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The Bell about Electricity- Elixir Securities Limited

Karachi: Expensive supplier credit limited earnings

According to Elixir Securities, interest cost on payables/borrowing exceeded mark-up income on overdue receivables during 1QFY12 by PKR400mn, up 4.8x YoY (after tax earnings impact of PKR0.30/share) as major proportion of rise in overdue receivables was funded with fuel supplier credit, which yields a negative spread of 2%. In contrast, funding receivables through short term borrowing earns a positive spread of 1‐2%. Trade debts increased by PKR7.8bn during 1QFY12, whereas payables increased by PKR6bn and short term borrowing increased by PKR1.6bn.


Spread Income
PKR mn 1QFY11  1QFY12 YoY 4QFY11 QoQ
Financial Charges 2,015 2,788 38% 2,411 16%
Less: Interest on LT Debt 180 149 -17% 164 -10%
Cost of funding receivables 1,835 2,639 44% 2,247 17%
Other Income 1,939 2,239 16% 2,002 12%
Net other Income (loss) 104 (400) -484% (245) 64%
Source: Elixir Research, Company Accounts


EPP‐fuel cost differential on the higher side

Fuel cost exceeded Energy Purchase Price (EPP) by an estimated PKR420mn during 1QFY12 (after tax earnings impact of PKR‐0.31/share), up 2.5x YoY, against Elixir Securities’ expectation of PKR100mn. Increasingly negative EPP‐fuel cost differential indicates higher than expected efficiency de‐rating on LSFO. KAPCO generated 98.6% of electricity on LSFO during 1QFY12 with the remaining 1.4% on HSD. LSFO prices grew by 49% YoY for 1Q, which also contributed to the rise in efficiency loss. Elixir Securities has revised its assumption for EPP‐fuel cost differential for 2QFY12 to PKR‐200mn (from PKR‐100mn), and after incorporating efficiency savings for 2HFY12, net EPP‐fuel cost differential for FY12 is expected at PKR396mn (after tax earnings impact of PKR‐0.29/share).

Maintenance cost up 1.9x YoY

Maintenance cost for the quarter stood at PKR124mn, up 1.9x YoY due to base effect as no major maintenance project was completed during 1QFY11 due to floods. Generation during the quarter stood at 1,340Gwh, down 20% YoY at a load factor of 45.1%. By the end of 1QFY12, major overhaul of three gas turbines, and inspection of three turbines were under progress. Elixir Securities expects the company to complete overhauls during 2QFY12, which would jack up maintenance charges to PKR600mn, up 69% YoY.


Key Financials Outstanding shares:880mn
(PKR mn) 1QFY11A 1QFY12A  YoY 4QFY11A QoQ
Sales 16,201 22,096 16%  25,574  -14%
Cost of sales 12,894 19,633 18%  23,128  -15%
Gross Profit 3,307 2,463 -1% 2,446 1%
Administrative Expenses 140 90 46% 131  -31%
Other operating income 1,939 2,239 -11% 2,002 12%
Operating Profit 5,106 4,612  -6% 4,317  7%
Finance cost 2,015 2,788 -14% 2,411 16%
Pre-tax profit 3,091 1,824  4%  1,906  -4%
Taxation 1,054 627 1% 635  -1%
Profit after tax  2,037 1,198 6%  1,272 -6%
EPS (PKR)  2.31 1.36 6% 1.44 -6%
Source: Elixir Research, Company Accounts

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