NHPC Share Price Target: Navratna PSU Stock, 117% Potential Upside; BUY Ahead Of Q2 Results?

The National Hydro Electric Power Corporation Limited, or NHPC Limited, is a company owned by the Indian government. The largest hydropower development company in India, NHPC Limited operates a variety of businesses, including the production of solar and wind energy. In accordance with the Companies Act of 1956, NHPC Ltd. (formerly known as National Hydroelectric Power Corporation Ltd.) was established in 1975. After successfully completing its initial public offering (IPO) in 2009, NHPC has since been listed on both the NSE and the BSE. With 1593.70 MW in joint venture, 6971.20 MW from 22 hydropower stations, 123.70 MW from four solar power projects, and 50 MW from a wind power project, NHPC's total installed capacity as of September 30, 2024, is 7144.90 MW. With its 6971.20 MW hydro share, NHPC accounts for approximately 14.85% of the nation's 46928.17 MW installed hydro capacity. Since Ventura Securities has set a target price of Rs 176 with a two-year timeframe, the broking believes that there is an enormous potential upside of 117% on the shares of NHPC from its current market price of Rs 81.

NHPC Share Price Target

"Given the leading position of NHPC in hydropower, strong revenue growth outlook driven by ongoing capex and scope for profit margin expansion, we remain positive on the stock. We initiate coverage with a BUY rating and a price target of INR 176 (32.9X FY27 EV/EBITDA)," said the research analysts of Ventura Securities.

"With a focus on FY30 power generation targets, NHPC's current valuation appears more attractive than its peers. NHPC is aiming for 20 GW of capacity, equating to INR 4,504 per GW based on its current market cap, which is notably lower than Adani Green Energy Ltd.'s INR 5,550 per GW. Both companies are comparable, as they are fully green power producers, whereas others have a mix of thermal power in their portfolios. As the largest hydropower producer in India with ambitious expansion plans, we believe NHPC warrants a valuation re-rating. Its assets are strategic and generate long-term, secured cash flows, leading us to apply the Discounted Cash Flow (DCF) methodology to determine its intrinsic value for FY27. Moreover, our estimates, which support a DCF value of INR 176, are quite conservative compared to the consensus, offering a significant margin of safety in our forecast," the brokerage further added.

Reasons To Buy The Shares of NHPC

"With increased government support for hydroelectricity and enhanced economics due to the cost-plus RoE model, NHPC has strong growth potential. It is the only 'completely green' PSU power generation company in India, with a leading hydropower capacity of 7 GW, representing 15% of the country's total hydropower capacity. With ongoing capex to expand its capacity to 12 GW by FY28, its market share is expected to rise to 20%. Additionally, 8.3 MW of NHPC's hydropower projects are currently under survey & clearance. Once operational, these could boost NHPC's overall hydropower capacity to 24.6 GW, a threefold increase from the current capacities," said Ventura Securities in a note.

"The company is also expanding its solar+wind power generation capacity from the current 173MW to 1.6 GW over the next five years. The expected commissioning of both hydro and solar projects will enhance earnings, with the full impact anticipated in FY27-28. NHPC's hydroelectric plants operate under a regulated model, offering a RoE of 15.5%-16.5%, which may increase to 16%-17% for new projects as per the draft CERC Tariff Regulation for FY29," the brokerage stated.

"Over FY24-27, we expect NHPC's revenue/ EBITDA/ net earnings to grow at a CAGR of 8.8%/ 12.0%/ 5.2% to INR 12,402 cr/ INR 6,925 cr/ INR 4,224 cr respectively. EBITDA margins are expected to improve by 471bps to 55.8%, while net margins are expected to decline by 357bps to 34.1%. The company is incurring debt to fund 70% of its new capex, which could increase the interest component on P&L and debt burden on balance sheet. As a result, return ratios - RoE and RoIC - are expected to improve by 4bps to 9.4% and 9bps to 5.6% respectively by FY27E," Ventura Securities further added.

NHPC Q2 Result Date

NHPC has informed the exchange about the Board Meeting to be held on 07-Nov-2024 to inter-alia consider and approve the Unaudited Financial results of the company for the quarter ended September 2024, as per a stock exchange filing.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor 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.