NishatChunianPowerLimited

Unbeatabledividendyield!
UR
CurrentPrice:PKR36

Bloomberg Reuters MCAP(USDmn) 12MADT(USDmn.) SharesOutstanding NCPL.PA NCPL.KA 125 0.3 367

Tuesday October1, 2013 Nishat Chunian Power Limited (NCPL) is all set to announce its FY13 financial results on 04 October, 2013. We expect NCPL to report a net profit after tax to the tune of PKR2.7bn,culminatingintoEPSofPKR7.48 On sequential basis, profit after tax is expected to clock in at PKR731mn (EPS PKR1.99),up22%QoQ The most significant factor towards higher profitability will be 18%YoY decline in financecost Being on a conservative side, we should expect the board to declare a final cash dividendofPKR1/sharetakingFY13scashdividendtoPKR5/share We are currently reviewing our financial model in order to incorporate sectors improved dynamics. However, we tend to have a likeness towards NCPL given its tempting14%dividendyield!

NCPLvs.KSE100RelativeChart
KSE100Index 240 220 200 180 160 140 120 100 80 Oct12 Nov12 Dec12 Jan13 Mar13 Feb13 Apr13 May13 Jun13 Jul13 Aug13 Sep13 Oct13 NCPL

Lowerfinancecosttopropelearnings36%YoY
NishatChunianPowerLimited(NCPL)isallsettoannounceitsFY13financialresultson04 October, 2013. We expect NCPL to report a net profit after tax to the tune of PKR2.7bn, culminating into EPS of PKR7.48. The expected profitability depicts stunning growth of 36% over previous years net earnings of PKR2.0bn (EPS: PKR5.51). On sequential basis, profit after tax is expected to clock in at PKR731mn (EPS: PKR1.99), up 22%QoQ. The toplineisanticipatedtogrowby16%YoYaselectricitygenerationnumberssuggest10pps improvement in load factor, reaching 73% in FY13. However, the gross profit is expected toincreasebymere2%asrelativelyhigherOperationsandMaintenance(O&M)expenses willdiluteeffectsof5%PKRdevaluationagainstthegreenback.Themostsignificantfactor towards higher profitability will be 18% YoY decline in finance cost, which is expected to be around PKR2.5bn in FY13. The main reasons behind shrinking finance cost include a) increasing proportion of principal repayment in installments and b) 300 bps cut in SBP discountrateandresultantdeclineinKIBORduringFY13. FY13E:FinancialHighlights

NCPL Profile: NCPL is a public limited company incorporated in Pakistan. The company is a subsidiary of Nishat Chunian Limited. The principal activity of the company is to build, own , operate andmaintainafuelfiredpowerstationhavinggross capacity of 200MW and net capacity of 195MW at Jamber Kalan,District Kasur, Punjab.The company has a power purchase agreement with its sole customer, National Transmission and Despatch Company Limited (NTDCL) for 25 years which commencedfromJul10.

PKRmn Sales

4QFY13 6,354 4,947 1,407 17 1,411 674 737 731 1.99 3.00

3QFY13 6,411 5,257 1,154 15 1,149 545 605 600 1.63

QoQ 1% 6% 22% 10% 23% 24% 22% 22% 22%

FY13E 25,041 19,777 5,264 67 5,294 2,526 2,769 2,748 7.48 5.00

FY12 21,585 16,399 5,186 102 5,117 3,081 2,036 2,025 5.51 3.50

YoY 16% 21% 2% 34% 3% 18% 36% 36% 36%

CostofSales
GrossProfit AdministrativeExpenses FinanceCost Profitbeforetaxation Earningpershare(PKR)

ProfitfromOperations

Profitaftertaxation Dividendpershare(PKR)

TaseerAbbas
taseer.abbas@bmacapital.com +92111262111Ext:2056

Source:BMAResearch

BMACapitalManagementLtd.801Unitower,I.I.ChundrigarRoad,Karachi,74000,PakistanForfurtherqueries,pleasecontact: bmaresearch@bmacapital.comorcallUAN:111262111 This memorandum is produced by BMA Capital Management Limited and is only for the use of their clients. While the information contained herein is from sources believed reliable, we do not represent that it is accurate or complete and should not be relied upon as such. Opinions expressedmayberevisedatanytime.Thismemorandumisforinformationonlyandisnotanoffertobuyorsell,orsolicitationofanyoffertobuy orsellthesecuritiesmentioned.

Brightprospectsforfinalpayout
Just to mention, our earnings projection of PKR7.48/share can be broken down into: i) Project CompanyEquity of PKR2.11/share,ii) OperationsandMaintenance(O&M) savings of PKR2.6/share and iii) fuel efficiency gains of PKR1.3/share while the remainder is attributedtoseveralfactorsincludingpositivespreadfromoverduetradereceivables.This concludes NCPL has a capacity to pay total cash dividend of PKR6/share (the sum of aforementionedcomponents,ifthecompanydecidestodistributeallO&Msavingsaswell as fuel efficiency gains). Still being on a conservative side, we should expect the board to declareacashdividendofPKR1/sharetakingFY13scashdividendtoPKR5/share.

Recommendation
We are currently reviewing our financial model in order to incorporate sectors improved dynamics. However, we tend to have a likeness towards NCPL given its tempting 14% dividendyield!