HUBC: Narowal Tariff Finalized At Last

NEPRA has finally approved tariff for HUBCO Narowal Power Project which had its COD in Mar11. This would have a positive impact of PKR0.91/share from core tariff; leading to a revision in our FY12 EPS estimation to PKR7.15/share from PKR5.7/share    With approval of final tariff, NPP will raise a differential claim which is assumed to be a bullet payment    Incorporating the same, we expect the company to announce a final dividend of PKR2.5/share. This will lead to a total payout of PKR5.5/share for FY12    Our NPP profitability estimation does not include earnings from 1) positive interest spread earned through differential between penalty received from NTDC and charge paid to lending institution and 2) efficiency gains; which keeps the room open for further upside    With an anticipated dividend payout of PKR6.5/share in FY13, the stock currently offers a compelling dividend yield of 16%    We have a BUY stance on the stock with a DDM based Dec12 TP of PKR48/share. The stock offers an upside of 16% from yesterday’s closing of PKR41.5/share

HUBC: Narowal Tariff Finalized At Last