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In-line quarter; Poised for 50% jump in generation capacity by FY26

NHPC’s 1QFY24 consolidated net revenue was INR 27.6bn (-1% YoY, +36% QoQ), in line with JMFe. EBITDA came in at INR 15bn (+2% YoY, +67.5% QoQ), 2% ahead of JMFe. EBITDA margin improved to 54.3% as compared to 53%/44.3% in 1QFY23/4QFY23 respectively, primarily due to moderation in other expenses during the quarter. Adj. PAT was INR 10bn (flat YoY, +61% QoQ), 21% ahead of JMFe due to a higher dividend (INR 280mn) from NHDC and an insurance claim (INR 340mn). The commissioning of the Parbati project has been delayed to early FY25 from late FY24 on account of torrential rains and recent floods in Himachal Pradesh, which was factored into our estimates. Two units of the 8x250MW Subansiri project are expected to be commissioned in 4QFY24. We continue to maintain our BUY rating on the stock with an unchanged SOTP-based TP of INR 55/share.

* Operational highlights: Generation during the quarter was 7,787MU vs. 8,010MU in 1QFY23. The 3% YoY decline was on account of lower water availability in Kishanganga, Loktak and Dholinga power stations. However, availability has improved and the company has been generating higher energy since Jul’23 with better PLFs. The management expects 2QFY24 to be better than last year in terms of operational parameters. The PAF for the quarter stood at 94.1% vs. 98.6% in 1QFY23.

* Project updates and status: Two units of the 8x250MW Subansiri project are expected to get commissioned during Jan-Feb’24. Work on it has been halted due to rain and flooding. It is expected to resume post-monsoon with no change in the targeted period for commissioning (by 4QFY24). We have already factored this into our estimates considering the challenges in the execution of hydropower projects, particularly in the Himalayan region. In the case of Parbati-II, the company had initially planned on commissioning a couple of units in FY24 but that has been delayed to early FY25 on account of torrential rains and recent floods in Himachal Pradesh. This project has got impacted the most. We expect two units of 4x250 MW Parbati-II to get commissioned in early FY25 and the remaining units to be commissioned progressively by May’25.

* Pumped-hydro storage (PSP) opportunity: The company sees PSP as a large emerging opportunity in the power sector and wants to jump in at an early stage. It has recently signed an MoU with the state of Maharashtra for about 7,350MW of PSP projects. NHPC has also entered into MoUs with the states of Gujarat, Odisha and Andhra Pradesh for the development of PSPs. It is one of the key focus areas for growth for NHPC. The company expects PSPs to come on the RTM model with 16.5% RoE. The expected construction time is 4-5 years post 1.0-1.5 years of compliance and clearances. The 1st project is expected to come online by FY29 in Maharashtra. The capex requirement depends on the type of project. The off-stream PSP project will cost INR 60-65mn/MW whereas an onstream PSP project will cost INR 80-90mn/MW.

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