Extended non-performance period and failure to surpass its IPO issue price of ₹ 36. Investors almost wrote off NHPC.
But something changed for the stock in the last couple of years. A greater push for renewable energy and favorable government policies led to strong demand for the stock, helping it cross the ₹100 threshold for the first time on February 2, 2024.
In this article, we will perform a fundamental analysis of the NHPC share price and examine the stock’s long-term growth potential. Let’s begin.
What does NHPC Do?
NHPC is a state-owned hydropower generation company that develops, operates, and sells bulk power to state utilities.
Recently, it has also diversified into developing solar and wind energy projects.
As of 31st October 2024, the company operates 22 hydropower stations, five solar power projects, and one wind energy project, with a combined installed capacity of over 7,200 MW.
Along with its multiple joint venture partners, NHPC is currently developing 15 renewable energy projects, a mix of hydro and solar, with an installed capacity of over 10,000 MW.
Apart from selling energy from all its renewable energy projects, it earns revenue from power trading, contract execution, project management, and consultancy work.
NHPC Management Team
Shri Rajendra Prasad Goyal is the Chairman and Managing Director of NHPC and holds the additional charge of Director (Finance). He started his career with NHPC in 1988 as a Senior Accountant and rose through the ranks, serving the company on various key projects. He is an associate member of ICAI and holds a Master’s Degree in Commerce from the University of Rajasthan.
Shri Uttam Lal is the Director (Personnel) and has over 35 years of rich experience in human resource policies, industrial relations, employee benefits, and learning and development. Before joining NHPC, he headed the HR functions of the R&D wing of NTPC. Shri Lal has a management graduate degree from XISS, Ranchi, with an additional qualification of Bachelor of Law (HRM) and Harvard Manage-mentor certification.
Shri Raj Kumar Chaudhary is the Director (Technical) at NHPC, overseeing the development and operations of various projects in India and Bhutan. He joined NHPC in 1989 as a Probationary Executive (Civil) and rose through the ranks of his career to the post of Director (Technical).
Shri Sanjay Kumar Singh is the Director (Projects), and before joining NHPC, he was the Chief General Manager of SJVN Ltd. He has over 32 years of experience in the Power & Infrastructure sector. Shri Sanjay holds a degree in B.Tech (Civil) and has worked at various levels for key project activities like Project Construction, Survey & Investigation, preparation of detailed project reports and cost estimates, project planning and execution, and many other things.
NHPC Shareholding Pattern
In the Domestic Institution segment, mutual funds in India hold a 3.63% stake in the company, and the Life Insurance Corporation of India has a 3.96% stake.
NHPC Financial Performance
Revenue
In FY24, total income declined by 1.24% to ₹10,025 crores from ₹10,150.90 crores in FY23.
And, in the first half of FY25, total income increased by 5.1% to ₹6,440 crores from ₹6,124 crores reported in the same period last year.
EBITDA
In FY24, EBITDA growth was flat and decreased slightly to ₹5,733 crore from ₹5,743 crore in FY23. However, the EBITDA margin improved to 68% in FY24 from 61.65% in FY23.
Net Profit
In FY24, NHPC recorded a 2.3% decline in net profit at ₹3,743.94 crores, down from ₹3,833 crores in FY23.
In the first half of FY25, net profit decreased by 21% to ₹2,177.74 crores from ₹2,788.64 crores reported in the same period last year. The company’s net profit margin declined to 37.90% at the end of H1FY25 from 49% at the end of H1FY24.
NHPC Financial Ratios
Current Ratio: At the end of Q2FY25, the company’s current ratio declined 1.15 times from 1.24 times recorded in the same period last year.
Debt-Equity Ratio: At the end of Q2FY25, the debt-to-equity ratio increased to 0.90 times from 0.82 times in Q2FY24.
Debt Service Coverage Ratio (DSCR): The company’s debt service capability declined significantly. At the end of Q2FY25, its DSCR was 2.05 times, down from 4.39 times at the end of Q2FY24.
Return on Capital Employed (ROCE): At the end of FY24, the company’s ROCE was 6.85%.
