POW update – BUY

Petrovietnam Power Corporation (Hose: POW)

POW is currently the largest publicly traded company in generating and selling electricity from natural gas.  Owning seven (7) power facilities with 4,200 MW including: hydro, coal-fired and especially gas turbines, in which Nhon Trach 2 Thermal Power JSC (HOSE: NT2) as a primary representative.  In addition,  POW is projecting other substantial generators such as Nhon Trach 3 & 4 (NT3 &4), which offer an attractive growth outlook.  We issue a BUY recommendation on POW with a target price of 16,651 VND, representing a 19.4% total expected return.

Complying with the objectives outlined in National Power Plan VIII (PP8), which was officially authorized by the Prime Minister in mid-May 2023 for the 2021 – 2030 period, which stipulated that the electricity industry must advance one-step ahead in order to pave the way for sustainable economy development, energy demand and national energy security.  Furthermore, in accordance with commitments made at COP 26 & 27, the Government has set the target of seek and utilizing greener and friendlier environmental energy, with less carbon emission that contributes to global warming and the greenhouse effect.  As a result, gas turbines becomes the most promising contender to supplant coal-fired power facilities, which serves as foundation sources and enhance renewable energy simultaneously.

According to NOAA, the first year of El Nino cycle’s two-year period will occur in 2023, resulting in lower precipitation than many years’ average, longer sunlight hours and higher average temperature.  This would increase the power mobilization output from thermal group in the expense of hydropower.  Therefore, it is expected to bode well for thermal groups to post a strong result during 2023 – 2024 period.

POW has a solid financial situation, together with strong operating cash flow from its energy-mixed portfolio, which is capable of generating up to 23 bn kWh annually (almost 10% of national energy demand).  Moreover, NT3 & 4 project – 1,624 MW, which will be the first gas turbines using imported LNG, would serve as a catalyst for the corporation’s growth after 2024.