Hub Power’s Earnings Decline Amid Power Purchase Agreement Setbacks

Karachi: Hub Power Company Ltd (HUBC) reported a significant decline in its earnings for the third quarter of fiscal year 2025, owing primarily to setbacks in its power purchase agreements. The company’s net profit after tax (NPAT) stood at PkR11.0 billion, a 36% decline compared to the same period last year. This decrease aligns with market expectations.

The drop in profitability was mainly driven by a reduced topline, following the termination and renegotiation of the power purchase agreements (PPA) for HUBC’s base plant and Narowal Energy Limited (NEL). The company reported consolidated revenue of PkR17.1 billion, marking a 46% decrease from the previous year. This decline led to a reduction in the company’s gross margins to 41%, from 52% in the corresponding period last year.

The firm’s share-of-profit from associates decreased by 16%, totaling PkR10.2 billion, due to the absence of one-off increases from the China Power Hub Generation Company’s (CPHGC) share-of-profit experienced previously.

HUBC’s finance costs fell by 56% to PkR2.9 billion, driven by lower interest rates and significant retirement of short-term borrowings during the first nine months of FY25.

On an unconsolidated basis, the company’s NPAT was PkR5.0 billion, a 29% decrease year-over-year. However, HUBC saw a notable increase in standalone dividend income, which surged 99% to PkR5.1 billion. This increase is attributed to HUBC’s indirect stake in CPHGC, a 1200MW coal-based plant.

The effective tax rate for the quarter was 19%, compared to 16% and 39% in the third and second quarters of FY24 and FY25, respectively.

AKD Securities Limited maintains a ‘BUY’ stance on HUBC, with a target price of PkR151 per share by December 2025, alongside a dividend yield of 6% during the same period.