Buy NHPC, target price Rs 40: Emkay Global

Emkay Global has buy call on NHPC with a target price of Rs 40. The current market price of NHPC is Rs 37.15.
NHPC, incorporated in the year 1975, is a large cap company (having a market cap of Rs 36965.73 crore) operating in Power sector.

NHPC key products/revenue segments include power, lease & other income, income from finance leases, other operating revenue, income from project development and contract revenue for the year ended March 31, 2022.

Financials
For the quarter ended June 30, 2022, the company has reported a consolidated total income of Rs 2990.86 crore, up 47.58 per cent from last quarter total income of Rs 2026.62 crore and up 15.62 per cent from last year same quarter total income of Rs 2586.91 crore. Company has reported net profit after tax of Rs 1052.86 crore in latest quarter.

The company’s top management includes Mr.Abhay Kumar Singh, Mr.Yamuna Kumar Chaubey, Mr.Rajendra Prasad Goyal, Mr.Biswajit Basu, Mr.Raghuraj Madhav Rajendran, Dr.Uday Sakharam Nirgudkar, Prof. (Dr)Amit Kansal, Dr.Rashmi Sharma Rawal, Mr.Jiji Joseph. Company has Lodha & Co. as its auditors. As on 30-06-2022, the company has a total of 1,004 crore shares outstanding.

Investment rationale
NHPC is expected to commission 2,800 MW of hydro capacity (50% of its present capacity of 5.5GW) over the next two years. Parbati II(800MW) and Subansiri (2,000MW) are at advanced stages of construction. Together, they will add Rs90bn to the regulated equity (up from Rs130bn to Rs220) over the next 2-3 years.

Apart from 2800MW under construction at the standalone level, NHPC has~3.6GW of projects under construction through subsidiaries/JVs. On the RE side,1,040MW of solar projects are under construction and 600MW is under a tender stage at the standalone level.

This will lead to improvement in RoE from 9.5% to ~11% by FY2025. We expect an EPS CAGR of ~11% over FY22-FY25E. The brokerage maintains Buy with a TP of Rs40.

Promoter/FII Holdings
Promoters held 212.85 per cent stake in the company as of June 30, 2022, while FIIs owned 19.83 per cent, DIIs 43.68 per cent.