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POW Update – OUTPERFORM
01/12/2023 - 3:03:38 CHPetrovietnam Power Corporation (HOSE: POW)
POW released its Q3/2023 result with the parent company’s NPAT reaching VND83 bn, +23.6% YoY. Accumulated 9M2023, NPAT amounted to VND743 bn VND, completing 66.5% of the plan, but only 27.8% of our projection. Our NPAT forecast is revised down by 48.5% in comparison to the last updated report, to VND1,377 bn. Accordingly, the target price is revised down to VND13,535 per share, representing a total expected return of 18.7%. Rating OUTPERFORM.
These following variables most significantly impact our earnings forecast for POW in 2023.
1) The NT1 factory failed to meet anticipated output despite the appearance of the El Nino cycle in 2023.
2) The FMP has declined compared to the average level of the previous period.
3) NT2 booked a large amount of repair expenses, leading to negative NPAT of more than VND 120 bn.
4) Vung Ang extended its repair duration from Q3/2021 to Q3/2023, instead of the initial completion plan of February 2023.
5) Fossil fuel input prices have not decreased much but have even increased like coal.
6) And finally, El Nino curtailed hydropower output.
Q3/2023’s revenue decreased by 6.0% YoY, reaching VND 5,679 bn, primarily due to the fact that POW underwent many factories overhaul in order to exploit advantage of the rainy season, which result in prior to hydropower over thermal power.
Regarding the capital increase by VND 5,000 bn, during the investor meeting in Oct 2023, POW disclosed that it had submitted a capital increase plan to the parent company – Vietnam Oil and Gas Group (PVN). Although the method has not been mentioned, we believe that the capital will come from retained earnings and research funds because the company has not distributed any dividends since the beginning of 2022, reserving all profits for reinvestment.
The progress of the NT3 and NT4 plants was reported on schedule, more than 60% of the total volume has been constructed and commercial power generation of the NT3 plant is expected in November 2024 and NT4 in May 2025.
