NHPC Ltd (NHPC)

FairStock Score: 50/100 — MIXED

Score breakdown: P/E: 1/3 · ROCE: 0/2 · Growth: 0/2 · Dividend: 1/1

Key Financials

Strengths

• Promoter holding of 67.40% provides strong government backing and strategic importance in India's hydro power sector.
• Hydroelectric assets are long-lived with low fuel costs once operational, creating a stable operating foundation.
• Recorded recent traction with sales growth of 12.37% and profit growth of 17.14%; latest quarter profit was ₹321 Cr.
• Dividend yield of 2.54% gives some income support to long-term holders.
• Debt/equity of 1.09 is manageable for an infrastructure utility, with book value of ₹39.49.

Concerns

• ROE of 7.96% and ROCE of 7.42% are low, signaling mediocre capital efficiency for a company trading at 23.95 times earnings.
• Very low 5-year revenue CAGR of 1.47% shows weak historical growth despite the recent quarterly improvement.
• Free cash flow is deeply negative at -₹2,524 Cr, suggesting heavy capex with no current cash return to equity owners.
• Price of ₹81.48 is far above the Graham Number of ₹52.90, giving a negative margin of safety of -42.39%; Altman Z-Score of 1.09 and EV/EBITDA of 554.12 also raise red flags.

AI Analysis

NHPC is a 67.4% government-owned hydro power generator. In many ways, this is a business I can understand: hydroelectric assets are long-lived, and once built, they produce electricity with minimal fuel cost. That is a real advantage. But the numbers tell me this is not a wonderful compounder. The five-year revenue CAGR is just 1.47%, so despite a recent quarter showing sales of ₹2,221 Cr and net profit of ₹321 Cr, historical growth is very low. Return on equity of 7.96% and ROCE of 7.42% are barely above the cost of capital; a great business should generate far more. The company's debt-to-equity of 1.09 is acceptable for an infrastructure utility, but free cash flow of -₹2,524 Cr shows that capital expenditure is consuming cash rather than enriching shareholders. Valuation is puzzling. At ₹81.48, the P/E is 23.95 and the P/B is 2.06, while book value is ₹39.49. The Graham Number is only ₹52.90, giving a margin of safety of -42.39%. With a PEG of 12.55, the recent 17% profit growth is nowhere near enough to justify the price. Even the dividend, at 2.54%, barely compensates for the low returns. An Altman Z-Score of 1.09 and an EV/EBITDA of 554.12 should make any investor pause; these are not characteristics of financial strength or cheapness. I would rather wait for a price that gives a real margin of safety, and for evidence that growth and cash conversion have improved. As Graham would say, price is what you pay, value is what you get. Today, value is not enough.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer