Nishat Chunian Power Q3 FY26: Higher Dispatch, Weaker Core Margins, and a New Profit Engine

Verdict

Nishat Chunian Power Limited’s quarter ended March 31, 2026 delivered a strong headline profit increase, but the quality of that increase is much more mixed than the bottom line suggests. Q3 revenue rose 73.7% year on year to Rs2.168 billion as generation activity increased, yet cost of sales rose 139.5%, gross profit fell 37.1%, and gross margin compressed to 13.5% from 37.3%. Profit from operations also declined 31.9% to Rs328.5 million.

The reason profit after tax still rose 50.9% to Rs681.1 million was the new contribution from NexGen Auto (Private) Limited. NCPL recognized Rs393.7 million as its share of the associate’s Q3 profit. Before that contribution, profit before levy and tax would have been about Rs324.6 million, roughly 32.6% below the comparable quarter. The quarter therefore shows two businesses moving in opposite directions: a weaker core power-generation margin profile and a powerful first contribution from the company’s diversification into electric vehicles.

The nine-month comparison requires even more care. Reported PAT swung to Rs1.58 billion from a Rs3.28 billion loss, but the prior period contained a Rs5.585 billion adjustment to the balance payable by CPPA-G, while the current period benefited from Rs390.6 million of associate profit and substantial gains on short-term investments. The cleaner signal is that nine-month revenue rose 11.2%, while gross profit fell 51.3% and profit from operations fell 42.7%.

Results at a glance

• Company: Nishat Chunian Power Limited
• Ticker: NCPL
• Reporting period: quarter and nine months ended March 31, 2026
• Basis: company-level condensed interim financial statements; unaudited and prepared under IAS 34
• Q3 revenue: Rs2.168 billion, up 73.7% year on year
• Q3 gross profit: Rs293.0 million, down 37.1%; gross margin 13.5% versus 37.3%
• Q3 profit from operations: Rs328.5 million, down 31.9%
• Q3 share of profit from NexGen Auto: Rs393.7 million
• Q3 profit after tax: Rs681.1 million, up 50.9%; EPS Rs1.85 versus Rs1.23
• 9MFY26 revenue: Rs4.482 billion, up 11.2%
• 9MFY26 PAT: Rs1.580 billion versus a Rs3.281 billion loss, with the prior period distorted by a Rs5.585 billion CPPA-G adjustment
• 9MFY26 net operating cash flow: Rs66.8 million versus Rs7.571 billion
• Interim dividend: Rs1.50 per share, or 15%, amounting to approximately Rs551.0 million

What improved

The clearest operating improvement was utilization. Management reported that NCPL dispatched 56,261 MWh during the first nine months of FY26, up 171% from 20,762 MWh a year earlier. Plant capacity factor increased to 5.57% from 1.61%, while availability remained high at 98.61%. That higher dispatch is the principal reason turnover increased despite a less favorable tariff structure.

The company itself makes the trade-off explicit. Management says reductions in the capacity tariff and delayed-payment rate under the amended Power Purchase Agreement lowered revenue, while the increase in capacity factor offset that pressure. The regulatory record supports the structural change: the amendment shifted NCPL toward a Hybrid Take-and-Pay model, under which part of the return component is tied more directly to actual dispatch rather than being entirely fixed.

Finance cost was another positive. Nine-month finance cost declined 23.4% to Rs10.4 million, and Q3 finance cost remained very small at Rs3.9 million. This is not a highly leveraged operating structure in the traditional sense; the bigger liquidity issue is the timing of collections from CPPA-G rather than interest expense itself.

What weakened / needs attention

The core generation margin deteriorated sharply. Q3 cost of sales increased from Rs782.7 million to Rs1.875 billion, far faster than the 73.7% growth in revenue. Raw materials consumed rose to Rs1.489 billion from Rs382.0 million. With more generation, fuel consumption naturally increased, but the economic result was clear: Q3 gross margin fell almost 24 percentage points to 13.5%.

This pressure was not confined to one quarter. For nine months, revenue increased 11.2% to Rs4.482 billion, but cost of sales rose 79.1% to Rs3.458 billion. Gross profit fell to Rs1.024 billion from Rs2.101 billion and gross margin dropped to 22.8% from 52.1%. Administrative and other expenses also increased, leaving profit from operations at Rs1.378 billion, down 42.7%.

Management expects utilization of residual-fuel-oil plants to remain structurally low because national electricity demand is subdued and fuel economics remain challenging. It also highlighted the carbon and petroleum levies introduced from July 2025 as additional fuel-cost pressure. Those comments matter because the latest quarter benefited from higher dispatch, but that dispatch did not translate into stronger generation margins.

Earnings quality: the associate changed the quarter

The largest bridge between weaker power operations and higher reported earnings was NexGen Auto. NCPL invested Rs2.0 billion and held a 33.33% interest at March 31, 2026. The carrying value of the associate had risen to Rs2.391 billion after recognizing Rs390.6 million of post-acquisition profit for the nine-month period. In Q3 alone, NCPL recognized Rs393.7 million as its share of the associate’s profit.

This contribution is economically real under equity accounting, but it is not revenue or operating profit from the power plant. It should therefore be assessed separately when judging the recurring earnings power of the legacy generation business. The interim report also states that the associate contribution is based on NexGen Auto’s unaudited financial statements for the period, another reason to keep the distinction visible.

Other income also became more important. Nine-month other income rose 29.7% to Rs718.0 million. The cash-flow reconciliation shows Rs445.6 million of unrealized gains from fair-value remeasurement of investments and Rs230.3 million of realized gains on investment disposals. These gains supported earnings but are market-linked rather than a stable power-generation margin. They should not be treated as equivalent to recurring energy or capacity income.

