Hub Power Company (HUBC) announced its 1QFY24 result wherein company reported profit to equity owners of Rs17bn (EPS of Rs13.17) up 88% YoY while down 29% QoQ. Along with the result, company announced interim cash dividend of Rs5/share, which came in line with our expectations.

1QFY24 result came slightly higher than industry expectations due to higher share of profit from associates and JV.

Share of Profit from Associate and JV jumped by 289% YoY to Rs12bn in 1QFY24. The significant increase is due to the earnings contribution from ThalNova Power Plant which started commercial operation on Feb 17, 2023 followed by higher earnings contribution from China Power Hub Generation (CPHGC) amid rupee devaluation against US dollar.

However, Share of Profit from Associate and JV declined by 18% QoQ, primarily due to one-off insurance claims recorded in 4QFY23.

Finance cost increased by 203% YoY to Rs7bn in 1QFY24. This is likely on the back of higher borrowings to finance the newly operational ThalNova plant and Thal Energy alongside higher short term borrowings and higher interest rates.

Effective tax rate of HUBC clocked in at 15% in 1QFY24 as compared to 10% in 1QFY23 and 8% in 4QFY23.

We maintain a buy stance on HUBC with a Target Price of Rs120/share and a dividend yield of 21% for FY24.

Courtesy – Topline Pakistan Research