HUBC beats analyst estimates but disappoints on dividend

Insight Research has just released an update on Hub Power Company’s recent quarterly results. Here are the important points from the HUBC earnings announcement:

Strong Growth in Profits

In its 3QFY24 results, Hub Power Company (HUBC) has reported a consolidated Profit After Tax (PAT) of approximately PKR17.2 billion, with Earnings Per Share (EPS) at PKR13.3. This marks a significant increase of 53% year-over-year (YoY) from PKR11.2 billion (EPS: PKR8.7) in the same period last year. The boost in profits is primarily attributed to higher profit from associates, reduced finance costs, and increased capacity payments. Sequentially, earnings have also risen by 12%.

Revenue Growth

HUBC’s revenue surged by 17% to PKR31.8 billion in 3QFY24, largely driven by higher capacity payments.

Improved Gross Margins

The company’s gross margins improved by 3.3 percentage points year-over-year to reach 51.6%. This enhancement was a result of PKR devaluation along with improvements in the u-shaped PCE component of the base plant.

Associates’ Contribution

Hub Power saw a remarkable increase in its share of profit from associates, rising by 87% YoY and 15% QoQ to PKR12.1 billion. This growth is possibly attributed to increased profit share from China Power Hub Generation Company (CPHGC).

Rising Finance Costs

Finance costs increased by 40% YoY, totaling PKR6.6 billion in 3QFY24, due to higher interest rates and an increase in short-term borrowing.

Effective Tax Rate

The effective tax rate for the quarter stood at 16.3% in 3QFY24, compared to 14.2% and 15.7% in 3QFY23 and 2QFY24, respectively.

Cash Dividends

In addition to the results, HUBC announced a cash dividend of PKR2.5 per share, bringing the total cash dividend for 9MFY24 to PKR11.5 per share, compared to PKR24.0 per share in the same period last year. The dividend was slightly disappointing to investors which resulted in a price crash right after the announcement.

Financials (PKRmn)*	3QFY24	3QFY23	2QFY24	YoY	QoQ	9MFY24	9MFY23	YoY
Net Sales	31,791	27,231	29,913	17%	6%	95,434	81,918	16%
Cost of Sales	15,401	14,098	13,161	9%	17%	45,555	46,201	-1%
Gross Profit	16,390	13,133	16,752	25%	-2%	49,879	35,717	40%
Gross Margin (GM)	51.6%	48.2%	56.0%	52.3%	43.6%
Selling & Distribution	574	342	692	68%	-17%	1,612	974	65%
Financing Cost	6,597	4,721	6,977	40%	-5%	20,643	11,845	74%
Other Income	778	(159)	900	-588%	-14%	1,997	748	167%
Share of Associates’ Profit	12,104	6,476	10,565	87%	15%	34,703	19,553	77%
Profit Before Tax (PBT)	22,074	14,308	20,387	63%	8%	63,985	42,680	50%
Taxation	3,605	2,034	3,203	77%	13%	10,015	6,252	60%
Net Income	18,468	12,274	17,184	50%	7%	53,970	36,428	48%
Attributable to Holding Co.	17,186	11,249	15,278	53%	12%	49,547	33,647	47%
Earnings Per Share (EPS)	13.3	8.7	11.8	–	–	38.2	25.9	–
Dividend Per Share (DPS)	2.5	2.8	4.0	–	–	11.5	24.0	–

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Disclaimer
The information in this article is based on research by Insight Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.