Why the nine-month profit swing is not a clean turnaround

The reported move from a Rs3.281 billion nine-month loss to Rs1.580 billion profit looks dramatic, but last year’s base was exceptional. The 9MFY25 income statement included a Rs5.585 billion adjustment to the balance payable by CPPA-G. Before that adjustment, the comparable period had Rs2.392 billion of profit before levy and tax after finance cost. In 9MFY26, the equivalent figure before the new associate contribution was about Rs1.367 billion, down roughly 42.9%.

That comparison is much more informative than the headline loss-to-profit swing. It shows that the amended commercial framework removed a major prior-period accounting distortion, but underlying power operations generated less profit before the new associate contribution. The latest reported PAT is therefore a combination of normalized accounting after the CPPA-G adjustment, weaker generation economics, investment-market gains and the new EV associate.

Cash flow and balance sheet: receivables are rebuilding

Cash conversion weakened materially. Net cash generated from operating activities was only Rs66.8 million in 9MFY26, down from Rs7.571 billion a year earlier. The working-capital reconciliation explains why: trade receivables absorbed Rs1.214 billion of cash, inventories absorbed Rs524.1 million and other receivables absorbed Rs317.8 million. A Rs1.036 billion increase in trade and other payables offset part of that outflow.

At March 31, trade receivables from CPPA-G stood at Rs2.678 billion, up 82.9% from Rs1.464 billion at June 2025. Management said Rs2.029 billion was overdue, almost double the Rs1.053 billion overdue at June 2025. The receivables remain backed by the Government of Pakistan guarantee under the Implementation Agreement, but the cash-flow consequence of delayed settlement is visible in the balance sheet.

Short-term borrowings consequently increased to Rs1.850 billion from Rs749.7 million at June 2025. Trade and other payables rose to Rs1.343 billion from Rs307.2 million, while inventories increased 57.1% to Rs1.442 billion. Current assets still comfortably exceeded current liabilities because NCPL held Rs11.735 billion of short-term investments, but the company ended March with negative cash and cash equivalents of Rs1.816 billion after netting bank balances against short-term borrowing.

Investing activity also used cash. NCPL made a Rs2.0 billion long-term investment in NexGen Auto during the period. Net cash used in investing activities was Rs1.252 billion after large purchases and disposals of short-term investments. This makes the next cycle important for judging whether earnings from the associate can translate into distributable cash rather than remaining primarily an equity-accounting contribution.

Sector context: NCPL is not the only RFO plant seeing this pattern

A close listed peer, Nishat Power Limited, reported a similar operating mix for the same period. Its nine-month capacity factor rose to 6.84% from 4.00% and dispatch increased to 87,852 MWh from 51,408 MWh. Yet nine-month gross profit fell 58.6%, and Q3 gross profit fell 52.6% even as Q3 revenue rose 37.5%. Management there also pointed to the Hybrid Take-and-Pay amendment, lower delayed-payment economics and high fuel costs.

That peer evidence does not make NCPL’s margin decline automatic, because the plants have different dispatch profiles and accounting details. It does, however, support the inference that higher RFO dispatch during the period could coexist with weaker gross economics across more than one comparable generator. NCPL’s own cost note and management commentary remain the primary evidence for its result.

At the system level, the Power Division has reported progress in containing the broader circular-debt stock and said the July-December 2025 net flow was below Rs80 billion. NCPL’s own receivables nevertheless increased sharply through March 2026. The two facts are not contradictory: aggregate sector improvement can coexist with company-level timing mismatches in CPPA-G settlements. For NCPL, the relevant test is actual collection of its overdue balance.

Dividend and capital allocation

The board approved an interim cash dividend of Rs1.50 per share, equal to 15% of par value and approximately Rs551.0 million in aggregate. The payout is meaningful relative to Q3 PAT, but the period also featured a Rs2.0 billion strategic investment and rising short-term borrowing. Capital allocation is therefore becoming more complex: NCPL is simultaneously returning cash to shareholders, funding diversification and managing renewed working-capital pressure in the power business.

What to monitor next

• Dispatch and capacity factor: whether the recent increase in generation persists, and whether higher volumes can produce better gross profit rather than merely higher fuel consumption.
• Fuel and tariff economics: the relationship between RFO cost, new levies and the Hybrid Take-and-Pay tariff structure.
• CPPA-G collections: whether the Rs2.029 billion overdue receivable begins to convert into cash and reduces reliance on short-term borrowing.
• NexGen Auto contribution: whether the associate continues to generate material profit and, over time, cash distributions; the current-period share of profit is based on unaudited associate accounts.
• Investment gains: whether short-term investment income remains supportive, while recognizing that realized and unrealized market gains are inherently less predictable than contracted operating income.
• Core power margins: profit from operations and gross margin should be watched separately from associate income and investment gains to assess the legacy plant’s economics.
• Dividend funding and liquidity: whether operating cash generation improves enough to support shareholder distributions, diversification and working-capital needs simultaneously.

AlphaGen model outputs

• Alpha QoQ Score: 71.72
• TTM Performance Score: 58.12
• 3Y Business Perf Score: 22.32
• Sector Leadership Score: 66.2018

These four measures are AlphaGen model outputs, not company-reported figures.

Sources

• Pakistan Stock Exchange — Nishat Chunian Power Limited, Third Quarterly Report for the period ended March 31, 2026
• Pakistan Stock Exchange — NCPL company page, announcements and reported financials
• NEPRA / CPPA-G — NCPL tariff-adjustment application and Hybrid Take-and-Pay framework
• Pakistan Stock Exchange — Nishat Power Limited, Third Quarterly Report for the period ended March 31, 2026
• Ministry of Energy (Power Division) — circular-debt update