Morning Call about -1) Hub Power Company 2) Pak Suzuki Motor Company – Arif Habib Limited

Karachi, August 16, 2013 (PPI-OT): 1) HUBC; Time for bumper dividend now.

Hub Power Company Limited’s (HUBC) Board of Directors is all set to announce company’s FY13 financial results on August 19, 2013.

According to Arif Habib Limited preview HUBC to post a net profit after tax of PKR 9,914mn (EPS: PKR 8.57) for FY13 marking a stunning growth of 21% YoY over profit after tax of PKR 8,190mn (EPS: PKR 7.08) in FY12.

The company’s net sales are expected to drop by 5% YoY as Narowal plant witnessed months long shut downs in 2HFY13 while fuel prices and old plant’s utilization (FY13 load factor 73% vs. FY12’s 74%) registered minor changes only, YoY. Another significant contributor towards profit growth is 8% YoY drop in finance cost as 300 bps cut in SBP discount rate and gradual principal repayments are expected to bring finance cost to PKR 6,541mn.

Arif Habib Limited also expect the board to announce final cash dividend of PKR 4.5-5/share, however, the possibility of a surprise bumper dividend cannot be ruled out as the company has capacity to pay around PKR 10/share as discussed earlier in Arif Habib Limited reports. Arif Habib Limited recommends a HOLD for HUBC!

Financial Highlights 
PKR mn                   4QFY13E    3QFY13    QoQ   FY13E     FY12     YoY
Sales                    32,630     42,534   -23%  165,124  174,712    -5%
Cost of Sales            28,554     38,254   -25%  148,323  159,091    -7%
Gross Profit              4,077      4,280    -5%   16,801   15,621     8%
Profit from Operations    4,016      4,182    -4%   16,455   15,272     8%
Finance Cost              1,504      1,520    -1%    6,541    7,083    -8%
Profit before taxation    2,512      2,661    -6%    9,914    8,190    21%
Profit after taxation     2,512      2,661    -6%    9,914    8,190    21%
EPS (PKR)                 2.17       2.30     -6%    8.57     7.08     21%
DPS (PKR)                 4.50        -              7.50     6.00 

Source: Company financials, AHL Research
 

2) PSMC; One off gain to escalate 1HCY13 earnings!
The Board of Directors of Pak Suzuki Motor Company Limited (PSMC) is scheduled to meet on August 19, 2013 to approve the financial results for 1HCY13. Arif Habib Limited expects the company to post profit after tax (PAT) of PKR 888mn (EPS: PKR 10.79) in 1HCY13, representing a 35 YoY decline from 1HCY12’s PAT of PKR 1,369mn (EPS: 16.64). Arif Habib Limited believes this decrease in the profitability is primarily due to an estimated 33% YoY drop in the volumetric sales of the company’s, translated into 27% YoY decline in the top-line to PKR 26.5bn.

On quarterly basis, Arif Habib Limited expect s the company to register 45% QoQ jump in the profitability to PKR 526mn (EPS: PKR 6.40). This jump in the bottom-line comprises one-off gain on sale of company’s old Motorcycle plant of PKR 274.5mn (PKR 3.34/share). Gross profit of the Company in 2QCY13 is expected to be around PKR 701mn, translating into a gross margin of 5.4%, as compared to 4.7% in the preceding quarter and 7.2% in the corresponding period last year. Currently Arif Habib Limited maintains ‘Sell’ recommendation for the stock.

Financial Highlights
PKR mn                        2QCY13E   1QCY13A   QoQ   1HCY13E   1HCY12A    YoY
Net sales                       12,917    13,605   -5%   26,523     36,471   -27%
Gross profit                       701       645    9%    1,346      2,252   -40%
Sales and admin expenses           253       266   -5%      520        576   -10%
Other income                       408       129  217%      537        332    62%
Finance cost                        10        36  -72%       46          7   576%
Profit after tax                   526       362   45%      888      1,369   -35%
EPS (PKR)                         6.40      4.40          10.79      16.64

Source: Company Accounts and AHL Research