HUBC price target raised to 180

Insight Securities has just released an update on its coverage of Hub Power Company (HUBC) stock. The research house has raised its Dec 24 HUBC price target to Rs. 180 per share.

Here are the key points from the report:

Diversified Investments Driving Growth

HUBCO, known for its strategic investments, has capitalized on various opportunities, particularly in the energy sector. Leveraging policies such as the 2015 power policy and initiatives like the China-Pakistan Economic Corridor (CPEC), HUBCO has made significant investments in projects like China Power Hub Generation Company (CPHGC), Sindh Engro Coal Mining Company (SECMC), Thar Energy Limited (TEL), and ThalNova Energy (TNPTL). These ventures have substantially boosted the company’s profitability, with earnings growing at a remarkable rate of 39% over the past five years.

Strong Financial Performance

Recent ventures, including the coal-based power plants TEL and ThalNova, which came online in December 2022 and March 2023 respectively, have driven significant growth. This growth is evidenced by a notable increase in profitability, with the company’s earnings rising by 44.8% year-on-year in the second half of fiscal year 2024 compared to the same period last year. Projections indicate further growth, with expected earnings per share (EPS) of PKR 51.9 and PKR 58.0 for fiscal years 2024 and 2025 respectively.

Powering Growth through Coal-Based Plants

HUBCO operates three coal-based power plants, with TEL and ThalNova contributing significantly to its target price based on future cash flows. Additionally, CPHGC, operating on imported coal, has also played a vital role in the company’s growth trajectory. However, uncertainties surrounding tariff adjustments pose a risk to CPHGC’s valuation.

Expansion into Exploration and Production

HUBCO’s entry into the exploration and production (E&P) sector, marked by the acquisition of ENI Pakistan’s operations, further diversifies its portfolio. This strategic move is expected to contribute positively to the company’s target price based on future cash flows.

Outlook on Dividend Payouts

With most equity commitments fulfilled, analysts anticipate a resumption of dividend payouts. While debt repayments may initially impact dividends, the company’s historical trend suggests a potential increase in payouts in the long run.

Overall Cash Position and Future Ventures

HUBCO’s strong position in the merit order, along with government prioritization of payments to ensure plant operation, bodes well for its cash situation. Additionally, partnerships with companies like BYD in the electric vehicle segment and exploration of battery energy storage solutions (BESS) open new avenues for growth and diversification.

The information in this article is based on research by Insight Securities. 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.