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Nishat Power Q3 FY26: Dispatch Rebounds, but Core Margin Compresses as EV Profit Supports Earnings

Nishat Power generated more electricity in Q3 FY26, but fuel costs and the revised PPA compressed core margins. Nexgen Auto and investment income became major earnings supports.

Sep 24, 2026

Verdict

Nishat Power Limited’s March 2026 quarter showed a sharp recovery in dispatch but a much weaker margin on the electricity it sold. Q3 revenue rose 37.5% year on year to Rs2.33 billion, yet cost of sales rose 88.1%, gross profit fell 52.6% to Rs288.9 million and gross margin compressed to 12.4% from 35.9%. The plant was being called more often, but the economics of those additional units were materially less profitable under a combination of high fuel costs and the revised Power Purchase Agreement.

Reported net profit still increased 6.4% to Rs691.0 million because earnings below the generation line changed dramatically. Nishat Power recognized Rs393.7 million as its share of profit from Nexgen Auto in Q3, while other income contributed Rs238.4 million. The associate contribution alone equaled about 57% of quarterly PAT, making diversification a central part of the earnings story rather than a side item.

For the nine months, the headline turnaround from a Rs2.11 billion loss to Rs1.66 billion profit is real but highly distorted by the prior-year one-off CPPA-G adjustment. The cleaner reading is that power-generation margins are structurally lower after the PPA reset, while investment returns and the new EV associate are now doing more of the work. The next result therefore needs to be judged on dispatch quality, receivable collection, cash conversion and the repeatability of these non-generation earnings streams.

Results at a glance

  • Company: Nishat Power Ltd
  • Ticker: NPL
  • Reporting period: quarter and nine months ended March 31, 2026
  • Basis: unaudited company-level condensed interim financial statements prepared under IAS 34 and the Companies Act, 2017; figures are reported in rupees thousands unless stated otherwise
  • Q3 revenue: Rs2.33 billion, up 37.5% year on year
  • Q3 gross profit: Rs288.9 million, down 52.6%; gross margin 12.4% versus 35.9%
  • Q3 profit from operations after other income: Rs366.8 million, down 46.4%
  • Q3 share of profit from Nexgen Auto: Rs393.7 million
  • Q3 PAT: Rs691.0 million, up 6.4%; EPS Rs1.95 versus Rs1.83
  • 9MFY26 revenue: Rs5.15 billion, down 1.3%; PAT Rs1.66 billion versus a Rs2.11 billion loss
  • Interim dividend declared after period end: Rs1.50 per share, totaling about Rs531.1 million

What improved

The clearest improvement was utilization. During the nine months, Nishat Power dispatched 87,852 MWh to CPPA-G versus 51,408 MWh a year earlier, an increase of about 70.9%. Average capacity factor improved to 6.84% from 4.00%, while availability remained very high at 98.20% versus 98.39%. That combination matters: the plant itself remained available and the power purchaser called on it materially more often.

The company links the better dispatch environment to disruptions in liquefied-natural-gas supply arising from Middle East geopolitical conditions. CPPA-G’s March 2026 energy-purchase data independently show Nishat Power supplying RFO-based electricity during the month, consistent with management’s description of furnace-oil plants being used as part of the system’s backup generation mix.

Diversification also moved from strategy to reported earnings. Nishat Power invested Rs2.0 billion in Nexgen Auto and held 33.33% of the company at March 31. The investment’s carrying amount had risen to Rs2.39 billion after recognition of Rs390.6 million of post-acquisition profit for the nine-month period. In Q3 alone, the equity-accounted share was Rs393.7 million, meaning almost all of the nine-month associate profit arrived in the March quarter.

The balance sheet also retains substantial financial liquidity despite the rise in borrowings. Short-term investments stood at Rs19.67 billion at March 31, up from Rs18.11 billion at June 2025. That pool is important when interpreting the low cash balance and higher short-term debt: the company has shifted a large part of its liquidity into investments rather than simply holding it in bank accounts.

