Nishat Power Limited; Dividend to increase by 50% in FY13! – AHL Research

Nishat Power Limited; Dividend to increase by 50% in FY13! – AHL Research

By: Arif Habib Ltd.

Nishat Power Limited registered an 18% YoY higher bottom line in 1QFY13

Nishat Power Limited (NPL) achieved an 18% YoY earnings growth in 1QFY13 with profit after tax (PAT) of PKR 509mn (EPS: PKR 1.44) against PKR 431mn (EPS: PKR 1.22) in 1QFY12. This growth in earnings emanated from a 10% YoY lower finance cost of PKR 671mn compared to PKR 746mn in similar quarter last year. Higher fuel prices and growing indexation factors compensated for the lower load factor of 70% in 1QFY13 (84% in 1QFY12), resulting in a humble decline of 8% YoY in the company’s topline.

Deductions from Capacity Purchase Price remain a downside risk

National Transmission & Dispatch Company (NTDC) has so far deducted an amount of PKR 823mn from company’s CPP invoices as the plant was not fully available for power generation while Nishat Power Limited has included this amount to its trade debts. This could result in per share cash impact of PKR 2.33 if not acknowledged by the NTDC. However, the management has taken the matter to the Supreme Court and feels that it has meritorious grounds to be hopeful of recovery.

Dividend to increase by 50% in FY13E

Nishat Power Limited operated at a capacity factor of 70% in 1QFY13, which is expected to improve further and our estimates for the company’s net profit after tax work out to the tune of PKR 2,200mn (EPS: PKR 6.21) in FY13. On these basis, we anticipate a dividend of PKR 3/share, a 50% YoY growth in cash payout.

Recommendation

Our DDM based target price for Nishat Power Limited stands at PKR 21/share, which offers an upside potential of a significant 27% from last closing price of PKR 16.5/share. We also expect NPL to pay a cash dividend of PKR 3/share in FY13, translating into an attractive dividend yield of 18%! On these grounds, we recommend ‘Buy’ on the Scrip.

 

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