, it has 5,451MW hydro capacity and 50MW/50MW Solar and Wind capacity.
NHDC (a 51% subsidiary of NHPC share) owns 1,520MW, along with the Government of MP.
Both these together form 15% of the total hydro capacity (~46GW) in the country.
The projects of NHPC share tend to get awesome returns on a regulated basis.
Recently, NHPC share has acquired Jal Power Corp. Ltd.
The Govt. of India on 30th March’21 accorded investment approval for acquisition of JPCL.
The balance work of the project will be completed in a period of 38 months.
Tendering is under process in respect of Balance E&M Works.
The estimated cost of the project is Rs. 938.29 crore and estimated levelized tariff is Rs. 4.37 per unit.
Considering the project pipeline in near future, it can reach the CAPEX of ₹ 8,000 Cr to ₹ 10,000 Cr and NHPC share is planning to create two different joint ventures.
One for development of Renewable Energy, small hydro and Green Hydrogen Projects and other for Strategic Business Venture.
The company is expected to expand its standalone capacity by 50% in the next 4/5 years – 5.5GW to 8.4GW with the addition of Parbati II (800 MW expected by FY23/FY24) and Subansiri Lower (2,000MW expected by FY25/FY26E).
In the medium term, it is planning to execute projects which is under construction – 500 MW (with the help of its subsidiary) and 1.6 GW (under JV).
RISK
Execution risk for under-construction projects.
Regulatory risk due to cost-plus regime.
VALUATION
NHPC share is really superb business and has a strong balance sheet.
According to the management of the company, it has taken initiatives to streamline the processes by adopting new technologies in the areas of engineering for its sustainable growth.
It is also looking forward for remote operation of some of its power stations.
NHPC share remained in its comfort zone due to the low overall gearing and maintained debt coverage metrics.
Thus, it is expected that the stock will see a price target of Rs.37 in 8 to 10 months’ time frame on a one-year average P/BVx of 1x and FY23 BVPS of Rs.37.
Wise Money suggests that this stock is analysed for a horizon of 8 to 10 months.
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