Karachi, August 29, 2022 (PPI-OT): HUBC: FY22 Analyst Briefing Takeaways
HUBC held its corporate briefing today to discuss the financial results for FY22. To recall, the company posted a NPAT of PkR7.0bn in 4QFY22, bringing cumulative NPAT in FY22 to PkR28.5bn (EPS: PkR22.0), down 15%YoY. In a surprising turn, the company did not pay out dividends for the year-end, after paying a special dividend of PkR6.5/sh in January.
The load factors of the Hub, Narowal, Laraib and CPHGC plants in FY22 were 12%/46%/57%/62% compared to 2%/26%/63%/72% in FY21 respectively. Notably, availability for the CPHGC plant was 71% compared to 91% in FY21 owing to the shutdown of one of the plants in the first six months of the year.
The TEL and TNPTL plants are expected to achieve commercial operations in 1HCY22, with the TEL plant successfully synchronizing with the grid and the TNPTL achieving energisation. The TEL plant is 99% complete and the COD is expected in September, while the TNPTL plant is 85% complete and is expected to achieve commercial operations in December.
In a further update on its associated companies, the management has told that phase-II of SECMC is expected to be initiated in September, after which the mine will be able to supply more coal. Furthermore, the acquisition of ENI is still pending approval by the government, after which the company will be able to start operations.
CPHGC has received US$27mn of the insurance claim regarding the lightening strike in 2021 which forced the plant to shut down. Further disbursements are expected from the insurance company in the next few months, with the remaining amount currently under negotiation. Moreover, the tariff true-up for CPHGC was announced by NEPRA on 30’Jun, but is currently under Appellate Tribunal.
The higher tax in FY22 (7% vs. 5% in FY21) is on the back of supertax applicable on dividends received from CPHGC. One thing to note, the proposal of making corporate tax applicable on IPPs after 25 years of operations has been reversed. Hence, the base plant will continue to not be taxed on income from power generation.
The management explained its decision to not pay out any dividends at year-end. Citing that high global commodity prices are projected to strain cash reserves in the coming quarter, along with higher finance costs as the interest rates have risen exponentially. Hence, the company chose to be prudent in its payout, and expects to return back to normalcy in the future.
We have a buy call on the scrip with a Target Price of PkR116.2/sh, offering an upside of 78% from last close, along with a D/Y of 13%.