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BR Research

NPL – fuel cost driving earnings growth

Nishat Power Limited (PSX:NPL) announced the financial performance for 1HFY20 last week. The power company has been
Published February 17, 2020

Nishat Power Limited (PSX:NPL) announced the financial performance for 1HFY20 last week. The power company has been facing lower utilisation factors because of its place on the merit order, which has been the main factor in driving revenue growth down. NPL’s revenues fell by 25 percent year-on-year in 1HFY20, and by 19 percent year-on-year in 2QFY20 due to lower generation and dispatch levels.

However, lower load factors have also benefited the profitability of the company by driving the costs of sales down, of which fuel cost is a major component. NPL’s profitability has been seen rising; 1HFY20 earnings increased by 27 percent year-on-year, which was primarily due to lower cost of sales in 2QFY20 as well as 1HFY20. This resulted in over 30 percent increase in gross profits and increase by 2x in gross margins.

Same was seen in FY19 financial performance by NPL when turnover of the company came down by 8 percent, year-on-year but the gross profits improved by 18 percent year-on-year due to lower cost of sales. However, FY19 financial performance was dampened by excessive exchange losses, which have not been significant in FY20.

Nishat Power Limited
Rs(mn) 2QFY20 2QFY19 YoY 1HFY20 1HFY19 YoY
Sales 2,310 3,071 -25% 7,262 8,918 -19%
COGS 725 1,871 -61% 3,925 6,440 -39%
Gross profit 1,585 1,201 32% 3,337 2,477 35%
Admin expenses 101 60 68% 176 132 34%
Other expenses - 2 -100% - 3 -100%
Other income 3 2 59% 4 4 -8%
Finance cost 329 226 45% 668 448 49%
PAT 1,159 915 27% 2,497 1,899 31%
EPS (Rs/share) 3.272 2.584 27% 7.051 5.362 31%
Gross margin 68.62% 39.09% 45.95% 27.78%
Net margin 50.16% 29.78% 34.38% 21.29%
Source: PSX Notice

NPL continues to face the issue of receivables from NTDC as according to the company, the power purchaser continues to default on its payment obligations. As per 1QFY20, total receivables from NTDCL stood at Rs 18,541 million versus Rs 16,045 million by the end of FY19, out of which overdue receivables are Rs 14,438 million as at September 30, 2019, versus Rs13,145 million as at June 30, 2019. Despite the liquidity crunch, NPL announced an interim cash dividend of Rs1 per share for the period ended 1HFY20.

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