NHPC Puts Up A Robust Show

The state-owned NHPC has surprised the streets with its numbers in the third quarter. It has reported a topline growth of 11% to Rs 1010 crore, thanks to its other operating income, which nearly doubled to Rs 99 crore from Rs 51 crore a year earlier. Its net sales, however, grew moderately by 5.75% to Rs 911 crore. The net profit, on the other hand, rose by 47% to Rs 311 crore.

The company, during the quarter, has seen the commissioning of 33MW of hydro power generation capacity, which has helped it to post good numbers in the quarter. Earlier, in the first two quarters, the company had reported a decline in its revenues as well as in the net profit, which makes December quarter the first one in this fiscal to have reported growth in revenues as well as in the profit.

During the quarter, NHPC has reported expanded EBITDA margins due to the lower employee cost and other expenses, both of which declined by 16% and 26% respectively on a YoY basis. The EBITDA margins were at 67% in the third quarter of the current fiscal, compared to 47% reported a year earlier. Normally, due to the falling water levels in the dams after monsoon, hydro power companies report  lower EBITDA margins. NHPC, however, has been an exception. Although it is questionable whether this level is sustainable.

Among other costs, it has reported a growth of 15% in its interest cost to Rs 98 crore. The tax rate remained higher at 33%, compared to 22% a year earlier.

The company has shown a good performance on the bourses based on the reports that it is nearing the commissioning of some projects. It has already commissioned its 11MW Chutak projects (4th unit), while unit I and II of Teesta low dam project have been synchronised in January 2013. They will have a capacity of 66 MW and their commissioning is expected in some weeks.  It has a current capacity of 5559 MW and the commissioning of Teesta will take the total capacity to 5625 MW.

We believe that the positive news in the stock has already been discounted by the markets. The stock looks expensive at the PE ratio of 13.5x of its TTM earning of Rs 2.08. We advise our readers to avoid the scrip.