NT2 – Vibrant 3Q21 to offset the 1H21 loss – Update

• NT2’s net profit rose 305% yoy in 3Q21 thanks to 81.7% yoy ASP surge, almost offsetting the loss of 1H21.
• We adjust FY21/22/23F EPS by -14.0%/-0.2%/2.0% to reflect lower Qc assigned when Brent oil price remains high.
• Reiterate Add with a lower TP of VND29,200, following the downward adjustment on earnings.

9M21 results: Soft output volume to be counterbalanced by ASP hike

NT2’s output slumped 40.3% yoy in 3Q21 on lower Qc assigned as EVN preferred to mobilize from renewable energy (RE) and hydropower plants. However, average selling price (ASP) rose sharply 81.7% yoy due to recent gas price hike, making 3Q21 revenue to grow positively 8.4% yoy. Gross profit margin (GPM) widened 19% pts yoy thanks to no large maintenance. Financial expenses dropped 86.2% yoy as NT2 has completed its long-term debt obligation since 2Q21. Net profit recorded VND273.8bn in 3Q21, vs negative VND5.9bn to in 3Q20. For 9M21, output dropped 25.6% yoy while ASP surged 27% yoy, bringing revenue to modestly drop 5.0% yoy to VND4,515bn. A sharp decline of 56% yoy in financial expenses helped 9M21 NP to edge down only 2.2% yoy, fulfilling 69.2% of our full year forecast.

We expect output gradually to recover in FY22-23F

We expect NT2’s output will drop 12.5% yoy in FY21F then bounce back 20% yoy in FY22F after retreating 3.8% yoy in FY23F (maintenance plan). ASP will record a leap of 12.5% yoy in FY21F and continue to remain high level of around 1723-1760VND/kWh in FY22-23F. We believe the debt repayment in 2Q21 will help reduce NT2’s interest expense and exchange rate risk and improve its future financing cash flow. We forecast financial expense will decrease 73.1% yoy in FY21F then remain stable of VND49bn and VND35bn in FY22-23F, respectively. Consequently, NT2’s net profit may drop 21.6% yoy to VND649bn in FY21F then grow 25.8% yoy to VND818bn in FY22F.

Reiterate Add with target price of VND29,200

We trim our TP to VND29,200 (-3% versus our previous report) following an adjusted EPS of -14.0%/-0.2%/2.0% for FY21/22/23F. We think it’s time to accumulate a defensive stock with limited downside risks but attractive dividend policy. Downside risks are 1) fuel price remain high, hampering the output mobilization, 2) lower-than-expected power consumption growth due to the presented risk from Covid-19. Upside catalysts are 1) higher-than-expected power output, 2) NT2’s surprise earnings of VND400bn will be address in the future.

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