Hub Power Company Limited (HUBCO) is expected to report an after-tax profit of approximately PKR 11.1 billion for the first quarter of FY27, representing a 33 percent decline from the previous quarter. Lower gross profit and reduced earnings from associates are expected to weigh on the company’s quarterly performance.
Despite the anticipated decline in profitability, revenue is projected to increase on the back of higher power offtakes. The company is also expected to announce a quarterly dividend of PKR 2 per share.
Revenue Climbs on Higher Power Offtakes
HUBCO’s sales are forecast to rise 26 percent year-on-year to nearly PKR 22 billion, supported by increased contributions from its power generation operations.
Thar Energy Limited is expected to remain the largest contributor, accounting for approximately 69 percent of revenue. Its plant utilisation reached 88 percent, up 13 percentage points from the corresponding period last year.
Narowal Energy Limited recorded the sharpest increase in sales, with net revenue rising 2.3 times to PKR 4.8 billion. The increase followed disruptions in RLNG supplies amid the ongoing conflict in the Middle East, which affected the operating dynamics of the power sector.
The stronger sales outlook reflects higher offtakes, although the resulting revenue growth is not expected to translate proportionately into higher earnings.
Higher Fuel Costs Squeeze Profit Margins
HUBCO’s gross profit is projected to decline 4 percent year-on-year to PKR 7.3 billion, despite the anticipated increase in revenue.
Cost of sales is expected to rise 49 percent, driven by higher generation volumes and elevated fuel costs. The appreciation of the rupee has also reduced the indexation benefit on return-on-equity and debt components, adding further pressure on margins.
Operating profit is forecast to remain broadly stable year-on-year at approximately PKR 7.0 billion. The figures indicate that higher operating costs are offsetting much of the benefit from increased power generation and sales.
Associate Earnings Decline After Major Dividend Payouts
HUBCO’s share of profit from associates is estimated at PKR 10.2 billion, down 5 percent compared with the same period last year.
The decline is primarily attributed to lower other income at China Power Hub Generation Company (CPHGC), following substantial dividend distributions during the first half of FY26.
CPHGC distributed approximately PKR 78.6 billion in dividends during that period, of which PKR 36.1 billion was attributable to HUBCO. The resulting reduction in cash reserves limited interest and other income in the current quarter.
Lower associate earnings are expected to remain a key factor behind HUBCO’s weaker quarterly profitability, despite stronger revenue from its power generation operations.
Power Demand Recovery Faces Operational Risks
Pakistan’s power sector is showing early signs of improved demand, with total generation increasing 5.7 percent year-on-year during the quarter under review.
However, geopolitical uncertainty and supply-chain disruptions continue to pose risks to electricity generation and fuel availability. These factors could constrain output and influence operating costs in the coming months.
Separately, Unit 1 of CPHGC recently experienced an electrical fault in its transformer. A firm restoration date has not been announced.
Capacity payments remain protected under the power purchase agreement as long as plant availability stays at or above 85 percent. This provides an estimated 55-day window to resolve the issue while maintaining the applicable capacity payment protection.
HUBCO Earnings Outlook Remains Mixed
HUBCO’s expected first-quarter results reflect a mixed operating environment. Higher offtakes are supporting revenue growth, particularly through Thar Energy and Narowal Energy, while increased fuel costs and lower associate earnings are weighing on profitability.
The projected PKR 2-per-share dividend offers shareholders a quarterly payout despite the expected earnings decline. Going forward, investors will monitor fuel costs, plant availability, associate income and developments affecting power generation across the sector.