FFBL & HUBC: Result Previews,(AKD Daily, Oct 23, 2019)
Fauji Fertilizer Bin Qasim Ltd (FFBL) is expected to post 3QCY19 NLAT of PkR76mn (LPS: PkR0.08) on a standalone basis, vs. NPAT of PkR790mn (EPS: PkR0.85) in 3QCY18. This will take cumulative 9MCY19 NLAT to PkR2.0bn (LPS: PkR2.17) vs PkR203mn (LPS: PkR0.22) in the same period last year. The loss for the quarter is expected to be largely on the back of (i) 5.4ppt YoY lower gross margins of 12.6%, courtesy cost push inflation amid limited pass-on and (ii) 95% YoY higher finance cost due to additional borrowing for working capital amid policy rate hikes. On sequential basis, the losses are expected to remain flattish despite 62/31% feed/fuel gas price hike (effective Jul’19), due to higher ending inventory amid higher retention prices. However, absence of (i) dividend income from Pakistan Moroc Phosphore (PMP), and (ii) deferred tax of PkR533mn in the previous quarter will keep bottomline in red. Downside risk to our earnings estimate may emanate from higher finance cost due to IFRS 16 implementation w.r.t power purchasing agreement with FFBL Power Company Ltd or, FX losses (7% QoQ PKR depreciation). On the other hand, dividend from unlisted associates/subsidiaries is an upside risk to our earnings estimates – case in point, PkR761mn dividend from PMP in 2QCY19.
Hub Power Company Ltd (HUBC) is expected to post 24/37% YoY/QoQ higher consolidated NPAT of PkR3.7bn (EPS: PkR2.83) in 1QFY20. Higher earnings for 1QFY20F is expected on the back of (i) 25% YoY increase in gross profits led by 27% rupee devaluation and, (ii) higher share of profits (PkR1.4bn; EPS: PkR1.15) from 47.5% held China Power Hub Generation Company Ltd (CPHGC) after the second unit of the 2x660MW plant commenced operations in Aug’19. The impact of new coal based power plant running at full capacity would be more visible in the upcoming quarter. Finance cost and admin cost, expected to be up 2.3x/93% YoY, will keep the bottomline growth in check. On sequential basis, 26% higher finance cost is expected to be the only major earnings dampener, courtesy higher policy rate. Downside risk to our earnings estimate emanates from (i) lower than expected earnings from 1,320MW CPHGC plant and (ii) higher than expected finance cost on the back of complete drawdown of remaining long term finance facility. Amid debt-based capex financing, we do not expect HUBC to announce any dividends alongwith its 1QFY20 results.
AKD Research
Hub Power Company is a holding company. Through its subsidiaries, Co. is engaged as a power producer in Pakistan that focuses on developing, owning, operating and maintaining power stations. Co. supplies electricity to Water and Power Development Authority and National Transmission and Despatch Company under long term Power Purchase Agreements for its Hub and Narowal plants respectively.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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