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Stable quarter

NLC India (NLC IN) reported an 8% YoY increase in revenue to INR 38bn in FY25, driven by a 9% rise in power generation revenue to INR 33bn, although mining revenue declined 8% YoY to INR 19.6bn. EBITDA rose 43% YoY to INR 8.6bn. However, higher depreciation, up 26% YoY, and interest expenses, up 63% YoY, led to a 79% YoY decline in PBT before regulatory income to INR 915mn. Operationally, power generation rose 2.8% YoY to 28BU while coal and lignite production grew 36.0% YoY and 1.6% YoY, respectively. NLC incurred INR 77bn in capex, up 81% YoY, commissioned 660MW Unit 1 of the Ghatampur thermal plant, and targets commissioning Units 2 & 3 by July and October 2025, respectively. Regulated equity currently stands at INR 97.1bn and is projected to double to ~INR 183.2bn by FY30. We retain Buy with a TP of INR 320.

Top line increases 8% YoY; PAT robust on higher regulatory income: Revenue increased 8% YoY INR 38bn. Revenue from generation rose 9% YoY to INR 33bn; however, revenue from mining declined 8% YoY to INR 19.6bn. Employee expenses went up 57% YoY to INR 11bn. EBITDA jumped 43% YoY to INR 8.6bn. Depreciation surged 26% YoY to INR 5.8bn. Interest expense increased 63% YoY to INR 3.3bn. Profit before tax and interest before adjusting for regulatory income declined 79% YoY to INR 915mn. This was on account of lower Other income and increased finance cost.

Power generation increases 2.8%; lignite production up by 1.6% in FY25: Power generation increased 2.8% YoY to 28BU in FY25. It has achieved the highest-ever coal production of 17.2mn tonne, up 36% YoY growth. Lignite production rose 1.6% YoY to 24mn tonne. NLC has incurred a capex of INR 77bn in FY25, growth of 81% YoY over the past year.

Capacity expansion plans: NLC had commissioned the 600MW Ghatampur thermal plant Unit 1 in Q3FY25. Total installed capacity currently stands at 6,731MW. The company plans to commission units 2 & 3 of the Ghatampur thermal plant by July 2025 and October 2025, respectively. South Pachwara coal block will start operations by July 2025. The first unit of Talabira thermal project will be commissioned in March 2029, and the next two units will be commissioned after a gap of six months. Current regulated equity stands at INR 97,130mn, which includes INR 62,610mn for thermal and INR 34,520mn for mines. Regulated equity is likely to reach INR 183,200mn by FY30.

Retain Buy with a TP of INR 320: We expect a revenue CAGR of 14%, an EBITDA CAGR of 25% and a PAT CAGR of 14% during FY24-27E.We introduce FY28E earnings. We reiterate Buy with a TP of INR 320. We value the regulated thermal business at 1.8x FY30E P/BV discounted to FY27E and the regulated mining business at 1.8x FY30E P/BV discounted to FY27E. We ascribe the RE business value of 12x FY27E EV/EBITDA and the merchant coal business of 4x FY27E EV/EBITDA.

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