GEG Update – OUTPERFORM

GIA LAI ELECTRICITY JSC (HoSE: GEG)

GEG reported a decline in its Q3/2024 financial performance, with revenue reaching VND543 bn, -4.1% YoY. The company incurred a loss of VND48 bn in NPAT compared to a profit of VND315 mil in Q3/2023. For 9M2024, NPAT reached VND80bn, -27.8% YoY, completing 29.6% of the company’s annual plan and 30.4% of ACBS’ forecast. The weaker-than-expected performance, both compared to the previous year and our forecasts, is primarily attributable to the temporary pricing of the Tan Phu Dong 1 project at 50% of the ceiling price, despite its commercial operation commencing in May 2023. This pricing mechanism has been insufficient to offset increased operational costs. Consequently, we decided to lower our target price for GEG to VND12,400 per share, representing an expected total return of 13.5%, rating OUTPERFORM.

Q3/2024 financial performance was below our expectations with a loss of VND48 bn in NPAT, bringing 9M2024 NPAT to a mere VND80 bn, -27.8% YoY and -37.5% QoQ. This underperformance was primarily due to a 4.1% YoY decrease in Q3/2024 output, particularly in wind power, which recorded a 13.8% YoY decline in output to 131 mil kWh. Additionally, GEG is currently facing the risk of regulatory audits related to its wind power projects, with all four of its owned projects undergoing inspections, although no official conclusions have been reached.

The revision in our forecast is primarily attributed to the adjustment of the selling price for the Tan Phu Dong 1 project throughout 2024. The price has been revised downward from the transitional ceiling price for renewable energy (RE) sources (VND 1,587/kWh) to the temporary price currently being paid by EVN (50% of the transitional ceiling price). We have postponed our expectation for the company to finalize the official selling price negotiations with EVN for this project to 2025. Although it is unlikely that the company can negotiate the ceiling price, we forecast that the final selling price could reach VND1,500/kWh.