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POW – Save for a rainy day – Update

Company Note 20/08/2021    156

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  • In 1H21, POW’s net profit increased 16% yoy to VND1,384bn, fulfilling 60% of our full-year forecast.
  • We revise up FY21/22/23F EPS by 5.1%/14.7%/22.4% following higher output. Reiterate Add with a higher TP of VND15,000.

Market Price

Target Price

Dividend Yield

Rating

Sector

VND11,300

VND15,000

0.0%

Add

UTILITIES

1H21 result: better than expected

In 1H21, POW’s total output decreased 14% yoy to VND9,488bn mainly due to subdued gas-fired and coal-fired output (-24%/-2% yoy), while hydropower output increased impressively 76% yoy thanks to favorable hydrological conditions. 1H21 revenue edged down 0.4% yoy on 14% yoy growth of average selling price (ASP). Gross profit margin compressed 2% pts yoy as lower contribution from gas-fired output. SG&A declined 26% yoy in 1H21 by a slump in provision (VND280bn to VND13bn). Net financial income grew 144% yoy thanks to one-off gain and lower interest income. Consequently, 1H21 net profit increased 16% yoy to VND1,384bn, fulfilling 60% of our full-year forecast.

FY21-23F outlook: output will gradually recover

We expect POW’s output to drop 5% yoy in 2021F then bounce back 16%/1% yoy in 2022-23F following higher power mobilization for thermal power plants. By types of energy, we expect coal-fired output to stay flat, hydropower output to surge 44% yoy in 2021F but drop 18%/4% yoy in 2022-23F; and gas-fired output to grow 31%/3% yoy in 2022/2023F. Overall, POW’s net profit is expected to drop 1.3% yoy in 2021F and bounce back 20%/3.3% yoy in 2022-23F.

Nhon Trach gas power plants 3 & 4 will be growth engines for longer run

By end-Aug, POW will finalise the EPC contract for Nhon Trach 3&4, the country’s first LNG power plant. These two power plants with total capacity of 1500MW, using imported LNG from Thi Vai Terminal, will likely start commercial production in 4Q23 and 2Q24, respectively. We expect these power plants will bring POW ‘s revenue to grow 24.2% yoy over 2024-25F.

Reiterate Add with higher TP of VND15,000

We raise our 1-year TP to VND15,000 (+11% vs our previous report) following 5.1%/14.7%/22.4% EPS upgrade for FY21/22/23F. We think it’s time to accumulate a defensive stock with limited downside risks and reliable earnings growth. Downside risks are fuel shortage (coal, LNG) which might interrupt the operation and longer-than-expected Nhon Trach 3&4 completion time. Upside catalysts are higher-than-expected power output.

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