AHL Price Target for HUBC Rs. 201.5, a good time to buy?

Given the recent developments and projections for HUBC, now might be an excellent time to consider adding it to your investment portfolio. Here are a few reasons why.

Positive outlook and strategic partnerships

HUBC has consistently demonstrated strong financial performance and growth potential.

As of August 2024, analysts at AHL have reiterated a strong “Buy” recommendation for HUBC, with a target price of PKR 201.5 per share by June 2025, indicating a potential upside of 36%.

This positive outlook is bolstered by several key factors, including the company’s strategic partnership with Build Your Dreams (BYD), the world’s largest EV manufacturer.

This partnership is expected to unlock new investment opportunities and drive profitability.

HUBC’s subsidiary, Hub Power Holdings Limited, is venturing into the EV market through its associate company, Mega Motor Company (Private) Limited.

The potential profitability from this venture is significant.

For instance, the sale of just 10,000 units annually at an average price of PKR 9 million per unit could result in an incremental annualised earnings impact of PKR 5.95 per share for HUBC.

Although these figures have not yet been factored into the current target price, the future prospects look promising.

The big transition

One of the most significant developments for HUBC is the potential conversion of its base plant from Residual Fuel Oil (RFO) to Thar coal, which could occur sooner than expected due to proposed early retirement of the HUBC plant.

This transition is likely to result in advance capacity payments, which could expedite the plant’s conversion.

The switch to Thar coal is expected to improve the company’s profitability significantly, especially considering the recent signing of a MoU with K-Electric to explore power off-take opportunities following the conversion.

Additionally, HUBC’s increasing stake in the Sindh Engro Coal Mining Company (SECMC) is another positive indicator.

With a planned increase in mining capacity to 11.2 million tons per annum by 2024, HUBC’s expanded involvement in coal mining further solidifies its position within the energy sector and provides a stable foundation for future growth.

Strong dividend yield and valuation

From a financial perspective, HUBC offers an attractive forward price-to-earnings (P/E) ratio of 2.7x and a dividend yield (D/Y) of 17% as of FY25 estimates.

This combination of a low P/E ratio and a high dividend yield makes HUBC an appealing option for investors seeking both growth and income.

Moreover, the company’s diversified portfolio, including recent acquisitions in the oil and gas exploration sector, adds an additional layer of security and potential for increased earnings.

The company’s ability to distribute dividends, particularly from its investments like China Power Hub Generation Company Limited (CPHGC) and Thar Energy Limited (TEL), further enhances its attractiveness to investors.

These subsidiaries have already commenced operations and are expected to contribute significantly to HUBC’s earnings in the coming years.

Thus, for investors looking to capitalise on these developments, HUBC presents a promising opportunity.

Source: AHL Report