Equity Analysis /

Nishat Power Ltd: FY 18 results: DPS above expectations, but still disappointing

    Intermarket Securities
    17 September 2018

    Nishat Power Ltd (NPL) posted 4QFY18 NPAT of PKR795mn (EPS: PKR2.25), up 7/6% yoy/qoq. This takes full year FY18 earnings to PKR3.2bn (EPS: PKR9.07), up 11% yoy. The result was below our expectations of PKR3.3bn (EPS: PKR9.38) due to higher than expected O&M expense in 4Q.

    The increase in FY18 earnings is attributable to: (i) efficiency gains amid 29% yoy higher FO prices, (ii) higher penal income due to 29% yoy higher receivables and (iii) 5% yoy average PKR weakness. Meanwhile, dispatches remained stable at 72% compared to 74% in the same period last year, despite abrupt shutdown of furnace oil (FO) plants in Nov’17. 

    In 4QFY18 alone, the key result highlights include: (i) 19% yoy increase in topline despite slight decline in load factors (75% in 4QFY18 vs 78% in 4QFY17) due to 11% yoy average PKR depreciation, and 49% yoy higher crude oil price, but (ii) muted growth on gross profits level, due to higher O&M expense. 

    The company also announced a final cash dividend of PKR1.50/sh, translating into 17% payout ratio for FY18 vs. 64% average for last 3 years. The dividend was above our expectation of PKR1.0/sh but below market consensus of PKR2.0/sh.

    NPL has corrected 41% in 12M due to the recent cut in payouts. However, the FCFE/sh for NPL amounts to PKR3.56/6.91 per share in FY19/20F, indicating payout ability going forward. Our TP of PRs34/sh offers 29% upside on last close, implying a Buy stance on the scrip. We may revisit our investment case after management guidance and detailed financial accounts.