What weakened / needs attention

The generation margin deteriorated sharply. Q3 cost of sales increased to Rs2.04 billion from Rs1.09 billion, almost twice the pace of revenue growth. Raw-material consumption, the largest operating cost line and principally linked to fuel, rose to Rs1.60 billion from Rs620.7 million, an increase of about 158.5%. Management explicitly refers to high fuel-cost pressure, and the income statement shows why additional dispatch did not translate into proportional gross profit.

After administrative expenses, only Rs128.4 million remained before other income in Q3, compared with Rs466.5 million a year earlier. Other income lifted reported profit from operations to Rs366.8 million, but that was still 46.4% lower year on year. In other words, the core generation business weakened substantially even though the headline revenue line looked stronger.

The nine-month pattern is even clearer. Revenue was almost flat at Rs5.15 billion, but gross profit fell 58.6% to Rs944.0 million and gross margin dropped to 18.3% from 43.7%. Raw-material consumption rose 88.7% over the same period. The PPA amendment effective November 1, 2024 converted the tariff to a Hybrid Take & Pay model and reduced the delayed-payment rate, so more MWh no longer imply the same capacity and financing economics that existed under the earlier tariff.

Receivables are rebuilding as well. Trade debts due from CPPA-G increased to Rs2.50 billion from Rs1.66 billion at June 2025, a rise of about 50.7%. They remain supported by the Government of Pakistan guarantee under the Implementation Agreement, and delayed-payment mark-up applies when amounts are overdue, but the direction matters because it ties up cash and reintroduces working-capital sensitivity.

Recurring versus exceptional: the headline turnaround needs normalization

The biggest distortion in the nine-month comparison sits in the prior year. 9MFY25 included a Rs4.79 billion adjustment to the balance payable by CPPA-G following the revised arrangements. The cash-flow reconciliation shows this was associated with a Rs1.80 billion write-off of delayed-payment interest and Rs2.99 billion of sharing of prior years’ fuel and O&M earnings. That one-time charge pushed the comparable period into a large reported loss.

Before that prior-year adjustment, the 9MFY25 profit line immediately above it was Rs2.83 billion. In 9MFY26, profit before levy and tax was Rs1.94 billion even after including Rs390.6 million from Nexgen Auto. This means the apparent swing from loss to profit overstates the improvement in recurring economics. On a normalized reading, profitability below the old tariff structure was stronger than the current generation-and-investment mix.

Current-period other income also deserves separation from generation earnings. Other income totaled Rs1.13 billion in 9MFY26. The cash-flow reconciliation identifies Rs657.1 million of gains on disposal of mutual-fund investments and Rs457.4 million of unrealized fair-value gains, showing that investment returns were a major contributor. These gains are economically valid but can fluctuate with portfolio returns and should not be treated as equivalent to recurring plant margin.

Q3 provides the same message in a cleaner way. Profit before levy and tax reached Rs748.9 million versus Rs683.4 million a year earlier, but Rs393.7 million came from the equity-accounted associate. Without that new source, the quarter’s below-the-line earnings bridge would have looked materially weaker. The EV investment is becoming a genuine second earnings engine, but investors should track it separately from the power plant.

Cash flow and balance sheet

Cash conversion weakened sharply from the exceptional prior year. Net cash used in operating activities was Rs859.8 million in 9MFY26 versus Rs10.97 billion generated in 9MFY25. The prior-period inflow was dominated by a Rs8.96 billion release of trade receivables as longstanding power-purchaser balances were collected following the settlement. That benefit did not repeat.

This year, working capital moved the other way. Inventories absorbed Rs742.9 million, trade debts absorbed Rs842.2 million and advances, deposits, prepayments and other receivables absorbed Rs708.2 million. Higher trade payables provided a Rs660.5 million offset, but cash generated before working-capital changes of Rs950.8 million was ultimately converted into a cash outflow from operations after working capital, finance cost and tax.

