HUBC_FY22 Result Review ,(AKD Off the Analyst's Desk Aug 25, 2022)
AKD, Off the Analyst's Desk
HUBC: 2QCY22 Result Review
Hub Power Company Ltd (HUBC) announced the result for 4QFY22 today, in which the consolidated NPAT was PkR7.0bn (EPS: PkR5.4), down 20%YoY. This takes FY22 NPAT to PkR28.5bn (EPS: PkR22.0), decreasing by 15%YoY. The result is in line with our estimates, but in a surprising turn, the company has decided to not pay out dividend with the last quarter of the year.
The company has recorded a revenue of PkR32.1bn, increasing by 71%QoQ owing to significantly more utilization of the base and Narowal plants by NTDC in the final quar-ter. FY22 ends with PkR97.2bn revenue, rising by 78%YoY compared to PkR54.6bn in FY21.
Despite the higher revenue, gross profit has remained flat QoQ and YoY (PkR8.6bn) due to the low efficiency of the base plant. To emphasize, margins for the company have decreased from 46% in 3QFY22 to 27% in the fourth quarter, while margins for FY22 have clocked in at 34%, significantly down compared to 60% in FY21.
Share of profit from associates has increased slightly by 2%QoQ while also up 11%YoY. The profit received from CPHGC and SECMC remains a key driver for earnings, contrib-uting ~60% of total earnings in 4QFY22.
Finance cost for the quarter has clocked in at PkR2.5bn, in line with our expectations. This is an increase of 27%QoQ owing to higher interest rates in the quarter.
HUBC did not announce any dividend, against the market consensus. To note, the company received a debt clearance of PkR7.5/sh for the Narowal plant, from which PkR2.5/sh were in cash. To recall, HUBC paid a special dividend of PkR6.5/sh in Janu-ary after the second tranche of the debt clearance received in November.
We have a “Buy” stance on HUBC with a target price of PkR116.2/sh, offering an up-side of 62% from last close. However, due to low dividend payout capacity the scrip may remain under pressure in the short-term.
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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