Karachi, August 29, 2013 (PPI-OT): PSO has posted NPAT of PkRI2,558mn (EPS: PkR50.84) in FY13, a growth of 39%YoY vs. NPAT of PkR9,056mn (EPS: PkR36.67) in FY12.
According to AKD Securities in 4QFYI3, the company posted NPAT of PkR3,241mn (EPS: PkR13.12), a growth of 40xYoY/7%QoQ. The FY13 result was inline with our expected NPAT of PRR12,142mn (EPS: PkR49.16). Alongside the result, PSO announced a final cash dividend of PkR2.5/share, which was below our expected payout.
Key highlights of P50′s FY13 result included 1) revenue growth of 7%YoY to PkR1 ,100bn led mainly by a 25%YoY growth in MS volumes and higher prices, 2) gross margin remained marginally lower at 3.3% on account of lower gross margin during 4QFYI 3 due to inventory losses, and 3) finance cost reduced by a substantial 35%YoY to PkR7,591mn mainly due to contained penal mark-up. Going forward, while core business fundamentals are expected to remain strong profitability and payout capacity largely depend on liquidity across the energy chain.
In this regard, while we expect benefits of an increase in power tariff to flow to PSO, potential risks in the form of higher exchange losses from a depreciating PkR could counter additional earnings from interest on the recently issued PlBs. Having gained 61%CYTD, P50 trades at an FY14F PIE of 5.14; a discount of 36% to the broader market PIE of 7.97x and provides an FYI4F dividend yield of 6%. We are in the process of revisiting our investment case for P50 and will update investors accordingly.
KAPCO FY13 Result Review
KAPCO has posted NPAT of PkR7,354 (EPS: PkR 8.35) in FY13 vs NPAT of PkR6,071 (EPS: PkR6.90) in FY12, depicting a growth of 21%YoY. The FY13 result was inline with our expected NPAT of PKR7,712mn (EPS: PkR8.76). Alongside the result, KAPCO announced a cash payout of PkR4.5/share, taking cumulative payout for the year to PkR7.5/share.
Key highlights of the FY13 result include 1) revenue declined by 3%YoY to PkR97.1bn due to lower load factor during the year (FY13E: 46% vs 52% in FY12), 2) finance cost reduced by 18%YoY to PkR8.0bn as a result of lower short-term borrowing during the year, and 3) `other income’ reduced by 23%YoY to PkR5.89bn, where we expect penal mark-up income at -PkR690mn.
Going forward, risks to US$/PkR parity and an expected higher generation in FYI4F could lead to earnings growth while potentially lower borrowing requirements could pave the way for higher payouts. At current levels, KAPCO trades at an FYI4F PIE of 6.4x and DIY of 14.0%. As such, while our target price of PkR63/share implies limited upside, we flag the high D/Y as too compelling to ignore while sustained energy sector reforms presents room for valuation expansion.