Elixir Securities Limited – Flash Note

Karachi, September 22, 2017 (PPI-OT): Nishat Chunian Power Limited – Disappointing Payout Despite 88%YoY Rise in 4QFY17 EPS

Nishat Chunian Power Limited (NCPL) declared 4QFY17 earnings of PKR2.36/share, and a final dividend of PKR1.0/share; above our EPS expectation of PKR2.06. However despite skipping dividends twice during this year, the company continued to disappoint with a PKR1.0/share final dividend against our expectation of PKR2.0/share. Full year earnings clocked in at PKR8.17/share (up 9%YoY) with cumulative dividend of PKR2.5/share for FY17 (vs PKR7.75/share in FY16).

The massive drop in dividends reflects the growing mismatch between accounting profit and cash flows as the circular debt situation is taking its toll.

While revenue was in line with expectations, gross profit was 15% higher than our estimate for 4QFY17 owing to either better than expected thermal efficiency or lower than expected O and M expenses.

Excluding cost of sales, all major heads were in line with expectations.

We maintain our Buy rating on the scrip, with a Jun-18 PT of PKR52/share, representing 38.7% total potential upside (including 14.9% dividend yield). However we do not see any near term triggers to the stock unless dividend payouts increase to our projected levels.


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