NHPC Dividend: Below Rs 100, Maharatna Stock Is Rs 7,000 Crore Away From Hitting Rs 1 Lakh Crore M-Cap; BUY?

Super power generator, NHPC has given a power-packed performance this week due to its Q3 results and upcoming interim dividend payout to the tune of 14%. On February 15, NHPC shares gained as much as 9% and were among the top buyers amid a slow market trend. However, brokerages Kotak Institutional Equities and Elara Capital have recommended selling or reduce on NHPC shares which are currently trading below Rs 100.

On February 15, the Maharatna power company's share price stood at Rs 92.61 apiece, up by 4.6% on BSE with market cap of Rs 93,027.07 crore. The stock is just Rs 6972.93 crore away from hitting a market value of Rs 1 lakh crore.

Dividend:

The company approved an interim dividend of Rs 1.40 per share on the face value of paid-up equity shares of Rs 10/- each for the financial year 2023-24. In percentage terms, the dividend payout is to the tune of 14%. The company fixed February 22, 2024, as the record date for determining eligible shareholders. The interim dividend shall be paid/ dispatched within the period as stipulated in the Companies Act, 2013.

Q3 Results:

Revenue from operations stood at Rs 2,055.50 crore, on a consolidated basis, in Q3FY24, lower from Rs 2,582.76 crore in the same quarter a year ago, and Rs 2,931.26 crore in the preceding quarter. Consolidated PAT was at Rs 628.44 crore in Q3FY24, also declining from Rs 775.99 crore in Q3FY23 and Rs 1,693.2 crore in Q2FY24.

What Brokerages Say On NHPC?

Firstly, NHPC has surpassed JM Financial's target price of Rs 91 in a single day. JM's note said, "With significant hydro capacity addition expected by FY26/FY27 (800 MW Parbati-II, 2000MW Subansiri Lower, 120MW Rangit-IV, 624MW Kiru) and 1135MW Solar, the installed capacity with regulated return is set to grow 50% by FY26/FY27, after a gap of 3 years resulting in Revenue/EBITDA/PAT CAGR of 20%/24%/11% over FY23-26E."

Hence, profit booking is expected in the stock price ahead.

In its latest report, Elara Capital said, "We revise NHPC to Reduce from Buy due to the recent stock price appreciation, but we continue to remain positive on the stock given: 1) high dividend yield and 2) growth post commissioning of Parbati II/Subansiri projects. We revise earnings estimates for FY24E/26E. We revise our TP to INR 77 (from INR 60) on 2.0x FY26E regulated equity."

Elara highlighted about delay in commissions. The brokerage mentioned commissioning of two large projects - Parbati-II (800MW) and Subansiri Lower (2,000MW) - has slipped into FY25E and FY26E, respectively. Installed capacity (standalone; hydro), as of December 2023, was 5,551MW, and may reach 6,351MW/8,351MW by FY25E/26E, post the commissioning of Subansiri Lower (2,000MW) and Parbati II (800MW) projects. Regulated equity was INR 129bn, as of Mar-23 and may reach INR 224bn, as of FY27. NHPC has projects aggregating to 13.9GW under various implementation stages, including 10.4GW of projects under construction.

According to Elara, NHPC's (NHPC IN) 9MFY24 generation declined 10% YoY to 19.3BU versus 21.6BU in the corresponding period last year. Generation in Q3FY24 declined 28% YoY to 2.5BUs as against 3.6BU in Q3FY23. This was led by seasonality. Plant availability factor (PAF) deteriorated to 85.17% in 9M FY24 from 88.75% last year. PAF for Q3FY24 declined to 71.73% versus 88.25% in Q3FY23. Incentive income saw a sharp decline in Q3FY24 to INR 940mn versus INR 1,349.6mn last year. Incentives from secondary energy stood at 162.4mn in Q3FY24 versus 136.1mn last year. Deviation charges stood at INR 132.7mn in Q3FY24 versus INR 292mn in Q3 FY23.

Meanwhile, brokerage Kotak Institutional Equities said, "NHPC created more market value in the past quarter (Rs293 bn) than equity invested by the company in operational and under-construction projects (Rs265 bn) through its lifetime. Operationally, NHPC reported a PAT of Rs5.4 bn (-30% yoy, -62% qoq) due to lower generation of 2,642 MU (-28% yoy) on account of generation being impacted at three power plants on the Teesta river basin in October 2023. The commissioning of two large projects- Subansiri Lower (2,000 MW) and Parbati II (800 MW)-has slipped into FY2025E, primarily due to the disruption of works as a result of heavy monsoons. Downgrade to SELL (from ADD), with a revised FV of Rs60/share as the stock trades at 16X P/E and 2X P/B on FY2025E."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.