JS Securities Limited - JS Research (25 May 2023)

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JS Securities Limited – JS Research (25 May 2023)

May 25, 2023

Karachi, May 25, 2023 (PPI-OT): PKGP and LPL: Future dividend stream dependent on government flows

We present takeaways from Corporate Briefing Sessions held by Pakgen Power (PKGP) and Lalpir Power (LPL), together yesterday.

Management expects lower utilization to limit fuel losses of respective plants. Moreover, given exposure to circular debt, future dividend stream quantum is dependent on timing of government payments.

To recall, PKGP's balance sheet went debt free as at Mar-2023, with cash and equivalents at Rs9/share. On the other hand, LPL's cash balance stood at Rs5/share, against short term borrowings of Rs10/share.

Utilization expected to remain low

We present takeaways from Corporate Briefing Sessions held by Pakgen Power (PKGP) and Lalpir Power (LPL), together yesterday. Both plants run on Oil-Fired Steam Turbine, with each holding dependable capacity of 350MW. Falling among the bottom in National Transmission and Despatch Company’s (NTDC) Merit Order List, the plants remained almost shut in 3 - 4 months out of twelve months last year. As a result, PKGP’s capacity utilization has been almost 36%, while LPL’s utilization has been around 27%. Both companies expect similar situation to continue in CY23 over higher availability of relatively cheaper power from Hydel, Coal, Renewable and RLNG sources. Management expects lower utilization to limit fuel losses of respective plants. Moreover, given exposure to circular debt, future dividend stream quantum is dependent on timing of government payments.

Cash on balance sheets increase in 1QCY23

PKGP’s CY22 earnings clocked in at Rs8.4/share, while DPS for the year stood at Rs3.5. For 1QCY23, company’s earnings clocked in at Rs4.6/share. The company’s balance sheet went debt free as at Mar-2023, with cash and equivalents at Rs9/share, in addition to Rs13bn (Rs36/share) receivables outstanding.

LPL, on the other hand, has earned Rs7.1/share during CY22, out of which LPL also announced dividend of Rs3.5/share, while during 1QCY23, EPS clocked in at RS2.69. As at Mar-2023 end, the company’s cash balance stood at Rs5/share, against short term borrowings of Rs10/share. LPL’s receivables remain sticky at Rs11bn (Rs28/share). Maintaining practise of semi-annual dividend announcements, both company is expected to announce the next dividend with its 1HCY23 results.