1- Executive Summary

The energy supply-demand mismatch is ongoing for over a decade and the deficit has adversely affected almost all residential, industrial and commercial customers resulting in lower economic growth in Pakistan. The new government is determined to address the shortfall through various hydel, coal, solar, nuclear and wind power projects. However, due to urgency of the power requirements various private investments have been encouraged to address the instant energy needs of the country. Under the power policy of 1996 and 2002, twenty-nine Independent Power Producers (IPPs) have been introduced with gross installed capacity of 8,657 MW. KAPCO, being one of the largest IPPs, has installed capacity of 1,638 MW and dependable capacity of 1386 MW.1

This report is drafted from investor’s standpoint and can help in assessing the financials of KAPCO using following stock valuation frameworks: 1). Warren Buffett 2). Price-Earnings Multiple Approach 3). Capital Asset Pricing Model 4). Financial Ratio Analysis. Section 2 introduces the Company and gives an overview of the stock currently trading at Karachi Stock Exchange (KSE). KAPCO share analysis starts from Section 3 with Warren Buffet qualitative and quantitative pricing frameworks. Thirteen different parameters have been evaluated for qualitative analysis while three different pricing models show that it is better to invest in State Bank of Pakistan (SBP) Investment Bond than to invest in KAPCO share.

Section 4 and 5 examine the current stock price using P/E Multiple approach and Capital Asset Pricing Model. Section 6 explains the financial strength, management effectiveness and profitability, efficiency and market ratios using Ratio analysis. The report finally recommends not investing in KAPCO share due to circular debt problems resulting in potential cash-flow crunch, bullish momentum of