9MFY23: Earnings registered an increase of 57% YoY

The Hub Power Company Limited (HUBC) announced its 3QFY23 financial result today where the company posted a profit after tax (PAT) of PKR 11.2bn (EPS: PKR 8.67), up by 22% YoY compared to PKR 9.2bn (EPS: PKR 7.12) during 3QFY22. This took the 9MFY23 earnings to PKR 33.6bn (EPS: PKR 25.94), up by 57% YoY. The rise in earnings is majorly due a 3.9x YoY increase in share of profit from associates and joint venture and due to addition of Thar Energy Limited (TEL). However, finance cost also increased by 136% to PKR 4.7bn. Along with the result, the company also announced a cash dividend of PKR 2.75/share, taking the period end payout to PKR 24.00/share.

Result Highlights

§ During 3QFY23, net sales witnessed an increase of 45% YoY to PKR 18.8bn due to addition of TEL, and augmented furnace oil prices. On a QoQ basis, sales also increased by 9%. During 9MFY23, sales also increased by 26% YoY to PKR 81.9bn, led by higher FO prices, however dispatches went down by 9% YoY.

§ During 3QFY23, gross margins of the company increased by 219bps YoY to 48%. The rise in margins was mainly attributable to zero load factor (Hub base plant) during the quarter, we view.

§ The company recognized share of profit from associate and joint venture of PKR 6,476mn during 3QFY23 compared to PKR 4,165mn during 3QFY22. The rise is owed to a 22% YoY PKR depreciation, we view.

§ Finance cost during 3QFY23 increased by 136% YoY to PKR 4,721 due to higher interest rates and addition of TEL finance cost, we view.

Recommendation

Currently we have BUY call on the scrip with Dec’23 target price of PKR 119.7/share.

Courtesy – AHL Research