HUBC – Q4 2024 and beyond

HUBC - Fundamental Analysis
Posted by: Jabran Kundi 0

HUBC – Q4 2024 and beyond

HUBC has emerged as a promising long-term investment, driven by strong financial performance and strategic initiatives. Below is a detailed look at HUBC’s recent developments and future prospects.

What to expect in the 4th quarter?

EPS and Dividend Outlook

For the nine months ending in FY24, HUBC reported a consolidated Earnings Per Share (EPS) of PKR 38.2, compared to PKR 25.94 during the same period last year. This increase is mainly attributed to the full impact of Thar Energy (TEL) and ThalNova (TNPTL) projects commencing in October 2022 and February 2023, respectively.

The focus of the company is on paying back the loans they took for TEL and TNPTL. This may mean lower dividends in the short term. But in the long run, it may save them much more money which is eventually going to be passed on to the shareholders sooner or later.

Expected Financial Metrics:

Based on a recent report by SCS Research, here’s what we can expect in the 4th quarter.

  • 4QFY24 Dividend Per Share (DPS): PKR 8.5
  • Annual Dividend Yield (D/Y): ~14%
  • FY24 Price to Earnings (PE) Ratio: 2.7x

According to AKD Research, the expected EPS for the fiscal year stands at Rs. 57.9 accompanied by an annual dividend yield of 15.2%.

What are the upcoming power projects for HUBC?

Wind/Solar Hybrid Projects

HUBC, through its subsidiary Hub Power Holdings Limited (HPHL), has been prequalified for K-Electric’s (KEL) 200MW wind/solar hybrid project.

Sindh Solar Energy Project

HPHL has also been prequalified for 150MW and 120MW of the Sindh Solar Energy Project (SSEP) for power off-take by KEL.

Conversion of RFO-fired Plant

HUBC signed a Memorandum of Understanding (MoU) with KE for converting two units of the RFO-fired Hub Power plant to Thar coal after the existing Power Purchase Agreement (PPA) expires in March 2027.

What EV initiatives is HUBC taking?

Battery Energy Storage Solutions (BESS) and Electric Vehicles (EV)

HUBC is exploring opportunities in Battery Energy Storage Solutions (BESS) and the Electric Vehicles (EV) value chain. Earlier, there were mentions in the business media about a potential collaboration with China’s top EV manufacturer, Build Your Dreams (BYD).

Dividend Distribution

In November 2023, HUBC’s joint venture, China Power Hub Generation Company (CPHGC), disbursed its first dividend amounting to USD 70 million. HUBC received USD 32 million from this disbursement.

Share Purchase Agreement

HUBC has entered into a Share Purchase Agreement (SPA) with Habib Bank Limited (HBL) to acquire approximately 9.5% shares in Sindh Engro Coal Mining Company (SECMC).

Loan Repayments

Following the commencement of ThalNova Power Thar (TNPTL) and TEL, and the dividend start from CPHGC, HUBC has accelerated loan repayments. In the first half of FY2024, HUBC repaid PKR 2.3 billion, reducing total outstanding loans to PKR 17.2 billion as of December 31, 2023, down from PKR 19.5 billion on June 30, 2023.

Exploration and Production (E&P) Sector

Prime International Oil and Gas Co (PIOGC)

PIOGC, a 50-50 joint venture between HPHL and ENI’s local employees, aims to expand HUBC’s portfolio into oil and gas exploration. PIOGC owns multiple gas fields in zones 2 and 3 of Sindh.

Current Projects

  • Bhadra Area, Kirthar Block: Ongoing drilling operations expected to complete in May 2024.
  • Kadanwari Block: Two new wells have been successfully brought into production. The site for the next well is ready, awaiting rig availability post-Bhadra well completion.
  • South West Miano III Block: Legal formalities with the Directorate General of Petroleum Concessions (DGPC) are in progress for the exploration license award.

Subsidiaries and Their Holdings

Laraib Energy (LEL)74.95%
Hub Power Services Ltd (HPSL)100%
Hub Power Holdings Ltd (HPHL)100%
Narowal Energy Ltd (NEL)100%
Thar Energy (TEL)60%
SOURCE: SCS Research, Company Report

Associates and Joint Ventures

China Power Hub Generation Co (CPHGC)47.50% via HPHL
ThalNova Power Thar (TNPTL)38.30% via HPHL
SOURCE: SCS Research, Company Report

Joint Ventures

Joint VentureHolding
Prime International Oil and Gas Co50% via HPHL
China Power Hub Operating Co (CPHO)49% via HPHL
SOURCE: SCS Research, Company Report

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