Nishat Power – FY11 EPS expected at 6.76

Nishat Power Result Expectation: Nishat Power Limited (NPL) is scheduled to announce its FY11 financial results on September 5, 2011, we expect the company to post PAT of PKR2.39bn (EPS: PKR6.76) and pay full year dividend of PKR2/share. 4QFY11 EPS is expected at PKR1.60, down 8% QoQ.

O&M and fuel savings to support earnings: Average utilization for FY11 for Nishat Power stood at 86%, with 4Q generation of 338Gwh at 79% load factor. We expect O&M savings for 4Q at PKR195mn (PKR0.55/share) taking full year savings to PKR968mn (PKR2.73/share). Fuel savings for FY11 are expected at PKR363mn (PKR1.02/share) with 4Q fuel savings of PKR71mn (PKR0.20/share).

Spread Income to contribute PKR1.57 to FY11 EPS: Net penal interest income for 4Q is expected at PKR173mn (PKR0.49/share), which will take full year spread income to PKR555mn (PKR1.57/share). Receivables are expected to ease at year end and stand at PKR7.8bn, as Nishat Power received payments on June 28, 2011, after it invoked sovereign guarantee.

Nishat Power Investment Perspective: At yesterday’s closing price, Nishat Power offers an upside of 24% to our Jun-12 DDM based PT of PKR18.5/share, with an attractive dividend yield of 28% for FY12. Nishat Power is currently trading at FY12 P/E of 2.4x, offering a real USD IRR of 17% over the remaining term of the Power Purchase Agreement.

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