POW – Strong outlook has already priced in – Update

• 4Q revenue/net profit dropped 17%/25% yoy, due to 38% yoy drop in power output. FY21 net profit dropped 25% yoy to VND1,778.8bn
• We expect FY22F output to drop modestly (-2.3% yoy) then rebound 26.8%/31.2% yoy in FY23/24F thanks to the new NT3 thermal plant.
• Downgrade to Hold with a higher target price of VND19,200.

FY21 result: week performance due to solid thermal output loss
In 4Q21, POW’s power output dropped 38% yoy to 2,522m kWh due to low-electric load in the South, leading to insufficient Qc assigned. Average selling price (ASP) softened 16% yoy as lower contribution from thermal power. 4Q21 revenue dropped 55% yoy to VN D3,598bn and the company recorded a loss in gross profit of VND326bn as gas price surge eroded profit margin. SG&A dropped 184% yoy thanks to VND742bn payment from EVN, financial income surged 28x thanks to subsidiaries cash dividend. As a result, POW recorded net loss of VND62.7bn (-106% yoy).
For FY21, revenue dropped 17% yoy to VND24,565bn as thermal power segment was underperformed, leading to a 25% yoy slump in net profit of VND1,778.8bn, fulfilling 76% of our forecast.
Too conservative FY22 guidance, in our view
According to Management, POW set target of 900bn (-49% yoy) for FY22F net profit as they concern about low power demand. We expect VND1,764bn for FY22F net profit (96% higher than guidance; -1% yoy) as we believe a stronger recovery in Vietnam power consumption to lift gas-fired output by 22% yoy and gross profit margin to widen 2%pts yoy. Our forecasts are based on the assumption of 14,9bn kWh FY22F output expected to drop 2.3% yoy due to Vung Ang 1 operation halt and 18.5% yoy drop in hydropower output at the end of La Nina phenomenon.
For FY23/24F, output will bounce back sharply 26.8%/31.2% yoy thanks to fast pace of power demand growth and the contribution from Nhon Trach 3 in FY24F, leading to a revenue surge of VND32,218bn and VND44,280bn (+26.1% yoy and +37.4% yoy, respectively). Overall, POW net profit will increase 44.0% yoy and 44.5% yoy in FY23/24F, respectively.
Downgrade to Hold with a higher target price of VND19,200
We revise up our TP for POW by 28% versus our previous report as (1) We roll forward our DCF valuation to FY22F, (2) we adjusted FY22/23/24F EPS by -37.8%/-11.4%/+29.6%, respectively. Re-rating catalyst is higher oil price. Downside risk are longer-than expected Nhon Trach 3&4 completion time.

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