KEGOC demonstrates stable 9M2017 financial results

Altynay IbraimovaNovember 14, 2017

Today, KEGOC published its financial results for 9M2017, witnessing an increase in revenues in annual terms by 20%, while the cost of sales increased by 13%.

Today, KEGOC published its financial results for 9M2017, witnessing an increase in revenues in annual terms by 20%, while the cost of sales increased by 13%.

Revenues of KEGOC for 9M2017 increased by 20% yoy to T112bn. The main part of the proceeds is concentrated on electricity transmission services (62%), for which a 21% growth was recorded during the reporting period. Technical dispatching services provided growth of 12% yoy, a more dynamic increase was demonstrated by the sale of purchased electricity, the revenues of which increased by 45% yoy.

The cost of sales for 9M2017 increased by 13% to T64bn, mainly due to the increase in technological consumption of electricity (+ 17%) and the higher cost of purchased electricity (+ 44%).

For 9M2017 KEGOC reduced payroll costs (-2% yoy), while tax expenses increased by 39% yoy, as a result of which general and administrative expenses increased by 15% yoy.

In the reporting month, the Company recognized a foreign exchange loss of KZT5.5bn (5% of revenue) and reflected a reserve on the balance of deposit funds in Delta Bank and Kazinvestbank in the amount of KZT1.9bn, which was accrued due to the deterioration in the credit rating and financial condition of Delta Bank and deprivation of a license to conduct banking and other operations from Kazinvestbank.

Nevertheless, the company managed to complete 9M2017 with a net profit of T23bn, exceeding the indicator of 9M2016 by 1%.

Fig. 1. Selected financials

 

KZT bn

9М2016

9М2017

yoy

Revenue, including:

  93 010  

  111 717  

20%

 

the electricity transmission

  57 319  

    69 146  

21%

 

technical dispatching of the electricity

  14 186  

    15 868  

12%

 

electricity purchase/sale activities

    7 941  

    11 514  

45%

 

balancing of electricity production and consumption

    9 709  

    10 913  

12%

 

other

    4 740  

     4 497  

-5%

Cost of sales

  56 448  

    63 778  

13%

Operating profit

  27 463  

    37 386  

36%

Net profit

  22 415  

    22 715  

1%

Source: Company data

 

Our view

Revenues of KEGOC for 9M2017 are comparable with our expectations and taking into account the expressed seasonal nature of services, we believe that following the results of 2017 KEGOC will be able to meet our projected level of T161bn. The increase in cost of sales by 13% to T64bn is considered acceptable, given the expected growth in the figure for the year to T92bn. We note an improvement in operating activity from 29.5% (operating margin) to 33% in the reporting period and we see progress in optimizing expenses for the Company in such items as a payroll, travel expenses and consulting services. Excluding foreign exchange differences and accrued provisions for funds in Delta Bank and Kazinvestbank, the taxable profit of the company shows an increase of 29% yoy. We evaluate the results of KEGOC as neutral, and noting that the Company has capital-intensive projects accompanied by liabilities in foreign currency, we maintain our "Hold" recommendation for KEGOC shares with a T1 257/share TP.