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KAPCO: FY10 Result Review (Inline)

Kapco announced its FY10 result today. The company posted NPAT of PkR5.09bn (EPS-PkR PkR5.78) in FY10 against NPAT of PkR5.67bn (EPS-PkR6.44) in the corresponding period last year, a decline of 10.2%YoY. The result was inline with our estimated NPAT of PkR4.99bn (EPS: PkR5.67) for FY10.

Topline rose by 24%YoY to reach PkR85.9bn in FY10 versus PkR69bn in the same period last year The surge in topline is on the back of a weaker PkR against the greenback as Kapco’s tariff is indexed to the US$. However, higher non-pass through items (costs originating from repairs and maintenance) reflected in the cost of sales (up 30.2%YoY) diluted topline growth.
A decline of 22.5% in other operating income (due to lower cash balance) to PkR3.7bn in FY10 further aided bottomline decline. We also note that financial costs came down by 16.8%YoY at PkR5.3bn during FY10. The decline witnessed in financial costs is likely due to a lower interest rate environment and a slightly lower debt exposure.
Inline with expectations, Kapco also announced a final dividend of PkR2.75/share in FY10, taking full year FY10 DPS to PkR5.0/share. At current levels, we have an Accumulate stance on Kapco with a target price of PkR49/share. We would be reviewing our investment case post publishing of FY10 results and will revert shortly.
Umer Pervez
AKD Research
2 September 2010

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