AKD Securities Limited – AKD Daily (January 03, 2023)

Karachi, January 03, 2023 (PPI-OT): Pakistan Power: An update on the country’s IPPs

Overdue receivables of CPEC IPPs has amounted to ~PkR250-300bn as per recent newsflow, leading to disappointed Chinese investors alongside lower utilization of these plants as they remain cash-strapped.

While CPPA-G and NEPRA have expressed their support for KAPCO regarding the renewal, we advise investors to remain cautious of the scrip until and unless the PPA gets officially renewed, as till that time the plant’s fate hangs in the balance.

On HUBC, we have a “Buy” call (net dependable capacity of 3,386MW) with a Dec’23 Target Price of PkR110.7/sh, providing an upside of 73% from last close, alongside FY23/FY24 dividend yields of 13%/25% with expected payouts of PkR8/sh and PkR16/sh respectively.

However, due to the accumulation of circular debt keeping payout capacity hampered, the diminished quality of earnings along with an overall hazy sentiment for the market will keep price discovery for the scrip limited.