Karachi, 11 Oct 2023:IGI Securities Limited has projected a significant 60% year-over-year (y/y) surge in the earnings for the Independent Power Producers (IPP) universe during the first quarter of the fiscal year 2024 (1QFY24), boosting it to PKR 16.0bn from PKR 10.1bn during the same period last year. The escalation is anticipated primarily due to a weaker Pakistani Rupee against the US dollar and an augmented share of profit for Hub Power Company Limited (HUBC), albeit certain limiting factors, such as elevated finance cost and a revised tariff, might curtail the magnitude of this earnings growth.
A close analysis reveals that HUBC is poised to witness its earnings soar by +62%y/y to PKR 14.78bn, equivalent to an Earnings Per Share (EPS) of PKR 11.4. However, quarterly comparisons demonstrate a 38% quarter-over-quarter (q/q) decline. The y/y enhancement is attributed to several factors, including the depreciating PKR, a larger share of profit from China Power Hub Generation Company Limited (CPHGC), and contributions from Thar Energy Limited (TEL), Prime International, and Thal Nova. Meanwhile, the absence of insurance proceeds for an alternator for the Narowal plant and a diminished share of profit from CPHGC due to insurance proceeds received in the preceding quarter are among the factors for the q/q decline. Additionally, IGI Securities anticipates HUBC to announce a cash dividend of PKR 5.5/share alongside the result.
On the other hand, Nishat Chunian Power Limited (NCPL) is expected to register an increase in earnings to PKR 1.26bn (EPS: PKR 3.44), marking a +32%y/y progression compared to PKR 0.96bn (EPS: PKR 2.61) in the same period last year, while on a quarterly basis, a modest +3%q/q increase is anticipated. The board meeting scheduled for today is set to announce these financial results for 1QFY24. The growth in the earnings during 1QFY24 on a y/y basis is attributed to PKR depreciation and a notable decrease in finance cost due to a reduction in short-term borrowing.
Despite the substantial expected increases, the sector, and particularly companies like HUBC, are likely to witness their growth somewhat restrained by factors including increased finance costs and revisions to the tariff under agreements with power purchasers. On a sequential basis, earnings are expected to exhibit a 36% q/q decrease, attributed mainly to one-off insurance proceeds received by HUBC and its associates. As the financial results are announced and confirmed in the coming days, stakeholders and market watchers will be keen to observe the interplay of these various factors and their impact on the anticipated earnings.