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Buy This Miniratna Stock For A Target Price of Rs. 45 Says ICICI Securities

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National Hydroelectric Power Corporation (NHPC) Limited is India's largest hydropower generating organisation, in addition, the corporation has expanded into the fields of solar and wind power. NHPC is officially a 'Mini Ratna Category-I' organization, and the company's shares have increased 40.98 percent in a year, and 6.41 percent year-to-date (YTD). The stock has risen 19.00% in the past month and 8.50% in the previous five days. The stock is now trading at a market price of Rs 33.25, and brokerage company ICICI Securities anticipates more upside and has assigned the stock a buy recommendation with a target price of Rs 45.

 

Key investment rationale

Key investment rationale

The brokerage has said in a research note that "We visited NHPC's Subansiri Lower hydroelectric project, India's largest hydro plant under construction with a generation capacity of 2,000MW situated at the Arunachal Pradesh - Assam border in the North-East. With both the states completely on board and strict monitoring with monthly visits by board level officials of NHPC and senior power ministry officials, the project is progressing at a rapid pace. Overall progress of work up to 7th Apr'22 is 82%. Post our visit, we believe, while the first two units may be commissioned by Q4FY23E, the remaining units will go on-stream over FY24E."

"We have revised our estimates accordingly. FY25 will be the first full year of operations, although the plant will partly operate (50-60%) in FY24 too. Another positive outcome of the progress at Subansiri is that GoI is now working to fast-track other large hydro projects including Dibang (2,880MW) and revive Upper Subansiri (2,000MW) and Middle Subansiri (1,800MW). NHPC aims to become a 50GW company in the next 15 years, with 6GW HEPs under construction, and in-pipeline capacities of 26GW HEPs, 8GW PSPs and >12GW RE," ICICI Securities further added.

Buy for a target price of Rs 45
 

Buy for a target price of Rs 45

The brokerage has claimed that "NHPC is the only 'completely green' PSU power generating company as well as the largest in the country. We maintain our BUY rating on the stock and a DCF-based target price of Rs45. The stock is trading at 7.8x P/E and 0.9x P/B on FY24E basis. Its dividend yield is 6%."

Delay in project commissioning, disallowance of project capex leading to lower profit and any adverse regulatory changes by CERC lowering regulated RoE in 2024-29 regulations are the key risks of the stock as per the brokerage that investors should be aware of.

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

Read more about: stocks to buy
Story first published: Tuesday, April 19, 2022, 12:30 [IST]
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