(EHPL) Eastern Hydropower Sees 264% Profit Surge in Q3, But Financial Foundation Still Shaky

Eastern Hydropower Limited has posted an impressive rise in profitability for the third quarter of the fiscal year 2081/82, with net profit soaring to Rs. 12.37 million from Rs. 3.39 million in the same quarter last year — a sharp increase of 264%. This jump in net earnings reflects improved revenue generation and slightly better cost control on the financing front.

Revenue for the quarter stood at Rs. 104.71 million, an 11.96% increase compared to Rs. 93.52 million a year ago. The rise indicates that the company has either generated more electricity, sold it at better rates, or both. However, this gain comes alongside a massive jump in administrative expenses, which nearly doubled to Rs. 3.73 million from Rs. 1.98 million — an 88.08% increase. This raises red flags about operational efficiency and cost discipline, especially for a company still struggling to clean up its balance sheet.

On the financing side, the company made some modest progress. Finance costs dropped by 3.57%, from Rs. 40.55 million to Rs. 39.11 million. Additionally, total loans and borrowings were brought down from Rs. 636.16 million to Rs. 606.31 million, marking a 4.69% reduction. This may have contributed to easing the burden of interest payments, thereby supporting profitability.

The earnings per share (EPS) for the quarter rose to Rs. 2.66 from just Rs. 0.73 the previous year, reflecting the surge in net income. Despite this, the company’s net worth per share declined slightly to Rs. 73.52 from Rs. 74.28, which suggests that accumulated past losses are still dragging down shareholder value. This is further confirmed by the reserve and surplus figure, which remains in the negative at Rs. -164.19 million, a deterioration from last year’s Rs. -159.45 million.

From an investor’s perspective, the stock’s performance is particularly interesting. Eastern Hydropower’s market price stood at Rs. 378.66 at the end of Q3, placing its price-to-earnings (P/E) ratio at a high 142.32 times. While this could indicate strong investor confidence or speculation, it also suggests that the stock is highly priced relative to its earnings, which might be risky if profit growth does not sustain.

In terms of assets, investment in property, plant, and equipment increased by 25.76%, from Rs. 845.34 thousand to Rs. 1,063.07 thousand. This may reflect new infrastructure developments or upgrades that could contribute to higher future revenue, although the scale of increase is modest relative to the company's overall size. The company’s paid-up capital remained unchanged at Rs. 620 million.

Overall, Eastern Hydropower’s Q3 performance paints a mixed picture. On one hand, the company has significantly boosted its earnings and slightly improved its debt position. On the other, it continues to carry historical losses, rising administrative costs, and a valuation that could be considered overheated. Sustained profitability, better cost management, and improved equity health will be crucial for long-term investor confidence and financial stability.