The Hub Power Company Limited (HUBC) announced its FY22 financial result today where the company posted a profit after tax (PAT) of PKR 28,472mn (EPS: PKR 21.95), down by 15% YoY compared to PKR 33,688mn (EPS: PKR 25.97) during FY21. The decline in earnings is majorly due to 40% YoY decline in share of profit form associates and joint venture and 8% rise in finance cost. However, other income increased by 167% to PKR 2,124mn. During 4QFY22, company posted a PAT of PKR 7,019mn (EPS: PKR 5.41) compared to PKR 8,770mn (EPS: PKR 6.76), down by 20% YoY and 24% QoQ. Surprisingly, the company skipped payout along with the full year result restricting the FY22 payout to PKR 6.50/share.

Result Highlights

During FY22 net sales witnessed an increase of 78% YoY to PKR 97.2bn due to a 132% YoY increase in dispatches to 2,500 GWh and higher furnace oil prices. Hub base plant load factor settled at 12% (1,220 GWh), Narowal dispatched 868 GWh to the national grid converting the load factor to 46% while Laraib’s load factor arrived at 56% (413 GWh). During 4QFY22, sales also increased by 103% YoY to PKR 32.1bn due to aforementioned reasons.

During FY22, gross margins of the company decreased by 26pps YoY to 34%. The decline in margins is mainly attributable to higher load factor during the year. During 4QFY22, gross margins also decreased by 29pps YoY again due to the higher load factor, we view.

Other income increased by 167% YoY to PKR 2,124mn during FY22 due to higher income from management services, we view. The last quarter’s other income also increased by 153% YoY.

During FY22, the company recognized share of profit from associate and joint venture of PKR 9,232mn compared to profit of PKR 15,501mn during FY21. The decline in profits is witnessed due to loss of PKR 1,462mn during 2QFY22 amid recognition of impairment loss (PKR 1,990mn) on CPHGC’s equipment that was damaged during 1QFY22. During 4QFY22, share of profit increased by 11% YoY to PKR 4,236mn attributable to 14% YoY PKR depreciation against the US Dollar.

During FY22 finance cost of the company increased by 8% YoY to PKR 7,928 due to higher interest rates. Finance costs clocked-in at PKR 2,531mn during 4QFY22, up by 50% YoY amid higher interest rates.

Recommendation

Currently we have BUY call on the scrip with Jun’23 target price of PKR 125.7/share.

Courtesy -AHL Research