Nishat Power Limited (PSX: NPL), part of the Nishat group of companies posted its 1QFY18 result yesterday, which surprised the market on account of no dividend being announced. Market analysts have attributed the strain on the company’s liquidity as the primary reason behind this unexpected move.

The total receivables from NTDC at the start of this fiscal year amounted to Rs8,944 million out of which overdue receivables were Rs6,381 million. As the circular debt still persists, the majority of IPPs continue to suffer from delay in payments by WAPDA, which is the sole power purchaser.

Other line items mostly conformed to expectations. There was a 27 percent increase in the top line on a year-on-year basis. This was attributable to higher generation which clocked in an 11 percent increase and a load factor of 85 percent as compared to the same period in the previous year.

Another factor that boosted revenue was the higher trend in furnace oil prices for the period, which have increased by roughly 25 percent on a year-on-year basis. While this had a positive impact on the top line, there was a more than proportionate impact on the COGS that went up by 31 percent on account of the higher load factor. Consequently, gross margins fell by 233bps but still remain healthy.

There was negligible change in the finance cost as the majority is longer term debt, while reliance on short-term borrowings has seen an increase in mark-up according to a research note by Arif Habib Limited (AHL). The cumulative effect on the bottom line translated into an increase of 17 percent in PAT on a year-on-year basis.

Given that investors rely mostly on power company stocks for reliable dividend streams, the move to forego a dividend for the quarter despite an increasing bottom line might dampen investor interest in the scrip.