A power station stands at the site of a hydro-electric power project. (Photographer: Adeel Halim/Bloomberg) 

Motilal Oswal Rates NHPC New Buy; Sees 23% Upside

NHPC Ltd. received its most bullish target so far from brokerage house Motilal Oswal.

The hydropower development company’s shares are expected to reach Rs 37, the brokerage firm said in its research report without providing a time frame, after it initiated coverage with a ‘Buy’ rating.

The price target implies a potential upside of 23 percent from Friday’s close. This is the highest price target so far among the analysts tracked by Bloomberg.

NHPC is India’s largest hydropower generator, with a 15 percent share. It has 3.1-gigawatt projects under construction, which are expected to raise AES in capacity by 53 percent. Regulated equity in its plans and operating efficiencies are the key drivers of earnings.
Motilal Oswal Research Report

The research firm expects the company’s profit to grow at a compounded annual growth rate of about 20 percent over the financial years till March 2020, driven by commercialisation of assets, which will lead to about 11 percent CAGR in regulated equity, lower operations and maintenance under-recoveries and approval of pending tariff petitions.

“The consolidated profit with grow at a compounded rate of 8 percent over the financial years till March 2020,” Motilal Oswal said.

The research company also expects its return on equity to improve by 240 basis points to 12.4 percent and that the hydropower development company will be high-dividend-yield stock.

Shares of NHPC Ltd. have returned 22.2 percent so far this year, compared to 29.1 percent advance in the country’s benchmark Sensex. The stock trades at 10.3 times trailing 12-month earnings per share and 11 times its estimates for the coming year, Bloomberg data showed.