Kot Addu Power Company Limited (KAPCO) announced its FY21 financial result today where the company posted a profit after tax (PAT) of PKR 10,229mn (EPS: PKR 11.62), down by 57% YoY compared to PKR 23,613mn (EPS: PKR 26.83) during same period last year. The decline in earnings is witnessed due to CPP adjustment of PKR 19.3bn during FY21. Along with the result the company also announced a cash dividend of PKR 3.5/share taking full year payout to PKR 10/share.

Result Highlights:

· During FY21, sales declined by 3% YoY to PKR 69.6bn, due to lower RLNG prices. However, dispatches were 2% YoY higher than last year. Net sales witnessed a decline of 30% YoY due to capacity purchase price (CPP) adjustment of PKR 19.3bn.The dispute of outstanding liquidity damages between the company and Central Power Purchasing Agency has been resolved. Hence, the PPA of the company has been extended for 485 days with effect from Jun 27, 2021. During 4QFY21, sales increased by 58% YoY to PKR 24.0bn (ex. CPP adjustment). The rise in sales is witnessed due to higher (+43% YoY: 1,221 GWh) dispatches along with higher FO and RLNG prices.

· During FY21, other income declined by 36% YoY to PKR 13.2bn due to lower interest rates. However, during 4QFY21, other income increased by 74% QoQ to PKR 3.9bn. The rise in other income is witnessed due to tariff true-up.

· Finance cost also decreased by 63% YoY during FY21 on the back of lower interest rates and lower short term borrowings.

Recommendation

· Currently, we have ‘BUY’ call on the stock with a Dec’21 target price of 59.2/share.

Courtesy – AHL Research