Dear Clients,

The Hub Power Company (HUBC) scheduled its conference call today to shed light on the company’s financial results for 9MFY21 and to discuss the company’s outlook onwards. To note, the company’s bottom-line surged by 37% Y/Y to PKR 24.9bn, supported largely by its CPEC-based investments, a weaker PKR/USD parity and lower financial charges. The company’s results were largely in-line with industry consensus.

Key takeaways

– HUBC has set up a JV (Prime Oil International Oil & Gas) through its subsidiary, HPHL, with ENI’s local employees to take over ENI’s assets. A sales and purchase agreement has been executed to acquire all upstream operations. We estimate the venture to contribute PKR 3.0/sh towards HUBC’s bottom-line.

– Discussing the recently signed MoUs, HUBC is projected to receive 40% (PKR 23.2bn) of the overdue payment in the first installment and the remainder amount in 6 months. While the deadline (Mar’21) has passed, the company expects a decision to be made soon.

– Similarly, the 40% installment of Narowal’s project was due on the revision of the tariff. While the tariff has been determined by NEPRA, it has yet to be notified on the official gazette.

– China Hub Power (CPHGC) operated at a load factor of 65% during 9MFY21 while its availability factor of 94% was on account of scheduled outages during 1Q.

– The progress of Thar Energy Limited (TEL) is 60% complete with its equipment scheduled as per plan. The expected COD of the project is Mar’22.

– The progress of ThalNova Power (TNPL) has reached 37%. The management notified that the project’s progress slowed down as Chinese lenders were apprehensive about late payments. After further clarification, disbursements of foreign and local debt commenced in Apr’21 with a 2nd disbursement scheduled in May’21. Consequently, construction work on the project is expected to speed up and its COD of 2QCY22 remains intact.

– We have a BUY stance on HUBC with a Jun22 TP of PKR 139/sh. The stock offers an upside of 85% based on its last close.

Regards,
KASB Research