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HUBC & INDU_2QFY21 Result Previews, (AKD Daily, Feb 18, 2021)

AKD Daily HUBC & INDU: 2QFY21 Result Previews HUBC to post 18% YoY higher 2QFY21 EPS: We expect Hub Power Company Ltd (HUBC) to post 2QFY21 NPAT of PkR6.5bn (EPS: PkR5.01), up 18%YoY, but down 20%QoQ. This will take the 1HFY21 NPAT to PkR14.64bn (EPS: PkR11.29), up 32%YoY. For 2QFY21 alone, the YoY increase in earnings is expected on the back of 3% currency devaluation accompanied by a steep 41% decline in finance cost amid low interest rates. This should outweigh higher effective tax rate of 11% in 2QFY21 vs. 1% in the same period last year (25% WHT on dividend income from 46% owned CHPGC). On a sequential basis, the decline in earnings is due to 4% currency appreciation, coupled with lower dispatch from portfolio plants, where Base/Narowal/CPHGC operated at 0/21/60% in 2Q vs. 1/41/67% in 1QFY21. For 1HFY21, the 32%YoY increase in earnings is expected on the back of 4%YoY average PkR depreciation, 39%YoY decline in finance cost, and absence of PkR1.0bn transfer of share of 1.5% stake in CPHGC to GoB recorded in the same period last year. The company initiated dividends last quarter after a dry spell of 2 years, as CAPEX for its CPEC projects concluded in FY20, and lower finance cost created room for payouts. Dividend from CHPGC could trigger payout in 2HFY21. INDU – vigorous sales boost profitability: We anticipate INDU to post NPAT of PkR2.85bn (EPS: PkR36.28) for 2QFY21 rising 189%YoY/55%QoQ in its board meeting reserved on 25th Feb’21. The upturn expected is mainly on account of topline registering growth of 102%YoY/30%QoQ due to remarkable growth in sales of all Toyota Vehicles by 93%YoY/23%QoQ. This is also due to varying sales composition in favor of premium segment cars (Fortuner’s share of 6% against 3% in 1QFY21). The healthy profitability forecasted is primarily driven by PkR appreciation dampening the impact of rising steel prices, raising gross margin to 7.1% from 6.7% in last quarter, despite no significant price hikes. Moreover, the other operating income is projected to increase by 45%QoQ underpinned by extensive growth in short-term investments of ~PkR25bn (61%QoQ), augmenting net margin to 6.4% (vs. 5.4% in 1QFY21). We project the company to announce cash dividend of PkR20/sh in backdrop of expanding margins, robust sales, controlled inflation and strong cash flow situation. AKD Research