Short-term borrowings rose to Rs3.96 billion from Rs719.9 million at June 2025, while cash and bank balances fell to Rs30.5 million from Rs113.1 million. Read alone, that looks like a sharp deterioration. But current assets still totaled Rs25.25 billion against current liabilities of Rs5.16 billion, and the Rs19.67 billion short-term investment portfolio means the company remains highly liquid on a gross current-assets basis. The more relevant question is why borrowing has rebuilt while a large investment book is also being maintained.

The company also committed Rs2.0 billion to Nexgen Auto during the period. That cash deployment has already produced a substantial accounting profit, but it changes the capital-allocation profile: future returns increasingly depend on investment performance as well as the power plant. Management has additionally said it is pursuing a strategic stake in Rafhan Maize Products, which would push diversification further if completed.

Sector and peer context

CPPA-G’s official March 2026 energy-purchase data show that Nishat Power was dispatched on RFO during the month, alongside several other thermal plants. That supports management’s description of a period in which fuel-supply constraints elsewhere in the system created incremental room for furnace-oil generation. The key limitation is cost: RFO remains an expensive source, so dispatch can rise without restoring the older capacity-driven margin profile.

Close peer Nishat Chunian Power shows a remarkably similar pattern. Its 9MFY26 capacity factor rose to 5.57% from 1.61%, dispatch increased to 56,261 MWh from 20,762 MWh, and management also cited the Hybrid Take & Pay amendment, lower capacity tariff and lower delayed-payment rate. It simultaneously reported rising CPPA-G receivables and a meaningful profit contribution from the same Nexgen Auto associate. This peer evidence suggests NPL’s mix of higher dispatch, lower traditional tariff economics and diversification is not an isolated company event but part of a broader reset among these related RFO IPPs.

There is still an important company-specific difference in scale. Nishat Power dispatched substantially more electricity than the close peer during the nine months, while its short-term investment pool is also larger. The next cycle therefore depends not only on sector dispatch but on how NPL allocates this liquidity, manages the receivable cycle and converts its diversified investments into repeatable cash earnings.

Dividend and capital allocation

On April 28, 2026, the board declared an interim cash dividend of Rs1.50 per share, or roughly Rs531.1 million in aggregate. Because the declaration occurred after the March 31 reporting date, the interim financial statements correctly treat it as an event after the reporting period rather than a liability at quarter end.

The payout sits alongside a much larger capital-allocation shift: Rs2.0 billion invested in Nexgen Auto, a large mutual-fund portfolio and plans for another strategic equity investment. The company is effectively evolving from a single-asset thermal IPP toward a power-and-investment vehicle. That can reduce dependence on low-utilization thermal generation, but it also means earnings quality must increasingly be assessed across different risk profiles.

What to monitor next

  • Dispatch and capacity factor: whether the 6.84% nine-month capacity factor holds as LNG availability, electricity demand and merit-order conditions change.
  • Gross margin: whether fuel-cost pressure eases enough for higher dispatch to translate into better plant-level profitability.
  • Nexgen Auto contribution: whether the Rs393.7 million Q3 share of profit proves repeatable and begins generating cash distributions over time.
  • Investment income: realized and unrealized gains on the Rs19.67 billion short-term investment portfolio can materially move earnings from one period to another.
  • CPPA-G receivables: whether the rise to Rs2.50 billion reverses or continues, and what that means for operating cash conversion.
  • Borrowings versus liquidity: why short-term debt has risen while substantial mutual-fund investments remain on the balance sheet.
  • PPA economics: the continuing effect of Hybrid Take & Pay, lower capacity tariff and the reduced delayed-payment rate on recurring power earnings.
  • Capital allocation: progress on the proposed Rafhan Maize stake and whether further diversification improves cash yield without weakening liquidity.

AlphaGen model outputs

  • Alpha QoQ Score: 57.43
  • TTM Performance Score: 56.76
  • 3Y Business Perf Score: 32.95
  • Sector Leadership Score: 54.28

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

Sources

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