Written as on July 16, 2012
Highlights
• HUBC to posts PAT of Rs7.9bn (EPS Rs6.88) in FY12
• Revised tariff to yield incremental Rs0.97/ share in 4QFY12 earnings
• Recommendation 'Buy' with TP of Rs52/share
HUBC is scheduled to announce the FY12 result on Jul-18, 2012. In today's Value Seeker, we presents result preview of Hub Power Company Limited (HUBC) for FY12 along with the outlook for the scrip.
HUBC to posts PAT of Rs7.9bn (EPS Rs6.88) in FY12
We expect the company to post Profit after tax of Rs7.97bn up by massive 47%YoY, the bottomline will translate into an EPS of Rs6.88/share. The topline of HUBC is expected to register an increase of 39% YoY, rising to the level of Rs171bn in FY12. This expected improvement in topline earnings will be supported by 37% YoY increase witnessed under the fuel expense coupled with starting of generation from Narowal plant on actual tariff. HUBC being an IPP passes on the fuel cost of generating electricity to WAPDA. However, an increase of 112%YoY in financial cost due to funding for Narowal could be the deepening factor for the growth in bottomline. Along with the FY12 results we expect cash dividend for the full year to stand at Rs6/share including Rs3.0 per share already issued during the year.
Revised tariff to yield incremental Rs0.97/ share in 4QFY12 earnings
On quarterly basis, the company is expected to post the PAT of Rs3.0bn EPS Rs2.59, up by 52%QoQ as compared to 3QFY12. The bottomline earnings of the company is expected to book the gain of Rs0.97 per share after the OGRA specifically notified the actual tariff structure of Narowal plant (tariff was previously based on reference basis). Also the PKR depreciation against USD during 2HFY12 will support the bottom line earnings further.
Recommendation 'Buy' with TP of Rs52/share
HUBC is currently offering 21% upside potential with our target price of Rs52/share for Dec-12. Therefore, we recommend 'Buy' on the scrip. The scrip is currently trading at PE ratio of 7.3x coupled with 13.7% dividend yield on the FY13 earnings estimates.
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