NHPC Shares Up 19% In 30 Days, But Analyst Sees 23% Slide Ahead

NHPC‘s share price has continued its strong run at the bourses. In the last 30 days, the stock has gone up around 19%. However, analysts at ICICI Securities are not fully convinced about the stock’s future prospects.

The NHPC Analyst: Mohit Kumar-led analyst team at ICICI Securities reinstated coverage on the stock with a “sell” rating and target price of ₹81. The target indicates an around 23% downside from the current market price of around ₹105.

The NHPC Thesis: The brokerage said the power major had a muted year. The analyst said that NHPC’s power plant availability for FY24 was 77.6%, compared to 88.75% the previous year.

Power generation for the year was 21.7 billion units (BU), down from 24.6 BU year-on-year, leading to a 32% decrease in incentives to ₹460 crore. This decline was attributed to lower water availability and increased flooding incidents at select dams.

As a result, NHPC’s EBITDA for FY24 decreased by 20% year-on-year to ₹4,200 crore, and its profit after tax (PAT) fell by 3% to ₹3,750 crore. Despite these challenges, the brokerage pointed out that other income grew to ₹1,600 crore, largely due to higher dividend income from NHDC and an insurance claim of ₹400 crore billion, which did not impact PAT.

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The brokerage highlighted that NHPC is expected to commission hydro-capacities totalling 2.8 gigawatts over the next two years, including 2 gigawatts from Subansiri and 800 megawatts from Parbati. The total capital expenditure for these projects stands at ₹32,500 crore, with an incremental regulated equity of ₹10,000 crore, which the analysts anticipate could provide an immediate profit boost of ₹1,000–₹1,500 crore over the next two years.

The brokerage also said that NHPC is advancing in the pumped hydro storage sector, having signed memorandums of understanding (MoUs) to develop 6 gigawatts in Maharashtra, 2 gigawatts in Andhra Pradesh, 3 gigawatts in Madhya Pradesh, and 2 gigawatts in Gujarat.

The domestic brokerage firm said that while this sector holds long-term potential, it faces uncertainties such as lengthy gestation periods and the need for environmental clearances.

Price Action: NHPC’s share price was up 1.94% to trade at ₹105.10 as the markets opened on Wednesday.

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