Hub Power Company (HUBC) announced its 2QFY24 result wherein the company reported profit to equity owners of Rs15bn (EPS of Rs11.8), up 15% YoY while down 11% QoQ.

HUBC announced an interim cash dividend of Rs4/share along with the results, slightly lower than our expectation of Rs5/share. This takes 1HFY24 dividend to Rs9/share.

Topline increased by 19% YoY to Rs30bn in 2QFY24, primarily driven by higher capacity payments amid the rupee devaluation. However, on a QoQ basis, the topline declined by 11% due to lower power generation from the Base and Narowal plants.

Share of Profit from Associate and JV increased by 6% YoY to Rs10.6bn in 2QFY24. The increase is due to the earnings contribution from ThalNova Power Plant, which started commercial operation in 3QFY23, followed by higher earnings contribution from China Power Hub Generation (CPHGC) amid the rupee devaluation against the US dollar.

However, the Share of Profit from Associate and JV declined by 12% QoQ, primarily due to lower load factors for CPHGC and the stable rupee against the US dollar.

Finance cost increased by 46% YoY to Rs7bn in 2QFY24. This is likely because of higher borrowings to finance the newly operational ThalNova plant and Thal Energy alongside higher short-term borrowings and interest rates.

Effective tax rate of HUBC clocked in at 16% in 2QFY24 as compared to 18% in 2QFY23 and 15% in 1QFY24.

We maintain a buy stance on HUBC with a Target Price of Rs155/share and a dividend yield of 17% for FY24. The stock is currently trading at FY24E PE of 2.2x.

Courtesy – Topline Pakistan Research