Is Hydropower on Bubble just waiting to burst or I don’t see the future?
I see hydro’s which have not even started production, are in negative reserves, and not a single penny loan paid are currently trading above 400. Some hydro like Hurja, GLH, UPCL that are trading above 400 seems way too overvalued. Are people buying only thinking that they will issue right shares, which will lead to further increase in prices or is it FOMO kicking in?
A hydro can generate revenue of 3-4 crore per MW (as per Chilime, SHPC, BPCL financials) with most efficient utilization. Construction of per MW hydro is from 20 crore to 30 crore per MW depending on project. With no expense, these hydro can make gross earning margin of 15 to 20% (3 crore/20 crore). With operational expenses, the earning will decrease further. And hydro earning cannot grow by 40-70% like banks, insurance on year to year basis due to fixed production capacity and fixed rate.
There are many hydros which does not make even half of that, for e.g. National Hydro made revenue of 5.5 crore and net profit of 1 crore in last FY 76/77. National hydro is 7.5mw project. Its stock is trading at 370 for EPS of Rs. 0.76, this is PE of 486 times.