Business Recorder
Hub Power Company Limited’s (PSX: HUBC) 9MFY26 performance reflects a clear structural transition in its business model, where weakening core power operations are increasingly being offset by income from associates, lower financing costs, and emerging diversification. At the topline, revenue declined 22 percent year-on-year to Rs50.6 billion in 9MFY26. This is not merely a cyclical slowdown but a reflection of deeper structural changes in the company’s legacy portfolio. The early termination of the Hub Plant PPA and tariff renegotiations at Narowal have materially reduced topline contribution from core generation assets. This pressure is evident at the gross level, where profit fell sharply by 31 percent year-on-year to Rs21.6 billion in 9MFY26, with gross margins compressing to 42.7 percent from 48.6 percent last year. Lower spreads and reduced capacity utilization continue to weigh on the core business, reinforcing the shift away from generation-led earnings. Operating performance presents a mixed picture. Other income rose strongly by 67 percent year-on-year to Rs6.6 billion during the 9-month period, providing partial support, while administrative expenses increased, keeping operating profit under pressure. As a result, profit from operations declined 14 percent year-on-year to Rs26billion. The real strength in HUBC’s earnings lies below the operating line. Finance costs declined sharply by 45 percent year-on-year to Rs6.9 billion in 9MFY26, reflecting both lower interest rates and ongoing deleveraging following repayments of CPEC-related debt. More importantly, share of profit from associates increased to Rs32.3 billion, up 6 percent year-on-year, continuing to anchor the company’s earnings base. Contributions from Thar coal projects and China Power Hub Generation Company remain central, while newer investments are beginning to play a growing role. This shift in earnings composition is critical. HUBC is no longer a pure-play power generation company; it is increasingly an investment-led platform where dividends and associate income drive profitability. The completion of major Thar-based projects has enabled steady dividend inflows, strengthening cash generation and supporting the company’s consistently strong payout profile. The company also announced a latest interim cash dividend of Rs5 per share for 3QFY26, reinforcing HUBC’s strong payout profile even as its earnings base continues to shift away from legacy generation business. Despite operational weakness, these factors helped lift profit before tax by 6 percent year-on-year to Rs51.5 billion in 9MFY26. However, a sharp increase in taxation—up 43 percent year-on-year, likely due to higher effective tax rates and super tax—offset much of this gain. As a result, profit attributable to shareholders declined modestly by 3 percent year-on-year to Rs33 billion, with EPS at Rs25.49 during 9MFY26. Margins further highlight the evolving earnings profile. While gross margins declined, net margins expanded to 74.6 percent, reflecting the high-margin nature of associate income and lower financing costs. At the same time, HUBC is positioning itself for the future through diversification. The company’s entry into electric mobility through its partnership with BYD, along with investments in EV infrastructure, signals a strategic pivot toward new energy and mobility businesses. These initiatives, alongside its existing portfolio, suggest that future growth will increasingly come from outside traditional power generation.
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