NT2 – Reboot the growth engine – Update

• Higher-than-expected output mobilization helped 1Q22 NP reach VND159bn in 1Q22 (+39.4% yoy), fulfilling 24.4% of our full-year forecast.
• We expect 2022/23F NP to reach VND654bn (+22.6% yoy) and VND754bn (+15.1% yoy), respectively, thanks to solid power consumption recovery.
• Reiterate Add with unchanged target price of VND29,200.

1Q22 recap: brilliant quarter thanks to higher-than-expected output

NT2 announced 1Q22 business results, in which, revenue and NP surged 16.4% yoy and 39.4% yoy to VND2,006bn and VND159bn. The reason for the positive results including: 1) NT2 recorded an impressive 1Q22 output of 978m kWh (reaching 178% 1Q22 plan and increasing 6.1% yoy as power demand return to higher level post-Covid and the recent coal-fired shortage); 2) NT2’s average selling price (ASP) also reached high level of VND1,980/kWh in 1Q22. The recent surge of global Brent oil and natural gas price has effect on NT2 gas input price and the company reported a 66% yoy rise in gas input price to US$9.8/mmbtu from US$5.9/mmbtu in 1Q21, passing through higher ASP. 1Q22 GPM was nearly flat but the financial expenses dropped 90% yoy to VND2.1bn as NT2 has fully paid its long-term debt, thus NP reached VND159bn (+39.4% you).

We expect NT2 output will recover in 2022F owing on demand surge

We believe NT2 output will bounce back in 2022F from a low-base of 2021 thanks to strong demand recovery especially in the South post Covid-19. We forecast gas price to remain high level following expected Brent oil price of US$95/85 for 2022-23F. We also see the curtailment risk in gas-fired power from additional 3,980MW of wind power, however, the strong rise in power consumption will soon cover the excess capacity in upcoming years. Moreover, after 6 months of operation, wind power has shown its weaknesses of instability and gas-fired power will maintain as the reliable background source for the safety of power system. We project revenue and NP to reach VND7,875bn (+28.1% yoy) and VND654bn (+22.6% yoy) in FY22F, before continuing to shift up to VND7,168bn (-9% yoy with expected gas price reduction) and VND754bn (+15% yoy), respectively.

Reiterate Add with target price of VND29,200

We keep our TP of VND29,200 as we stay on our previous view about the recovery outlook of gas-fired power in 2022F. We think it’s time to accumulate a defensive stock with limited downside risks but attractive dividend policy, especially after strong discount in its stock price recently. Downside risks is 1) fuel price remain high, hampering the output mobilization. Upside catalysts are 1) higher-than-expected power demand growth, 2) Coal-fired shortage stay longer-than-expected.

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