Hubco: rejuvenating

After a tough year of overhauls and repairs, Hub Power Company Limited looked all bright-eyed in 1HFY15. The company initiated refurbishment of two of its boilers in FY14, which not only resulted in higher repairs and maintenance expenditure but also led to reduction in plants fuel efficiency levels.
During the first six months of FY15, Hubcos earnings increased by 62 percent, year-on-year. While the increase in earnings for 2QFY15 was more than double. This strong rebound in earnings is anticipated to have spurred from no overhauls and O&M activity during the period and restricted fuel efficiency losses due to lower load factor at the base plant.
However in 1HFY15, drop in furnace oil prices and restricted load factors due to furnace oil supply were a major drag on the IPPs net revenues. Sales growth was down by 18 percent, year-on-year, in 2QFY15, and stagnant in 1HFY15.
The menace of circular debt impacted the IPPs load factor and though the firms earnings benefited from it due to lower fuel efficiency losses, the plant has been operating below benchmark efficiency. Nonetheless, the firm will continue to benefit as long as the crude oil prices remain low; the impact of lower oil prices would be more visible in 3QFY15 financial result.
Also, the long due spin-off Hubs Narrowal Plant is likely to materialise soon. In case of divestment, the IPP will be able to improve its future prospects. One such investment is that of a 660MW coal-fired power plant.

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HUB POWER COMPANY LIMITED

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Rs (mn)                    2QFY15    2QFY14    YoY     1HFY15    1HFY14    YoY

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Turnover                   32,565    39,765    -18%    78,320    77,820     1%

Gross Profit                4,091     2,415     69%     7,650     5,228    46%

Gen. Admin exp                201       147     36%       365       261    40%

Profit from operations      3,903     2,284     71%     7,304     5,039    45%

Finance Cost                1,251     1,161      8%     2,558     2,101    22%

PAT                         2,651     1,122    136%     4,745     2,937    62%

EPS (Rs/share)               2.29      0.97    136%      4.10      2.54    61%

Gross Margin                 12.6%      6.1%              9.8%     6.7%

Operating Margin             12.0%      5.7%              9.3%     6.5%

Net Margin                    8.1%      2.8%              6.1%     3.8%

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Source: KSE Announcement

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