AKD Securities Limited – HUBC: 1HY15 Result Review

Karachi, February 16, 2015 (PPI-OT): Consolidated 1HFY15 NPAT for HUBC clocked in at PkR5.40bn (EPS: PkR4.67) vs. 1HYFY14 NPAT of PkR3.33bn (EPS: PkR2.88), up 62%YoY driven largely by reduced operating costs amidst significantly lower O and M charges.

In 2QFY15 alone, HUBC posted NPAT of PkR3.74bn (EPS: PkR2.66), up by 143%YoY/32%QoQ. While turnover came off by 28%QoQ on reduced generation at both plants, sequential profitability rose due to lower operating costs. Alongside the result, HUBC announced an interim cash dividend of PkR4/share (payout ratio: 86%).

Key 1HFY15 result highlights included: 1) firming up of both gross margins (+225bps YoY to 11.4%) and operating margins (+320bps YoY to 10.9%), 2) 18%YoY increase in finance costs pointing to persistent reliance on short term borrowings and 3) reduced generation levels in 2QFY15 pulling the average base plant load factors lower, still a slight improvement against last year’s overhaul impacted load factor (65% in 1HFY15 vs. 62% in 1HFY14).

HUBC has gained 9.3%CYTD to trade at a FY15F P/E of 9.8x. At current levels, AKD Securities Limited’s TP of PkR86.3/share offers a 1yr total return of 10.7% (incl. 9.9% D/Y).

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