Morning Call about Nishat Chunian Power Limited- Arif Habib Limited

Karachi: Handsome dividend along with 12% jump in earnings in 1HFY12

1HFY12 earnings were up by 12% YoY

In 1HFY12, Nishat Chunian Power Limited (NCPL) posted a profit after tax of PKR 1,025mn (EPS: PKR 2.79), compared to PKR 913mn (EPS: PKR 2.49) in 1HFY11, depicting an increase of 12% YoY.

According to Arif Habib Limited, this jump in earnings was mainly due to the higher fuel savings and higher penal interest income earned during the quarter. The company also announced an interim cash dividend of PKR1.5/share despite liquidity crunch.

However in 2QFY12 alone, company posted a profit after tax of PR445mn (EPS: PKR1.21/share), compared to profit of PKR 580mn in 1QFY12 depicting a decline of 23% QoQ. During the period NCPL incurred a maintenance cost of PKR 823mn which dragged down profitability in 2QFY12.

 

Nishat Chunian Power Limited – PKR million
2QFY12 1QFY12 %Chg. 1HFY12 1HFY11 %Chg.
Sales 4,340 6,225 -30% 10,565 8,449 25%
Cost of Sales 3,089 4,813 -36% 7,902 6,179 28%
Gross Profit 1,252 1,412 -11% 2,663 2,270 17%
Admin and Other Expenses 17 18 -3% 35 53 -34%
Other Operating Income 12 6 109% 17 28 -38%
Profit from Operations 1,246 1,399 -11% 2,645 2,245 18%
Finance Cost 798 817 -2% 1,615 1,321 22%
Profit before taxation 448 582 -23% 1,031 924 12%
Taxation 4 2 50% 6 10 -38%
Profit after tax 445 580 -23% 1,025 914 12%
Earnings per share 1.21 1.58 -23% 2.79 2.49 12%
Source: AHL Research

 

Nishat Chunian Power Limited – PKR million

Penal Interest Income contributed PKR0.77/share in 2QFY12 earnings In 1HFY12 NCPL’s receivables from National Transmission and Distribution Company (NTDC) reached PKR 11.03bn. Of this amount, overdue receivables stood at PKR 8.42bn, whereas short term borrowing also increased by 87% to PKR 6.79bn. Higher receivables resulted in penal income of PKR 286mn while positive spread on circular debt resulted in net impact of PKR 0.77/share. However company received PKR 4.0bn from Government of Pakistan in a debt swap deal.

Future Outlook

In FY12, Arif Habib Limited expects the company to post earnings of PKR 2,119mn (EPS: PKR 5.77) on the back of growing indexation factors coupled with efficiency gains and O and M savings. Arif Habib Limited expects company to declare a dividend of PKR 3.0/share in FY12, thus offering a dividend yield of 22.2%.

Recommendation

Arif Habib Limited’s Dividend Discount Model (DDM) based target price for Dec-12 works out to PKR 20.6/ share, which offers an upside potential of 52.0% from the scrip’s last closing price of PKR 13.55/share. Besides this upside potential, the stock offers FY12E dividend yield of 22.1%, making it one of the best defensive play in the market.

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