HUBC 9MFY15: restricted revenue growth

Hub Power Company Limited (KSE: HUBC) announced its financial performance for 9MFY15 last week, showing a growth in the power company’s earnings. The firm depicted a 31 percent year-on-year growth in profits for 9MFY15, and most of the gains came from 1HFY15 as HUBC’s financial performance for 3QFY15 was depressed; earnings took a dip of 12 percent year-on-year in the latest quarter.
In 9MFY15 and 3QFY15, drop in furnace oil prices restricted the revenue growth which was down by 41 percent, year-on-year in 9MFYFY15, and by 14 percent year-on-year 1HFY15. However, gross margins improved on the back of higher efficiency at the base plant and lower downtime.
The growth in margins trickled down to the bottom line despite the 61 percent increase in general and administrative expenses which depicts the overhaul and maintenance of the base plant during the fiscal year. Another factor that contributed to the earning accretion in 9MFY15 was the reduction in finance cost due to improved liquidity and lower short term borrowings by the firm.
While the IPP has been dragged by O&M expenses, green field coal power plants and the likely spin-off Hub’s Narowal Plant have positive prospects for the firm.

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HUB POWER COMPANY (HUBC)

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Rs (mn)                  3QFY15   3QFY14    YoY    9MFY15    9MFY14    YoY

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Turnover                 25,801   43,395   -41%   104,121   121,215   -14%

Operating Costs          22,340   39,970   -44%    93,010   112,562   -17%

Gross Profit              3,461    3,425     1%    11,111     8,654    28%

General and Admin           251      156    61%       617       417    48%

Other expenses              382        -              382         -

Profit from operations    2,836    3,278   -13%    10,140     8,317    22%

Finance Cost              1,020    1,220   -16%     3,577     3,320     8%

PAT                       1,816    2,057   -12%     6,561     4,994    31%

EPS (Rs/share)             1.57     1.78   -12%      5.67      4.32    31%

Gross Margin              13.4%     7.9%            10.7%      7.1%

Operating Margin          11.0%     7.6%             9.7%      6.9%

Net Margin                 7.0%     4.7%             6.3%      4.1%

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Source: KSE Announcement.

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