In Focus: PPL (18062008)

Fair value: Rs297
Investment strategy: “Buy”
PPL is currently trading at the discount of 11.2 percent from our fair value Rs297, while we maintain our "Buy" stance for the script at current levels. Going forward, we are expecting that the company would post PAT of Rs20.5bn in FY08 translating into EPS of Rs27.18 against EPS of Rs22.04 in corresponding period last year, showing enormous growth of 23.3 percent YoY.
The expected massive growth in bottom line earnings of the company would mainly backed by massive increase in well-head gas prices during the period. On average well-head gas prices of Sui, Kandhkot, Sawn and Miano fields were increased by 13.1 percent in January, 2008. These fields accounts 89 percent of total gas production of the company. In addition, substantial increase in oil production of the company would also support bottom line earning of the company.
Revenue Mix - During 9M08, we had seen significant changes in the revenue mix of the company, previously natural gas was accounting more than 90 percent in top line earnings of the company which is currently reduced to 83 percent. This is mainly due to massive increase in oil revenue of the company, which is now contributing around 14.7 percent in total revenue against 7.1 percent during same period last year.
Oil and Gas Production - During 9M08 oil production of the company had increased to 4,077bpd from 2,555bpd in corresponding period last year, depicting enormous growth of 59.6 percent on YoY. This is primarily due to increase in production from Tal block, Adhi field and additional production from Mela field, while Gas production of the company had shown nominal growth of 1.5 percent and increased to 919mmcfd from 905mmcfd during same period last year.