Historical performance From FY11 to FY13 LPL witnessed an increase in revenues but subsequently saw the top line take a hit in the past two years. The gross and net margins however continue to slide from FY11 to FY13 with the lowest point of the firm being FY13 in terms of profitability.
The director's report attributes this to an increase in delta loss which it measures as grams per kWh fuel consumption. The net margin was reduced from 4.83 percent in FY11 to 1.76 percent in FY13. However, since then the company has managed to recover somewhat and its net margin has risen up to 3.85 percent.
From an EPS of Rs 4.15 in FY11 the company has slid down to an EPS of Rs 2.24 in FY15. Throughout the past five years LPL has had issues with WAPDA which is its sole customer over payment of dues. By the end of FY15 Rs 6.68 billion was outstanding against WAPDA out of which Rs 4.50 billion was classified overdue. The company has blamed this delay in payment for disruption in fuel supply which in turn affects its generation performance.
Snapshot FY16 Lalpir Power Limited continued its steady performance although the top line took a considerable hit during FY16 which might be attributable to lower furnace oil prices during the period as well as lower dispatches. The company continues to face issues with CPPA against payment of dues which has resulted in erratic fuel supply and hence the reduced capacity factor.
Even though revenue was markedly lower as compared to the previous year, the company was able to earn a better profit margin due to a decrease in the delta loss which meant lower fuel consumption per kWh generated.
However, like the majority of IPPs LPL has been facing the adverse impacts of circular debt and was owed Rs 8.6 billion as outstanding till 31 December, 2016 out of which Rs 4.24 billion was classified overdue. The rise in circular debt has affected cash flow and constrained liquidity of the majority of IPPs in the power sector and this has also had an impact on LPL.
Stock performance Lalpir Power Limited has consistently underperformed the benchmark KSE-100 index since May 2016 last year with the last three months of this year showing a new low against the benchmark. Considering the lacklustre performance shown by the company and investor preference for growth stocks and MSCI scrips in the last few months, the stock has not fared well. However, the expansion into renewables with an imminent solar power plant set up might garner investor interest in the future if the profitability of the company also rebounds.
Future outlook In FY15 LPL has approved investment in the Lalpir Solar Power (Pvt) Limited (LPSL). The principal activity of LSPL will be to build, own, operate and maintain a solar power project having gross capacity up to 20MW which will be located near its oil power plant. The company has managed to recover from its weak financial performance in the past year and diversifying into renewables is a good strategy in the long term. LPL has entered into a contract for a period of thirty years for purchase of fuel from Pakistan State Oil Company Limited (PSO).
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LPL: Pattern of Shareholding
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Category Shares held Percentage
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Directors and their spouse(s),children 26,006,412 6.84
Associated Companies, undertakings and
related parties 212,589,863 55.97
Public Sector Companies and Corporations 1,475,000 0.39
Banks,DFIs,NBFC, Insurance,
Takaful, Modarabas and Pension funds 19,882,410 5.23
Mutual Funds 47,199,810 12.41
General Public
a. Local 20,023,472 5.27
b. Foreign 27,363 0.01
Foreign Companies 678,027 0.18
Others 51,956,375 13.68
Totals 379,838,732 100.00
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Source: Company accounts
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Nestle Pakistan
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Rs (mn) 1QCY17 1QCY16 YoY
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Sales (net) 30,417 26,733 14%
Costsof goods sold 18,997 17,009 12%
Gross profit 11,420 9,725 17%
Distribution & selling exp 4,385 3,511 25%
Administrative exp 767 669 15%
Operating profit 6,269 5,545 13%
Finance cost 195 258 -24%
Other operating exp 468 447 5%
Other income 45 52 -14%
Profit before tax 5,651 4,893 15%
Taxation 1,550 1,451 7%
Profit after tax 4,100 3,442 19%
EPS (Rs/share) 90.42 75.89 19%
Gross margin 37.55% 36.38%
Operating margin 20.61% 20.74%
Net margin 13.48% 12.87%
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Source: PSX
CORRECTION: With respect to yesterday's Brief Recording on Nestle Pakistan, The company's financial statement showed a wrong Gross Profit figure, which was carried forward to the earnings for 1QCY16. BR Research regrets the error. The correct financial statement is as follows:
Copyright Business Recorder, 2017