The Hub Power Company Limited (HUBC) announced its 3QFY22 financial result today, where the company posted a profit after tax (PAT) of PKR 9,241mn (EPS: PKR 7.12), up by 8% YoY compared to PKR 8,576mn (EPS: PKR 6.61) during 3QFY21.  This takes 9MFY22 earnings to PKR 21,453mn (EPS: PKR 16.54) compared to PKR 24,918mn (EPS: PKR 19.21), down by 14% YoY. During 9MFY22, the decline in earnings is majorly due to a 57% YoY decline in the share of profit from associates and joint ventures.

 Result Highlights  

·        During 3QFY22, net sales increased 56% YoY to PKR 18.8bn due to a 104% YoY increase in dispatches to 381 GWh and higher furnace oil prices. Hub base plant load factor remained 4% (94 GWh), Narowal dispatched 214 GWh to the national grid converting the load factor to 45%, while Laraib’s load factor remained 39% (73 GWh). During 9MFY22, sales increased by 68% YoY to PKR 65.1bn; again, higher dispatches and higher furnace oil prices were the primary reason behind this increase. 

·        During 3QFY22, the company’s gross margins decreased by 22pps YoY to 46%. The decline in margins is mainly attributable to the higher load factor during the quarter.

We believe the China Power Hub Generation Company (CPHGC) did not receive the insurance claim. ·        During 3QFY22, the company recognized a share of profit from associate and joint venture of PKR 4,165mn compared to profit of PKR 4,078mn during 3QFY21. During 2QFY22, HUBC recognized a share of loss from associates and a joint venture of PKR 1,462mn. The loss was the booking of the impairment loss (PKR 1,990mn) on CPHGC’s equipment that was damaged during 1Q, resulting in business loss.

·        Finance costs clocked in at PKR 2,000mn during 3QFY22, up by 4% YoY amid higher interest rates.

Recommendation

·        Currently, we have BUY call on the scrip with Dec’22 target price of PKR 132.1/share.

Courtesy- AHL Research