NHPC Shares Fall Over 3% After Q2 Earnings Miss Expectations Due to One-Off Factors

NHPC Limited's stock experienced a decline of over 3 percent, reaching ₹80.25 per share on Friday, after its second-quarter financial results for FY2025-26 fell below market expectations. The power generation company reported a consolidated net profit of ₹1,219.28 crore for the September quarter, an increase of approximately 15 percent compared to the previous year, primarily driven by higher revenues which rose to ₹3,629.98 crore.

However, the earnings were impacted by several one-off factors. JM Financial noted that NHPC's net revenue was 7 percent below their forecast and 22 percent below consensus. Similarly, EBITDA stood at ₹2,000 crore, up 12 percent year-on-year but missing estimates. A significant contributor to the miss was an estimated loss of around ₹160 crore from the Parbati-II project, which could not be commissioned as planned in April 2025 due to flash floods. Adjusted for a ₹230 crore Minimum Alternate Tax (MAT) credit, the adjusted profit after tax showed a stronger 39 percent year-on-year growth, broadly aligning with estimates.

JM Financial reiterated a 'Buy' rating on NHPC with a target price of ₹96, highlighting the company's fully green energy portfolio and a robust growth outlook. They project NHPC's regulated equity to increase substantially from ₹14,200 crore in FY25 to ₹28,000 crore by FY28. The company has set a capital expenditure target of ₹13,100 crore for FY26 and has a significant pipeline of hydro and solar projects under construction.

Impact: The immediate impact of the earnings miss and associated one-off factors is negative investor sentiment, leading to a dip in NHPC's stock price. The delay in project commissioning, particularly due to natural events like floods, underscores the operational risks inherent in large infrastructure projects. For investors, the focus will remain on NHPC's ability to execute its expansion plans and mitigate risks from environmental factors. The company's strong long-term outlook, driven by its green energy assets, remains a key positive. Impact Rating: 5/10

Difficult Terms: * **Consolidated Net Profit**: The total profit of a parent company and its subsidiaries after accounting for all expenses, interest, taxes, depreciation, and amortization. * **One-off Factors**: Unusual or infrequent events that impact a company's financial results in a specific period, not expected to recur regularly. * **Street's Expectations**: The financial performance predictions and targets set by financial analysts and the broader investment community. * **EBITDA**: Earnings Before Interest, Taxes, Depreciation, and Amortization; a measure of a company's operational profitability before considering financing and accounting decisions. * **Minimum Alternate Tax (MAT) Credit**: A tax credit provided to companies that pay MAT, which can be utilized against future tax liabilities under the regular tax regime. * **Commissioned**: Officially completed and ready for operation; in this context, refers to a power project becoming operational. * **Regulated Equity**: The capital invested in a regulated utility company that is recognized by regulatory bodies for determining tariffs and returns.