Buy NLC India Ltd For Target Rs.305 by Axis Securities
Decent Q3; Despite Seasonally Weak Quarter
Est. Vs. Actual for Q3FY25: Revenue – BEAT; EBITDA – BEAT; PAT – BEAT
Change in Estimates post Q3FY25:
FY25E/FY26E: Revenue 0%/0%; EBITDA: 0%/0%, PAT: 0%/0%
Recommendation Rationale
* PAT ahead of estimates: NLCIL’s PAT, after considering the regulatory deferral movement, stood at Rs 696 Cr, up 174% YoY but down 29% QoQ, surpassing consensus estimates by 185%. Consolidated net sales stood at Rs 4,411 Cr, up 39% YoY and 21% QoQ, beating consensus estimates by 45%. EBITDA came in at Rs 1,827 Cr, up 102% YoY and 70% QoQ, exceeding consensus estimates by 150%.
* Improved power generation: In Q3FY25, gross power generation stood at 6,820 MU, up 3% YoY and QoQ, including 443 MU of renewable energy (RE) power. The company commissioned 660 MW of Ghatampur Unit 1 in Dec’24, contributing to increased generation from Q4FY25. In Q3FY25, the Ghatampur plant generated 215 MU.
* Coal and lignite production: Lignite production grew by 5.23% YoY to 17.14 MnT in the nine months ended Dec’24, implying a Q3FY25 run rate of 4.9 MnT, down 13% YoY and 19% QoQ. Thermal coal production grew by 40% YoY to 11.52 MnT in the nine months ended Dec’24, implying Q3FY25 volumes at 5.56 MnT, up 53% YoY and 78% QoQ.
Sector Outlook: Cautiously Positive
Company Outlook & Guidance: NLCIL has commissioned Ghatampur Unit 1 of 660 MW, taking its thermal capacity to 5,300 MW. The company has ambitious capacity expansion plans, aiming to increase its current mining capacity from 50 MTPA to 102 MTPA by 2030, thermal power capacity from 5,300 MW to 10,465 MW, and renewable energy (RE) capacity from 1,431 MW to 8,059 MW. These capacity additions will require a substantial capex of Rs 1 Lc Cr, which is expected to drive growth in regulated equity
Current Valuation: SOTP - Thermal business at 1.3x (unchanged) on our consolidated regulated equity projections of FY33 discounted to FY26; Regulated Mining business at 1.9x FY27 regulated equity (from FY26); RE business at EV/EBITDA of 7.6x on FY27 EBITDA (from 9.0x FY26 EBITDA), and the merchant coal business at 6.0x EV/EBITDA on FY27 EBITDA (from 7.0x FY26 EBITDA)
Current TP: Rs 305/share (Unchanged)
Recommendation: We maintain our BUY recommendation on the stock
Financial Performance: PAT, after considering the regulatory deferral movement, was down 29% QoQ at Rs 696 Cr but up 174% YoY, beating the consensus comfortably by 185%. PAT adjusted for regulatory movements stood at Rs 1,485 Cr. Consolidated net sales stood at Rs 4,411 Cr, up 39%/21% YoY/QoQ, beating consensus estimates by 45%. EBITDA stood at Rs 1,827 Cr, up 102%/70% YoY/QoQ, beating consensus estimates by 150%. EBITDA margins were 41.4%, up 1282 bps/1198 bps YoY/QoQ. The company has declared an interim dividend of Rs 1.5 per share for FY25.
For More Axis Securities Disclaimer https://simplehai.axisdirect.in/disclaimer-home
SEBI Registration number is INZ00016163
