Nishat Chunian Group consists of five companies including Nishat Chunian Limited (a textile company), Nishat Chunian Power Limited (a power generation company), Nishat Chunian Electric Corporation Limited (a captive power generation company) and Nishat Chunian Entertainment Pvt. Ltd. (an entertainment company). Nishat Chunian Power Limited (NCPL) is part of the Nishat Chunian Group, and is a public limited company established in 2007 as a power generation project commissioned under the 2002 Power Policy. The plant started its commercial operations on July 21, 2010.
The independent power producer (IPP) is a 200 MW Reciprocating Engine Technology combined cycle power plant with a net output of 195 MWh. The primary fuel of the plant is residual furnace oil (RFO). Stock performance and shareholding pattern
NCPL share has been on downward trajectory against the benchmark index, which is not surprising as the power sector performance has been lacklustre lately, especially due to the furnace oil conundrum.
As for shareholding pattern, the majority of the stock is owned by Nishat Chunian Group, which has a stake of 51.07 percent in NCPL. Allied Bank Limited (ABL) of the financial institutions owns 8.17 percent of the total shareholding. Financial institutions together hold around 20 percent of the shares, and the general public's share accounts for almost 16 percent. The complete breakup of the shareholding is shown in the table.
Historical performance
Nishat Chunian Power Company Limited has had deteriorating revenues in the last couple of years, largely due to lower oil prices that kept the furnace oil prices low too. Another key factor in weaker revenue growth in FY15 and FY16 had been a lower capacity factor that went down from 82.5 percent in FY15 to 70 percent in FY16.
Lower capacity factor was due to lower demand by the customer, National Transmission and Dispatch Company (NTDC, which could be because of the merit order that prefers cheaper generation. On the other hand, however, the power company blames non-payment of dues by NTDC leading to non-availability of fuel. Also NCPL has witnessed a decrease in profitability over the years naturally due to higher O&M expenditure as the maintenance expenditure rises in the later years versus the initial years.
On the other hand, the power company has seen improvement in margins as can be seen from the table. That however, has not stopped the deteriorating liquidity position of the firm.
FY17 Performance and beyond
In FY17, Nishat Chunian Power Limited's turnover stood at Rs 16.15 billion, which was 17 percent higher on a year-on-year basis. NCPL's bottom-line increased by around nine percent year-on-year to Rs 2.99 billion, marking a turnaround in profits after two years of declining net income.
Improvement in top line came primarily from increase in furnace oil prices and higher capacity factor from 76.17 percent in FY17 versus 70.3 percent in FY16. This was due to higher demand from NTDC that rose from 1,208,325 MWH in FY16 to 1,315,869 MWH in FY17.
Similarly, BCPL's 1QFY18 performance saw revenues climb by 25 percent year-on-year, while earnings were up by 22 percent. Increased cost of furnace oil also led to a shrink in gross margins that dropped from 27.4 percent in 1QFY17 to 25.6 percent in FY18. During the three-month period, availability of the plant was 92.3 percent with a capacity factor of 84.9 percent.
Outlook
Despite improving profitability in recent times, NCPL is plagued with the evils of the circular debt. The company continues to face payment issues with NTDC, which has impacted its liquidity position. According to NCPL's director's report for the 1QFY18, total receivables from power purchaser were Rs 10.24 billion out of which Rs 5.94 billion were overdue.
The overall power sector came under pressure recently with the government announcing abrupt closure of FO power plants towards end 2017, which resulted in Nishat power, Nishat Chunian Power, Liberty, Hubco Narowal, Atlas and Kel plants to shut down due to the temporary ban on the use of furnace oil. However, even after the removal of the ban the threat to furnace oil based IPPs isn't over. The government is pushing to eliminate furnace oil for cheaper fuels, which is a big concern for the FO IPPs and their future profitability, not barring NCPL.
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NCPL Pattern of Shareholding as on June 30, 2017
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Categories of Shareholders Percentage
share held
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General public 15.95
Directors, CEO & their spouse/minor children 0.05
Associated Companies, Undertaking and related Parties 51.1
Of which
Nishat Chunian Limited 51.1
Joint Stock companies 2.19
Financial Institutions 20.06
Insurance Companies 3.5
Investment companies 0.02
Public sector companies 5.9
Mutual Funds 0.49
Funds 0.29
Others 0.48
Total 100
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Source: Company Accounts.
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NISHAT CHUNIAN POWER LIMITED
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FY12 FY13 FY14 FY15 FY16 FY17
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EPS (Rs/share) 5.46 7.45 7.90 8.41 7.50 8.17
Gross margin (LHS) 23.9% 20.1% 17.9% 22.7% 30.3% 26.8%
Operating margin 23.6% 20.4% 17.5% 22.0% 28.7% 25.3%
Net margin (LHS) 9.3% 10.9% 10.5% 13.7% 19.9% 18.6%
ROE 33.4% 37.7% 41.2% 41.9% 37.8% 32.6%
Current Ratio 1.32 2.23 1.36 1.41 1.29 1.30
Shareholder equity ratio 21.0% 32.1% 25.7% 30.5% 33.6% 38.6%
Net debt to equity ratio 3.46 1.77 2.49 2.16 1.82 1.51
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Source: Company accounts.
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NISHAT CHUNIAN POWER LIMITED (NCPL)
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Rs (mn) 1QFY18 1QFY17 YoY
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Sales 4,688 3,745 25%
Cost of sales 3,487 2,720 28%
Gross profit 1,200 1,025 17%
Administrative expenses 38 35 9%
Other expenses 5 10 -48%
Other income 8 24 -65%
Finance cost 270 269 0%
Profit after tax 896 736 22%
EPS (Rs/share) 2.44 2.00 22%
Gross margin 25.6% 27.4%
Net margin 19.1% 19.6%
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