Geregu Power declares N36.2bn profit in nine months

Geregu Power Plc on Thursday released its 2024 nine-month results, showing that pre-tax profits doubled to N36.2 billion.

This compares to the N18.1 billion in pre-tax profits reported in the corresponding period of 2023. The company reported a profit after tax of N24.1 billion.

When annualized, Geregu Power’s profits are around N32.1 billion, suggesting the company’s profits is growing at a compounded annual growth rate (CAGR) of 23per cent. It reported a profit after tax of N16 billion in 2023.

In addition to strong earnings growth, Geregu Power’s share price has surged by an impressive 188per cent year-to-date, reflecting positive investor sentiment and confidence in the company’s growth potential.

A review of the company’s financial statements reveals that Geregu Power generated a total revenue of N112.5 billion, representing a 102per cent increase year-on-year.

For the quarter ending September 2024, the company reported a revenue of N31.9 billion, up from N27 billion in the same period of 2023.

The revenue breakdown reveals that N71.4 billion was generated from energy sales, while N41.1 billion came from capacity charges.

Despite inflationary pressures and rising costs, Geregu Power maintained strong gross margins of over 41%, though this was slightly below its historical margin of 50 per cent.

The company has projected a pre-tax profit of N16.8 billion and a profit after tax of N11 billion for the final quarter of 2024.

If achieved, this could take its full-year pre-tax profit to approximately N53 billion, representing an impressive 118 per cent year-on-year increase in profits.

This projection highlights the company’s potential to continue its robust earnings growth despite operating at around 50 per cent capacity due to grid constraints and market challenges.

Geregu Power’s performance has been buoyed by recent positive developments in Nigeria’s electricity industry.

Several government initiatives aimed at addressing chronic issues within the power sector, including reforms of the Transmission Company of Nigeria (TCN) and increased private sector involvement, have created a more favorable operating environment for power generation companies (GenCos) like Geregu.

In 2023, the Nigerian Electricity Regulatory Commission (NERC) approved higher electricity tariffs, which have positively impacted the profitability of generation companies by ensuring a better alignment between costs and revenues.

Geregu Power’s share price, which is up 188% year-to-date, currently reflects a price-to-earnings (P/E) ratio of 102x, positioning the company as a high-growth stock in the eyes of investors.

The doubling of its profits while operating at just 50 per cent capacity highlights its significant growth potential.

With a compounded annual growth rate (CAGR) of 23 per cent for profits, investors are clearly betting on Geregu’s ability to expand its earnings even further in the near future.

However, the company’s high P/E growth (PEG) ratio suggests that while it is considered overvalued in terms of current earnings, there is room for further profit expansion.

Indications suggest that Geregu Power is exploring potential acquisitions to drive this growth, a move that could significantly increase its capacity and revenue base.