Hub Power Company Ltd (HUBC) held its analyst briefing earlier today, where the following was discussed:
· HUBC reported a consolidated NPAT of PkR70bn (EPS: PkR53.98) for the year, marking a 22%YoY increase. Growth was primarily attributed to the full-year inclusion of profits from TEL/TNPTL and a higher share of profits from associates, led by the depreciation of the domestic currency.
· Company’s associate i.e. CPHGC disbursed its second dividend of US$80mn in May’24, with company receiving ~PkR10bn (HUBC shareholding: 46%).
· Power dispatches remained low during FY24, primarily due to decreased generation demand and transmission constraints between southern and northern regions.
· The company acquired SECMC’s stake from HBL, positioning itself to benefit from the future transition towards local coal in various power projects and other sectors. The tentative timeline for the phase-3 expansion of the coal mine is set for Dec’25. Additionally, the company plans to take operational control of the mine once Engro Corp. exits the venture.
· Mega Motors Pvt. Ltd (MMCL), a wholly-owned subsidiary of HPHL, recently entered into a distribution agreement with China’s BYD to launch NEVs in Pakistan. The company is negotiating a technical licensing agreement to establish an assembly plant in Sindh.
· Management anticipates the local NEV assembly plant to come online by CY26, with the land already secured. Discussions regarding exporting vehicles are underway; however, they may depend on the competitiveness/efficiency of the assembly process.
· Regarding the capital structure and financing arrangements for the project, management is finalizing the project’s size/feasibility. While still premature, financing may involve a combination of D/E, and a potential reduction in future payouts.
· With regard to its future growth strategy, the company remains steadfast in expanding its generation from renewable sources (wind and solar). Currently, three projects remain prequalified: KE’s 200MW wind/solar hybrid and 270MW (120MW & 150MW) for Sindh Solar Energy (SSEP). However, the company was unsuccessful in the bidding stage for the 150MW solar project in Balochistan.
· Regarding energy storage and charging infrastructure, the company is engaged with battery manufacturers in China.
· Regarding Prime O&G (JV with Eni Employees Pakistan), the company is considering investing in foreign operations due to the ongoing depletion of domestic hydrocarbon resources.
· Regarding the tariff true-up for CPHGC, the process is currently under tribunal review, however management remains hopeful of the decision to favour the company.
· The company also renewed its MoU with KEL regarding the potential conversion of the Hubco base into a Thar Coal project after the PPA expires in March ’27.
· Plant-wise overdue receivables for Hubco/NEL/LEL/CPHGC/TEL/TNPTL as of Jun’24 are PkR53/10/4.7/72/6.5/6.5bn, respectively.
· We have a ‘BUY’ call on HUBC with a June’25 TP of PkR170/sh and a FY25 DY of 16%.
Courtesy – AKD Research
