Nishat Power Limited (NPL) announced its 2QFY23 financial result recently where the company posted a profit after tax (PAT) of PKR 1,101mn (EPS: PKR 3.11), up by 48% YoY, compared to PKR 745mn (EPS: PKR 2.10) in same period last year. This took the 1HFY23 earnings to PKR 2,044mn (EPS: PKR 5.77), up by 23% compared to PKR 1,660mn (EPS: 4.69). Along with the result, the company announced a cash dividend of PKR 2.00/share, taking the period end payout to PKR 4.00/share.

Result Highlights

• During 2QFY23, net sales witnessed a decline of 46% YoY to PKR 2,242mn. The decline in sales was owed to lower dispatches, which are likely to be down by 89% YoY. During 1HFY23, sales increased by 39% YoY mainly due to 71% YoY rise in FO prices, however, dispatches declined by 28% YoY. During 2QFY23, the decline in dispatches is anticipated on the back of 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 2QFY23, gross margins of the company increased by 31ppts YoY to 53%. The rise in margins is attributable to lower load factor, we view.

• Finance cost decreased by 66% YoY to PKR 30mn due to lower short-term borrowings.

Recommendation

• We have a BUY call on the scrip with a Dec’23 target price of PKR 21.13/share

Courtesy – AHL Research