Qatar Electricity and Water Co QSC (QEWC)reported Q3-FY14 net profit of QAR454 million (+9% Y-o-Y, +9% Q-o-Q), coming in 12% ahead of our forecast and Bloomberg consensus on the back of booking a non-recurring other income of QAR59 million , said EFG - Hermes research unit in a latest company note.


Earnings beat on non-recurring items for third consecutive quarter


Non-recurring below-EBIT items totalled QAR112 million in 9M2014, mostly related to claims settlement of RAF B2 plant, which are not expected to sustain in 4Q, as per management. Operationally, results were flattish Y-o-Y, as expected.

Operationally, story unchanged; growth muted on lack of expansions

Revenue showed a muted performance Y-o-Y at QAR812 million, in line with our forecast, on lack of capacity additions. Hermes expects sales growth to gain some momentum starting 2015, as RAF-A2 water plant (36-MIGD capacity) starts commercial operations in mid-2015. Gross profit came in at QAR481 million and EBITDA at QAR433 million, both flattish Y-o-Y and in line with Hermes forecasts.

Risks are to the upside; full-year dividend likely to surpass forecast

Although operationally there were no surprises, the non-recurring income booked in 9M2014 poses an upside risk to our full-year earnings and dividend forecasts, given the company’s consistent dividend payout ratio of c50%. Our current forecast calls for FY2014 net profit growth of 3.3% Y-o-Y, versus 9M2014a growth of 11% Y-o-Y, and a DPS of QAR7.27.