EUR 12.20 For Business Accounts Only

Hub Power Company (HUBC): 3QFY18 EPS Rs2.6, +16% YoY (+2%QoQ); DPS Rs 1.6/share (In-line with expectations)

• HUBC’s consolidated revenue declined significantly by 25% YoY during the outgoing quarter, mainly due to lower utilization of base plant from 71% in 3QFY17 to 26% in 3QFY18. The company along with its results announced dividend of Rs 1.6. This payout was in-line with our estimates.
• Operating expenses witnessed decline of 31% YoY in 3QFY18. We attribute this to absence of any major overhaul and lower O&M expenses related to Narrowal plant.
• HUBC recorded gross margins at 23.7% in 3QFY18, up significantly by 725bps YoY. The improvement in gross margins was attributable to lower fuel losses incurred due to lower load factor of base plant, we believe.
• General, admin & other expenses declined by 16% due to better cost control.
• Finance cost has increased by 7% YoY to Rs 1.1bn, led by increased reliance on short term borrowings due to higher receivables.
• 9MFY18 earning grew by 9% YoY which were primarily driven by lower fuel losses and O&M expenses.
• Keys risks to our investment thesis are 1) lower than expected rupee devaluation; 2) delay in commissioning of upcoming projects, and 3) circular debt pileup.