Pakistan’s largest listed IPP, Kot Addu Power Company (KAPCO) has posted financial results for July-September 2016 quarter (1QFY17), The Company has posted profit after tax  of Rs2.32 billion (EPS: Rs2.63) higher by 10%YoY, but below analysts’ expectation on account of lower load factor during the month of September. Margins for the quarter rested higher than estimates, at an all time high GM/OM of 18.8%/24.3% . Absence of major overhauls kept Cost of Sales/Opex lower by 24%/33%YoY, where as the Finance Costs witnessed an increase of 14%YoY (up Rs115 million), eroding profitability.    Upcoming quarters are expected to be a function of two conflicting scenarios. Firstly, lower load factors in subsequent quarters (as CPP payments make greater share of revenues) and receipt of penal income raise earnings, aiding margins. On the flip-side, any increase in fuel costs coupled with higher load factors or a major overhaul have the potential to drag earnings.  Market awaits confirmation of the privatization priorities of the Government of Pakistan (GoP).

 

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