The Hub Power Company Limited (HUBC) announced its 1QFY22 financial result today where the company posted a profit after tax (PAT) of PKR 7,416mn (EPS: PKR 5.72), down by 9% YoY compared to PKR 8,144mn (EPS: PKR 6.28) during 1QFY21. The decline in earnings is majorly due to 34% YoY decline in share of profit form associates.

· During 1QFY22, net sales witnessed an increase of 67% YoY to PKR 26.3bn due to a 147% YoY increase in dispatches to 892 GWh. The load factor of FO based remained high during 1QFY22 due to higher demand from power purchaser. Hub base plant load factor remained 20% (524 GWh), Narowal dispatched 267 GWh to the national grid converting the load factor to 57% while Laraib’s load factor remained 54% (100 GWh).

· During 1QFY22, gross margins of the company decreased by 22pps YoY to 30%. The decline in margins is mainly attributable to 7% YoY PKR appreciation and higher load factor during the quarter.

· During 1QFY22, the company recognized share of profit from associate and joint venture of PKR 2,293mn, down by 34% YoY. The reason for this decline is yet to be known and clarity in this regard is still awaited.

· Finance costs decreased by 13% YoY to PKR 1,660mn in 1QFY22 due to lower levels of short term borrowings.

Outlook and Recommendation

· Currently we have BUY call on the scrip with Dec’21 target price of PKR 144.6/share.

Courtesy – AHL Research