Earnings Report /
Pakistan

Hub Power: Q3 FY 20 preview – CPHGC to push earnings upwards

  • HUBC is expected to post Q3 FY 20 consolidated NPAT of PKR6,500mn (EPS: PKR5.01), up 2.1x yoy, and 19% qoq

  • We estimate PKR3,558mn share of profit from CPHGC in Q3

  • HUBC remains our top pick with a June 2020 TP of PKR134/sh

Yusra Beg
Yusra Beg

Senior Investment Analyst

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Intermarket Securities
27 April 2020

HUBC is expected to post 3QFY20 consolidated NPAT of PKR6,500mn (EPS: PKR5.01), up 2.1x yoy, and 19% qoq. This is expected to be led by (i) the absence of one-off loss in 2Q (transfer of 1.5% Government of Baluchistan stake in CPHGC), (ii) higher profits from its associate – CPHGC, and (iii) PKR depreciation which should help offset sharp rise in finance costs. This will take 9MFY20 NPAT to PKR17,553mn (EPS: PKR13.53), 2.1x yoy. We do not expect any dividends to be announced.

Preview: 

  • Net sales expected to come off 20% yoy to PKR10,655mn due to plant shut down at both of HUBC's RFO plants (Base plant and Narowal), on low demand from NTDC for expensive fuel-based plants.
  • Higher PKR/USD indexation (expected) vs. last year and penal income cash receipts should lead to a 16% yoy rise in gross profits to PKR6,928mn.
  • We estimate a PKR3,558mn share of profit from CPHGC in 3Q.
  • This is expected to significantly cushion the impact of higher finance costs (up a massive 65% yoy) on account of (i) higher interest rates and mark up on LT loans for new projects, (ii) and persistently hefty working capital requirements.

Earnings should continue to improve with rising share of profits from the CPHGC plant; however, cashflows may only improve upon substantial capacity payments from NTDC. With negative newsflow surrounding capacity payments, we have a cautious stance on the sector, within which HUBC remains our top pick with a June 2020 TP of PKR134/sh.