Hub Power Company (HUBC) has reported 2QFY22 consolidated NPAT of PKR4.8bn (EPS: PKR3.70), down 42% yoy and 35% qoq. The result is much lower consensus, with the deviation stemming from a c.PKR1.5bn loss from associate vs. PKR4.1bn profits SPLY – clarity is awaited on this front. HUBC did not announce any interim dividend as per consensus expectation, having already paid out PKR6.5/sh in Jan 2022 following receipt of its second tranche from the GoP.

QFY22 Review highlights:

Net sales have nearly doubled yoy to c.PKR20bn but lower by 24% qoq due to lower dispatch at all the plants likely due to lower demand from NTDC. RFO based plants (Narowal and HUBC’s Base plant) and hydel (Laraib) operated at a weak load factor, while CPHGC operated at sub-par levels likely due to recent lightning incident.

UBC reported gross profits of PKR8.0bn – muted growth yoy potentially due to lower penal income following the recent capacity payoff by the GoP.

HUBC reported a substantial PKR1.5bn loss from associate during the quarter vs. profit of PKR4.1bn SPLY and PKR2.3bn in the previous quarter. It is pertinent to mention there was a fire incident at the CPHGC plant in July 2021; however, we await clarity on this in HUBC’s upcoming analyst briefing.

Finance costs came off by 5% yoy due to low interest rates to PKR1.7bn.

The ETR has dropped to 4%, similar to the last quarter, likely due to lower profits from CPHGC, which attracts a higher effective tax rate.

We await further clarity on the deviations in today’s result. We maintain our liking for HUBC with a TP of PKR127/sh.

Courtesy – Intermarket Securities Limited.