PPL & HUBC_1HFY20 Result Previews, (AKD Daily, Feb 25, 2020)
PPL & HUBC: 1HFY20 Result Previews
PPL 2QFY20 Preview: PPL is slated to report 2QFY20 results today (25th Feb) where we expect the firm to report consolidated NPAT of PkR14.3bn (EPS: PkR5.25/sh) sliding 13%YoY and flat QoQ backed by lower realized oil/gas prices (mainly due to 6%YoY lower benchmark crude), moderate indexation movements and soft oil production. Major underlying aspects of forecasted performance include: 1) -8/-12%YoY shift in oil/gas sales where old fields succumbed to natural declines (Sui, Kandkhot in particular) while winter seasonality (Boyle’s law, with some utility linked transmission bottlenecks) played out to keep production of gas down 2%QoQ, 2) exploration expenses treading down with one dry well this Q as opposed to due to high dry well expense (largely from three dry wells) seen in 2QFY20, and 3) compared to exchange related gains flowing through to other income in FY19, 2QFY20 other income is expected at a normalized PkR828mn (down 83%YoY/15%QoQ) as the firm contends with adverse liquidity environment. In the absence of any additional Sukuk payment to clear circular debt, we assign low probability to payouts for PPL.
HUBC 2QFY20 Preview: is expected to post 2.6x/28%YoY/QoQ higher consolidated NPAT of PkR7.1bn (EPS: PkR5.50) in 2QFY20, taking 1HFY20 NPAT to PkR12.7bn (EPS: PkR9.80), up 2.35xYoY. Higher earnings for 2QFY20F is expected on the back of (i) 59%YoY increase in gross profits led by 16%YoY rupee devaluation and, (ii) higher share of profits from 47.5% held China Power Hub Generation Company Ltd (CPHGC) and SECMC (PkR3.3bn; EPS impact: PkR2.56). On a sequential basis, the impact of new coal based power plant running at full capacity will be more visible, which commenced operations mid 1QFY20 and contributed PKR1.8bn (EPS: PkR1.44) to 1QFY20 NPAT. Finance cost is expected to decline 12%QoQ, supporting sequential bottomline growth. We expect HUBC to delay payouts until FY20 end, as it manages to complete 100% of CAPEX financing of its 2x330MW local coal power projects, expected to commence operations in 2HFY21. Our TP of PkR161/sh offers and upside of 69% at last close, implying a Buy stance.
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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