HUBC plans Single Point Mooring facility on the Hub coast

Topline Pakistan Research has published a report on Hub Power Company (HUBC). The analyst sets the target price, revised to Rs244/sh, and forecasts that BYD will ramp up gradually. We have revisited our investment thesis on Hub Power Company (HUBC) and have increased our target price of HUBC after incorporating the recent development on BYD front, higher receivables recovery pattern, and dividend expectations from Thar coal-based power plant.

Our DCF based valuation suggest Dec 2026 target price of Rs244/share for the company which offers capital gain of 12% and dividend yield of 9.6%, translating into total return of 22%.

Our target valuation doesn’t include any development on utilization of the base power plant and its associated infrastructure. We have also not incorporated the settlement of China Hub Power (CPHGC) receivables which stands at Rs62bn (HUBC stake: 47.5%) in our base valuation. Any development on this will directly add to our valuation to the extent company receives amount.

We expect company to post Earnings of Rs35.7/39.1/42.5 per share for FY26/27/28 and dividend of Rs19/19/23 per share, respectively. While room for special dividend also remains subject to favorable resolution on LPS waiver issue for Chinese power plants and receipt of corresponding cashflows.

BYD – New Phase of Growth: According to the company’s corporate briefing session, more than 2,000 units have been sold in less than six months, which indicates growing market response in line with the global success of BYD. The CKD rollout expected to begin from 2H2026. We have assumed unit sales of 7,200 in FY27 and 13,200 in FY28, with stake-adjusted earnings contributions of Rs1.7/share and Rs3.5/share, respectively, for HUBC.

Dividend Stream to Continue: We expect the company to pay a DPS of Rs19 in FY26/FY27, respectively, primarily supported by coal-based power plants due to improved recoveries and likely announcement of Project Completion Date (PCD) of the Thar coal projects after which Thar Energy and Thal Nova can commence dividend payouts.

No Revision in PPA in sight: Previously, company’s Power purchase agreement (PPA) for Base plant was terminated while Narowal plant PPA was changed from Take or Pay to Hybrid Take and Pay. Currently, HUBC’s main plants are CPEC-based, where any discussions on changes to the arrangements would occur at the G2G (government-to-government) level, as per management. This minimizes the risk of PPA revisions.

Plans for Old site: The company is exploring different options for its old base site, which has ~1,100 acres of industrial land. Potential opportunities include establishing an aluminum smelter and/or developing a Single Point Mooring (SPM) facility on the Hub coast to import petroleum products for PSO, while leveraging existing infrastructure at the site in a JV form.

Key Risks: Key Risks to our investment thesis includes (1) Revision in PPAs, (2) Lower revision in True-up tariff, (3) Waiver of Late payment surcharge, (4) Lower than expected recovery rate, and (5) Change in regulatory framework.