PAT jumps 70% YoY in 1HFY15

Kot Addu Power Company Limited:On back of higher revenue, lower maintenance cost, and hefty surge in other income, the cumulative profit after taxation (PAT) of Kot Addu Power Company Limited (KAPCO) reached Rs 4,833 million (EPS: Rs 5.49) in 1HFY15 resulting in a 70% YoY growth when compared to a PAT of Rs 2,844 million (EPS: Rs 3.23) in 1HFY14. However heavy rise in finance cost did had a negative impact on the profitability of the company.

More significant growth in 2QFY15

The growth in earning was more significant in 2QFY15 where the PAT of the company totaled Rs 2,424 million (EPS: Rs 2.75) which is 116.7% YoY up from a PAT of Rs 1,119 million (EPS: Rs 1.27) in 2QFY14. This tremendous growth in earning was on back of significant drop in maintenance cost and hike in other income however surge in finance cost and lower revenue did affected the bottom-line. The corporate results were accompanied with a first interim cash dividend of Rs 4/share.

Revenue grows on higher indexation

Owing to higher generation, the net revenue of the company reached Rs 58,399 million in 1HFY15 which is 2.6% YoY up from Rs 56,934 million in 1HFY14. The plant of the company generated 3,598GWh of electricity during the period under review resulting in a load factor of 60.7% versus 3,115GWh of electricity generated in 1HFY14 resulting in a load factor of 52.5%. The cost of sales fell by 2.6% YoY in 1HFY15 to Rs 50,950 million versus Rs 52,318 million in 1HFY14. The cost declined because last year there was major overhaul of steam & gas turbines.

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Good boost by rise in other income

The bottom-line of the company was well supported by a 144% YoY rise in other income segment to Rs 3,840 million in 1HFY15 versus Rs 1,574 million in 1HFY14. The other income grew significantly on back of increased penal income from overdue receivables. However, the heavy surge in finance cost due to increased short-term borrowing had a negative impact on the bottom-line. The finance cost surged to Rs 4,105 million in 1HFY15 which is 133% YoY up from Rs 1,765 million in 1HFY14.

Recommendation:

The scrip is currently trading at a price of Rs 77.82/share offering an upside potential of 20% to our December’15 target price of Rs 93/share. Therefore we recommend a ‘BUY’ for the script.

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