Karachi, August 30, 2021 (PPI-OT): HUBC: Receivable settlement; payouts from CPEC JV triggers payouts

Hub Power Company Ltd (HUBC) announced 4QFY21 NPAT of PkR8.87bn (EPS: PkR6.84), up 31% on YoY basis, but flattish QoQ. This takes the FY21 NPAT to PkR33.68bn (EPS: PkR25.97), up 35%YoY. The company has also announced final interim cash dividend of PkR5.0/sh, taking full year payout to PkR12.0/sh.

For 4QFY21 alone, a steep 34%YoY decline in finance cost amid low interest rates and lower effective tax rate of 17% vs. 31% in the same period last year (to recall, 25% WHT on dividend income from 46% owned CHPGC for entire FY20 was recorded in 4QFY20)has offset 19%YoY lower profits from CPHGC.

For FY21, the 35%YoY increase in earnings came on the back of 38%YoY decline in finance cost, 13%YoY higher income from CPHGC and absence of PkR1.0bn transfer of share of 1.5% stake in CPHGC to GoB recorded in the same period last year.

The contribution of profits for China Hub Power Generation Company Ltd (CPHGC) to HUBC’s FY21 NPAT was PkR11.6bn (EPS: PkR8.96). A payout from the subsidiary after meeting debt covenants and, first tranche of receivables settlement (cash received PKR5.9/sh) received in Jun’21 triggered the payout, in our view.

We highlight that debt repayments and interest cost taken in lieu of equity investment in CPEC projects (PkR8-10bn in FY22/23F) are expected to be partially offset by coupon payments from Sukuks and PIBs (at ~PkR4bn per annum) as part of MoUs signed with GoP in FY22/23F. That said, commencement of all projects in FY23F will likely result in sustained momentum in payouts from then onwards.