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Transcorp Power Plc’s net income surged by 665.77 percent to N20.14 billion as at March 2024 from N2.63 billion the previous year, while its balance sheet remains solid which makes the company impervious to any economic downturn.
The median interest coverage ratio for Transcorp Power stood at 13.55 at the end of March 2024, higher than 2023’s 13.16, according to data from MoneyCentral calculations.
The figure is a measure of a company’s ability to repay its debts, with a ratio of at least 2 generally considered the minimum acceptable amount for a company with solid revenues. Analysts typically prefer a coverage ratio of 3 or higher.
The company can meet its long term obligations and it is not susceptible to financial risk as its debt-t0-equity ratio stood at 49.03 percent as at March 2024, from 64.40 percent the previous year.
An adequate solvency and liquidity position makes the company’s stocks attractive to investors. The improved financial performance of Transcorp Power also stems from strong earnings growth.
Revenue spiked by 222.52 percent to N67.8 billion in the period under review from N21.04 billion the previous year.
The growth at the top line (revenue) was largely driven by a 223.73 percent surge in sales from energy delivered to N45.2 billion.
Transcorp Power seeks to boost earnings and deliver superior returns to shareholders.
In 2020, Transcorp Power Plc initiated power exports beyond the borders of Nigeria, extending its reach to neighboring West African states, notably Benin Republic.
Analysts are optimistic the company will maintain the earnings growth momentum this year given positive fundamentals.
Transcorp power is spending over N44bn ($44m) in capex in 2024 to help achieve 740 megawatts (mw) of available capacity by 2024 year end, with 240mw set to be added by this summer. The firm is in talks with 3 Discos to help receive excess power it produces that the national grid cannot handle.
The firm is investing to boost cost optimization, improve gas usage and efficiency, and boosting capex on turbines maintenance.
Its play in West African power pool which brings in 18% of revenue will help to reduce FX risk. The company currently accounts for 7.0% of Nigeria’s installed grid capacity but generates 10.0% of the country’s power needs, with its leadership position in the West African Power Pool (WAPP) and planned strategic alliances with DISCOs, eligible customers, and state governments leaving legroom for output growth in the near term.
Transcorp Power has grown its profit by over 40% compound annual growth rate (CAGR) in the past 4-years and expects its annual revenues to surge to over N500 billion by 2031, from N142 billion in 2023.
“Looking forward, we anticipate a sustained expansion in revenue, driven by a combination of existing capabilities and emerging opportunities that the company is well positioned to capitalize on,” said analysts at Chapel Hill Denham.
“The recent completion of the overhaul of one of its major turbines, which had been out of operation since 2019, is expected to significantly enhance the company’s capacity utilization and power generation in the near term,” said the analysts.
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