Nishat Chunian Power Limited (NCPL) announced its 2QFY23 financial result today where the company posted a profit after tax (PAT) of PKR 878mn (EPS: PKR 2.39), up by 59% YoY, compared to PKR 551mn (EPS: PKR 1.50) in same period last year. This took the 1HFY23 earnings to PKR 1,838mn (EPS: PKR 5.00), up by 58% against PKR 1,163mn (EPS: PKR 3.17).

Result Highlights

· During 2QFY23, net sales witnessed a decline of 53% YoY to PKR 1,980mn, owed to lower dispatches, which are likely to be down by 93% YoY. During 2QFY23, the decline in dispatches was led by overall decline in electricity demand in the country due to economic slowdown. The overall country power generation also decreased by 4% YoY during 2QFY23 as FO-based generation went down by 88% YoY. During 1HFY23, sales increased by 8% YoY mainly due to 78% YoY rise in FO prices, however, dispatches declined by 48% YoY.

· During 2QFY23, gross margins of the company increased by 39ppts YoY to 60%. The rise in margins is attributable to lower load factor, we view.

· Finance cost increased by 8% YoY to PKR 274mn due to higher interest rates.

Recommendation

· We have a BUY call on the scrip with a Dec’23 target price of PKR 19.04/share.

Courtesy – AHL Research