By: Taurus Securities Limited
We review 1QFY16 financial results of Kot Addu Power Limited, wherein the power producer has reported net earnings of PKR2.1bn (EPS PKR2.4), declined by 13% YoY.
During the quarter, revenues dropped by 38% YoY to PKR32bn on the back of i) lower power dispatches (down 10% YoY) and ii) 52% YoY decline in LSFO prices. However, altering fuel mix in the past few months has resulted in increased power generation on gas, thus enabling the power producer to reap higher fuel savings.
However, the plunge in bottom‐line is majorly on account of higher operating & mainte‐ nance expenditure and lower other income.
For FY16 and FY17, we expect the company to report an EPS of PKR10.7 and PKR12.3, respectively. However, we maintain ‘Hold’ stance on the scrip, with rollover Dec’16 TP of PKR91/share. Though the price upside is not attractive (assuming no revision in PPA), KAPCO is offering an attractive dividend yield of 9.2%.
The company’s 660MW coal power project in Punjab is still in infancy stage and its feasi‐ bility study is underway.