Lalpir Power Limited - Furnace Oil Demise is a Boon
- We Initiate coverage with a Dec-18 PT of PKR35/share offering 72.6% total potential upside from last close (including 10.4% leading dividend yield) at a 14.5% cost of equity.
- LPL has historically suffered fuel losses of 160% of reported earnings over 2013-16. This has resulted in 6.7% average ROE which is expected to rise to 15.5%.
- We see reduction in utilization rate from the historical average of 58% over 2013-16 to 25% post 2023, with drastic reductions in utilization during 2017-2022. This could potentially reduce average fuel losses by 56%.
Lalpir Power Limited is a Pakistan-based power producer. The Company's principal activities are to own, operate and maintain an oil fired power station (the Complex) having gross capacity of approximately 360 megawatt (MW) in Mehmood Kot, Muzaffargarh, Punjab, Pakistan. Its segments include Contract Generation, Competitive Supply and Regulated Utilities. Its Competitive Supply businesses sell power to wholesale customers in markets in over seven countries, under short-term contracts or into daily spot markets. The Company utilizes coal, gas, water, oil, petroleum coke and biomass to fuel these plants. The Company sells electricity to residential, business and government customers through integrated transmission and distribution systems under exclusive concession contracts. The purchaser of the power is Water and Power Development Authority (WAPDA). It has over two units in Pakistan, such as Lal Pir and Pak Gen. It has approximately 130 power plants and over 10 distribution companies.
Elixir Securities Pakistan is a Corporate Member of the Pakistan Stock Exchange & Pakistan Mercantile Exchange and is one of the leading securities brokerage & investment banking firms in Pakistan, established since 1994. Our principal business activities include all aspects of Pakistan’s Capital Markets covering Securities Brokerage (Equities, Fixed Income and Commodities), Corporate Finance & Capital Markets Advisory (M&A, ECM, DCM) and Investment Research (Economics & Securities). We are one of the most active & aggressive Broker-Dealers in Pakistan executing trades for most of the Top 20 Global Brokers with unmatched corporate access credentials and have successfully advised and closed on some landmark ECM transactions in the history of Pakistan including the largest deal in frontier Asia (USD 1.02 billion). Our Clients include foreign and domestic financial institutions (Banks, Asset Managers, Insurance Companies, Pension Funds) corporates, HNWI’s and retail investors. This is supported by a very strong and independent research capability, which is quoted regularly in both local and international media.
Elixir Securities Pakistan is the proud recipient of many awards & recognitions including AsiaMoney’s Brokers Poll 2017, FinanceAsia’s Pakistan Best Investment Bank and Best Broker 2017, The Asset’s Best Brokerage House in Pakistan 2016, Asiamoney’s “Best Domestic Equity House 2015 in Pakistan”, The Asset Triple A Country Awards 2015 - Pakistan “Deal of the Year” and “Deal of the Year-Highly Commended”, CFA Society of Pakistan Awards for Year 2015 “Best Research Analyst (1st Rank), CFA Society of Pakistan Awards for Year 2014 “Best Research Analyst (1st Rank)”, “Best Trader” 2nd Runner-up (3rd Rank), The Asset Triple A Country Awards 2014’s “Best Deal in Pakistan” and Capital Finance International’s nomination for “Best Equity Research in Pakistan 2010”.
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