We expect Hub Power Company Limited (HUBC) to post NPAT of PkR16.1bn (EPS: PkR12.42) in the third quarter of FY24, up 5%/43% on QoQ/YoY basis. The aforementioned increase in earnings on a quarterly basis is primarily attributed to higher gross margins, resulting from the non-utilization of fuel oil-based plants (Narowal and HUBCO-base utilization: nil/69 Gwh during 3QFY24).

Generation profile of the company’s power plants were as follows: Hubco Base (0 Gwh), CPHGC (0 Gwh), TEL (369Gwh, ↓36%QoQ), NEL (69Gwh, ↑8.6xQoQ), TNPTL (492Gwh, ↑13%QoQ) and LEL (95Gwh, ↓32%QoQ). Overall, we expect the company to post revenue of PkR29.4bn (-2%/+8% QoQ/YoY), largely stable on a quarterly basis amidst the unchanged generation profile of the company as a whole (total HUBC utilization: 8.6% during 3QFY24 vs 8.5% in the quarter before).

On the non-operating front, Share of Profit from associates is expected to clock in at PkR10.8bn (up 2%QoQ/66%YoY) during the outgoing period. Finally, we expect the company to announce an interim dividend of PkR4.0/sh in the quarter, taking total payout during 9MFY24E to PkR13.0/sh (vs. PkR24/sh in SPLY).

Overall, HUBC remains our top pick inside the power generation space, with a Dec’24 TP of PkR160/sh, alongside promising dividend yields of 14%/21% for FY24/FY25, respectively.

Courtesy – AKD Research