Result Review of PPL FY08 (18082008)

Investment Strategy: Buy
PPL had recently announced it's FY08 result. Where the company had posted PAT of Rs19.7bn, translating into EPS of Rs26.12 against EPS of Rs22.04 marked in corresponding period last year, showing Y-o-Y growth of 18.5 percent. Along with the result company has also announced 10% bonus share to its equity holders. Moreover, company had already announced interim cash dividend of Rs15.5 during the period under review.
Further, top line of the company has increased by 19.5 percent to Rs45.72bn as compared to Rs38.25bn in same period last year, depicting substantial growth of 19.5 percent on Y-o-Y. This substantial growth was mainly backed by massive increase in international oil prices during the year coupled with average increase of 13.1 percent in well-head gas prices of Sui, Kandhkot, Sawan and Miano fields in January 2008.
In addition, other operating earning of the company has increased by 26 percent during the year which was primarily due to increase in deposit and TFCs rates during the year.
During 4Q08, PPL has posted decline of 16.6 percent in bottom line earnings which was mainly due to higher taxation charged during the period. Company has charged effective tax rate of 44% during the quarter against 33% in same period last year.
Going forward, PPL would be major beneficiary of the recent increase in well head prices of Sui, Adhi, Sawan and Miano fields which are increased by 30.1%, 11.2%, 16.7% and 16.7% respectively. These fields contributes around 87 percent in PPL's total gas production. We expect it would increase earnings of the company by Rs5.96 per share from FY09 onwards.
Recommendation
We estimate fair value of Rs332 for PPL, while the script is currently trading at the discount of 50.6 percent from our fair value and we maintain our "Buy" stance at current levels.