NHPC Share Price Analysis
NHPC shares were listed on 1 September 2009, and they were oversubscribed nearly 24 times. After their listing, investor response was muted, and the stock traded in a range-bound fashion below its IPO price for more than 10 years.
On 15th July 2024, the NHPC share price reached an all-time high level of ₹118.40. In the last three years, the NHPC share price made a remarkable turnaround and became a multibagger stock, growing by 37% annually.
NHPC has a consistent dividend payment track record. Over the years, it has distributed more than 50% of its net profit as dividends to shareholders. In FY24, the dividend payout percentage was 53% of its net profit.
In FY24, it paid ₹1.90 as dividend per share, ₹1.85 in FY23, and ₹1.81 in FY22. At the current NHPC share price of ₹79, the dividend yield ratio is 2.40%.
NHPC Share Price Valuation Score
Earning Per Share (EPS)
The following is the last five years Earnings Per Share of NHPC:
| FY20 | ₹2.99 |
| FY21 | ₹3.22 |
| FY22 | ₹3.52 |
| FY23 | ₹3.82 |
| FY24 | ₹3.73 |
The company’s EPS growth has been moderate during the last five years and even decreased in the most recent fiscal year. It is important to note that a company’s share price rise is directly proportional to its earnings growth.
Price-to-Book VS Median Price-to-Book
The price-to-book value of NHPC’s share price is 2, while the 5-year median price-to-book value is 2. This indicates that the stock is trading at two times the book value compared to its historical averages.
Price-to-Equity VS Median PE
The current PE ratio of NHPC is 26.7, meaning investors are paying 26.7 times for every ₹1 of earnings.
However, looking at the PE ratio in isolation doesn’t tell the full story. Therefore, we will compare it with a 5-year median PE.
As per data from the screener, the company’s 5-year median PE is 9.3. This means that at its current PE level, the stock is not trading at a premium compared to its historical valuations.
Because the stock was trading sideways with no major upside momentum following its IPO, the median long-term PE is low, and after the recent surge, the stock appears overpriced.
Comparing the stock PE to a peer firm will provide a more accurate estimate of stock valuations.
For example, SJVN Ltd., a state-owned hydropower generation business, trades at a PE of 45.7 times and has comparable financial metrics. This indicates that NHPC sells at a lower premium than its peer, SJVN.
NHPC Future Growth Outlook
The nature of its business restricts NHPC’s pursuit of aggressive growth in the hydropower segment. However, its recent diversification to solar and wind energy businesses provides the company with new growth opportunities.
Factors to look out for that could drive the earnings of the company:
Expansion Plans: The company has 10,402 MW of hydro and solar projects under various stages of construction, 4,112 MW of projects awaiting clearance, and 4,110 MW under survey & investigation, providing a long-term growth runway.
Flat revenue growth: In the last five years, the company’s compounded annual revenue growth has been 1%. A longer project execution timeline and flat revenue growth are key risks for NHPC’s share price growth.
The company’s operating margins are high, but due to the capital-intensive nature of the business and higher non-classified expenses, the net earnings margin is lower. A boost in earnings per share is crucial for the long-term growth of its shares.
Favorable Government Policies: In a bid to achieve 500 GW of renewable energy capacity by 2030, the government is supporting renewable energy companies through various policy initiatives, helping them grow and strengthen their balance sheets.
Environmental and Hydrological Risks: Adverse weather conditions, unfavorable hydrology, and variations in water flows can affect power generation and the company’s operational performance.
Regulatory Risks: Changes in regulatory regulations, particularly tariff adjustments, can impact NHPC’s revenue and profitability. While producing stable returns, the cost-plus tariff regime is subject to regulatory changes.
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
FAQ
Is NHPC a solar company?
NHPC is a state-owned hydropower generation company that recently diversified into developing solar and wind energy projects.
How has NHPC’s share price performed in the last 3 years?
As of 24 November 2024, the NHPC share price has returned 37% annually in the last three and five years.
Does NHPC pay dividends to shareholders?
NHPC has a consistent track record of paying dividends to its shareholders, with a dividend payout ratio of 50% compared to net profit. In FY24, it paid ₹1.90 per share as a dividend.
I’m Archana R. Chettiar, an experienced content creator with
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