HUBC has reported a consolidated NPAT of PKR8.6bn for 3QFY21 (EPS: PKR6.61), up 19%yoy, and 5%qoq, taking 9MFY21 NPAT to PKR24.9bn (EPS PKR: 19.21) – above consensus expectations. The deviation stems from marginally higher than expected indexation and lower late payment charges to fuel suppliers resulting in gross profits of PKR8.1bn. HUBC did not announce any dividends, in line with expectations.

3QFY21 Result Highlights:

Net Revenues have remained flat yoy at PKR12.02bn in 3Q vs. PKR11.82bn in SPLY on account of higher generation from Narowal and Laraib. This reflects the seasonal uptick in demand during summer months.

Higher PKR/USD indexation vs. last year and higher proportion of LPI receipts vs. payables led an 8%yoy rise in gross profits to PKR8.1bn.

Share of profits from associates (CPHGC) is sequentially flat at PKR4.1bn, while rising 7%yoy.

Finance costs have grown by a modest 6%qoq to PKR1.9bn but have dropped by a substantial 38%yoy, supported by lower interest rates.

The taxation charge on CPHGC’s accrued dividends to HPHL has led to an elevated effective tax rate of 12% vs. 6% SPLY.

The ECC has delayed payments to IPPs (under recently signed MoUs) to avoid conflicts with NAB’s ongoing investigation. We think the likelihood of HUBC receiving its first tranche is significantly higher vs. IPPs under 2002 Power Policy. We think the ongoing uncertainty within the sector is transitory, where HUBC is likely to benefit from an improved cashflow cycle once payments are disbursed.

We maintain our liking for HUBC with a June’21 TP of PKR125/sh.

Courtesy – Intermarket Securities Limited.