Buy NHPC Ltd for Target Rs 97 by Elara Capital
Capacity expansion drives growth
NHPC (NHPC IN) delivered a strong quarter, with revenue increasing 51% YoY to INR 41.2bn and reported PAT rising 64.8% YoY to INR 15.3bn, supported by capacity additions and higher generation. Generation rose 12.9% YoY to 23,132MU in H1FY27. Commissioning of five 250MW units of Subansiri Lower and improved performance at Parbati-II supported earnings. However, incentive-related income declined 61% YoY to INR 1,032mn, due to lower secondary energy income and PAF incentives. We retain Buy with a TP of INR 97
Robust quarter aided by capacity expansion:
Revenue from operations increased 51.0% YoY and 16.6% QoQ to INR 41.2bn. Generation expenses declined 8.5% YoY to INR 2.8bn, while employee expenses rose 21.0% to INR 3.5bn. EBITDA surged 72.8% YoY and 21.1% QoQ to INR 26.2bn, with margin improving to 64% from 56% in Q2 FY26 and 61% in Q1 FY27. Depreciation increased 40.1% YoY to INR 5.9bn. Interest expenses surged 105.1% YoY to INR 5.5bn. Other income declined 22.3% YoY to INR 2.0bn. Pre-exceptional PBT jumped 54.6% YoY and 41.7% QoQ to INR 16.9bn. Net movement in regulatory deferral account balances increased 140.4% YoY to INR 2.8bn. Reported PAT rose 64.8% YoY and 37.0% QoQ to INR 15.3bn. Adjusted PAT includes a significant adjustment of INR 2,310mn toward Teesta-IV.
Strong operational performance:
Total installed capacity stood at 9,583MW as on November 2026, comprising 9,021MW of hydro and 562MW of renewable capacity. It has commissioned five 250MW units (1,250MW) of Subansiri lower between December 2025 and October 2026, with the remaining three units of 750MW targeted for Q1FY28. Consolidated generation increased 12.9% YoY to 23,132MU in H1FY27 compared to 20,491MU in H1FY26. Subansiri Lower contributed INR 1,320mn to PBT in Q2FY27 and INR 1,400mn during H1 FY27. ParbatiII reported Q2FY27 PBT of INR 2,150mn vs a loss of INR 1,640mn in the corresponding quarter in the past year. NHPC has 8,954MW under construction, 9,387MW awaiting clearances & approvals, and 19,820 MW under survey & investigation
Mixed incentive income:
NHPC reported consolidated incentive-related income of INR 1,031.6mn in H1FY27, down 61% YoY from INR 2,646.3mn in H1FY26. The decline was primarily driven by a sharp reduction in secondary energy income to INR 564.6mn from INR 2,305.6mn and lower plant availability factor (PAF) incentives of INR 33.2mn vs INR 130.3mn. However, deviation charges increased to INR 433.8mn from INR 210.4mn, providing partial support. Consolidated PAF improved to ~86.7% in H1FY27, with Q2FY27 PAF rising to ~92.2% from ~80.8% in Q1 FY27, indicating improved plant availability.
Retain Buy with a TP of INR 97:
We see significant rerating potential post full Subansiri commissioning. In our view, NHPC is a strong play on clean energy, as it is diversifying its portfolio with entry into solar, wind, and pumped storage. We retain Buy with a TP of INR 97 based on 2.0x FY29E regulated equity. We raise our earnings estimates by 1% for FY27 and 20% each for FY28 & FY29 after factoring in increase in regulated equity from upcoming capacity addition.
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SEBI Registration number is INH000000933
