POW_NEUTRAL_TP 13,800_Upside 15%_Staying Steady In Difficult Times_BSC Company Update

Valuation

§  BSC recommends NEUTRAL for POW stock with a target price of VND13,800/CP for 2021, equivalent to 15%upside compared to the price on May 08, 2021 based on SOTP method, in which the average EV/EBITDA of the gas and electricity segments, coal and hydroelectricity are respectively 5.8x, 5.1x and 9.0x.

Forecasting business results

§  BSC forecasts POW's Gross profit and Profit after tax in 2021 to reach VND29.018 billion (-2.4% yoy) and VND3.085 billion(+15.9% yoy) respectively with the assumption (1) The price of NT2's new contract electricity with EVN decreased by VND 35/kWh; (2) Returning the provision of bad debts of VND370 billion of EPTC in 2020 and (3) Hydroelectric output +16% yoy thanks to the favorable hydrological cycle; (4) POW completed PVM divestment in Q1/2021, bringing financial revenue of VND354 billion (equivalent to 13% of Profit after tax in 2020).

Investment perspective

§   POW’s mobilized electricity output remains stable in the long term thanks to future growth in electricity demand.

§   Stable cash flow helps POW repay debts, thereby reducing financial costs for POW.

Risk                                           

§  Production of gas and coal thermal power segments may continue to decline in the future due to the competition of renewable energy power.

Business update

§  POW's net airstrike in Q1/2021 reached VND7,661 billion (-4% yoy) respectively due to a sharp decrease in electricity volume of the gas power segment (-26% yoy), making the total output mobilized in the period only reach 4.6 billion kWh (-12% yoy).

§  Profit after tax in the period reached VND 566 billion (+12% yoy) due to the absence of large Exchange rate difference losses and interest expense in the period decreased to VND109 billion (-47% yoy).