Pakistan’s first independent power producer (IPP), The Hub Power Company (HUBC) announced its 1QFY14 result on Thursday. On an unconsolidated basis, the Company posted profit after tax of PkR1.8 billion (EPS: PkR1.57) for the quarter, a decline of 14%YoY/9%QoQ. The result was below expected net profit of PkR2.6 billion (EPS: PkR2.26).
This deviation can be attributed to lower than expected revenue. The decline may have been on account of prolonged maintenance during the period, leading to lower capacity utilization. Key highlights of 1QFY14 result include: 1) revenue amounting to PkR38 billion, posting decline of 21%YoY likely due to longer than expected maintenance period but a sequential increase of 14%QoQ on revived generation from the Narowal plant, 2) financial charges dropping sharply by 48%YoY/38%QoQ due to lower short-term borrowing post circular debt retirement in June this year and 3) gross margin contracting by 3.4pptQoQ.
Going forward, analysts expect normalized operations from the Hub and Narowal plants and improved earnings and maintain payout expectations for FY14. At current levels, HUBC trades at an FY14F D/Y of 14.4%. That said, given lower than expected earnings posted for 1QFY14 across the sector, analysts await detailed results to update investors accordingly.