Equity Analysis /
Pakistan

Nishat Chunian Power Ltd: Q3 FY 19 results: Energy sukuk improves liquidity

    Yusra Beg
    Yusra Beg

    Senior Investment Analyst

    Intermarket Securities
    30 April 2019

    Nishat Chunian Power Ltd (NCPL) posted Q3 FY 19 NPAT of PKR751mn (EPS: PKR2.05), down 9% yoy and 21% qoq. This took 9M FY 19 NPAT to PKR2,605mn (EPS: PKR7.09), flat yoy. Results were accompanied by a second interim dividend of PKR1.0/sh, with overall payout rising to PKR2.0/sh. While finance costs continue to eat into NCPL’s overall profitability (Q3 FY 19 operating profits up 3% yoy), we are particularly encouraged by the surprise payout. This comes after the recent PKR200bn energy sukuk issuance, which has returned liquidity to the sector.

    Key highlights include: 

    • Dispatch levels dropped even further in Q3 FY 19 to 17% from 43% in H1 FY 19, resulting in lower O&M savings. That being said, higher capacity payments (on 20% PKR devaluation) and penal income markup led to a 14% yoy jump in gross profits. 
    • Fuel losses likely did not see a major jump, due to relatively stable oil prices during Q3 FY 19 (down 3% yoy).
    • NCPL witnessed a significant 45% yoy rise in finance costs to PKR372mn, likely on the back of higher working capital requirements. This ate into overall profitability.

    We think NCPL is well placed to benefit from the upcoming PKR200bn energy sukuk and resume regular dividends going forward. We have a TP of PKR29/sh on the name.

    Risks: (i) Further pile-up in payables (ii) plant shutdowns, and (iii) lower LNG availability.