As per the PSX notice, Thar Energy Limited (TEL) has achieved Commercial Operation Date (CoD) effective from Oct 01, 2022. TEL is a joint venture between The Hub Power Company Limited (HUBC), Fauji Fertilizer Company Limited (FFC) and China Machinery Engineering Corporation (CMEC). TEL owns a 330MW mine-mouth coal-fired power plant at Thar Block-II and also comes under China Pakistan Economic Corridor (CPEC).

The addition of TEL in the national grid will reduce the dependency of country on the imported fuel and bring down the overall fuel cost. Amongst the coal plants, Engro Powergen Thar Limited is already producing electricity on local coal and its fuel cost is PKR 3.29/KWh while the fuel cost of imported coal based power plant is PKR ~18.50/KWh.

In the table below, we have mentioned the shareholding, earnings and valuation impact of TEL on HUBC and FFC.

Recommendation

Currently we have BUY call on HUBC and FFC with Jun’23 target price of PKR 125.7/share and PKR 138.1/share, respectively.

Courtesy – AHL Research