TRANSPOWER: Robust topline performance drives earnings

Transcorp Power Plc (NGSE: TRANSPOWER: N323.49) delivered a robust Q1'24 performance, with its unaudited financial statement revealing a remarkable 7x surge in PAT to N20.14 billion. This substantial increase is primarily attributed to the triple-digit growth in the company's topline during the quarter under review. 

Notably, revenue surged 222.5% YoY to N67.9 billion, largely due to improved capacity utilisation and favourable pricing. A breakdown showed higher revenue generated from energy delivered (+222.9% YoY to N45.2 billion) and capacity charge (+218.3% YoY to N22.6 billion). The company also earned N6.0 million (up 100.0% YoY) in ancillary services, such as Blackstart operations and frequency control services provided. Cross-border power sales of spare capacity amounted to c.18.3% of total revenue, while local sales accounted for c.81.7% of total revenue.

Expectedly, natural gas and fuel costs, constituting 91% of the company's cost of sales, surged by 159.5% YoY to N30.1 billion "” nevertheless, the gross margin printed at 51.2% (vs 36.6% in Q1'23). Similarly, administrative expenses jumped by 5x to N4.3 billion, driven by higher management fees, which made up over 52.0% of total operating expenses in the period. Nonetheless, EBIT margins expanded by 11.2ppts to 43.3%. 

Elsewhere, net finance costs moderated by 81.5% YoY, following a significant 2.5x surge in interest income to N1.3 billion. While finance costs grew by 40.8% YoY, the company recorded a foreign exchange gain of N239.5 million (vs a loss of N2.4 billion in Q1'23), which contributed to the moderation in net finance costs. Our view is that the company took advantage of the high-interest rate environment while also lowering costs via the complete settlement of the $215 million acquisition loan obtained to acquire 100% interest in Ughelli Power Plc.

Meanwhile, Transcorp Power Plc reported a 13x jump in income tax expense to N8.6 billion in line with the strong performance, implying an effective tax rate of 30% (vs 20% in Q1'23). EPS stood at N2.69 (vs N32.8 in Q1'23), following the increase in the company's weighted average number of shares from 80 million shares to 7.5 billion shares.

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