BSC - Company Report SHP ICB 7535 BSC 12.05.2015

We recommend to BUY the stock SHP with 12-month target price at VND 22,100/share (+12% up to the market price dated 12.05.2015) after analyzing the stock under 3 valuation methods: FCFF, P/E and P/B. We expect the business to grow rapidly in 2015 thanks to the increase in electricity production output and electricity price.

SHP is a Small and Medium Enterprise (SME) that manufactures and trades hydropower in Vietnam’s Southern region. The company manages and operates three hydropower plants in Lam Dong area with a total capacity of 122.5 MW.

Rapid growth in 2014: SHP reached VND 596 billion revenue and VND 220 billion net profits after tax in 2014. The two figures increased by 3.07 and 2.11 times respectively compared to 2013. The operation of Da Mbri plant in Turbine 1 since Jan 2014 and in 2nd Turbine since May 2014, along with favorable hydrological conditions helped increase the company’s electricity output by 2.53 times compared to 2013.

Expecting further growth in 2015 thanks to the following factors: (1) Electricity production output will rise slightly because 2nd Turbine will operate Da Mbri plant all year round in 2015 instead of 8 months as in 2014. (2) Avoided cost tariff in 2015 increased compared to 2014. (3) Electricity price on the competitive electricity market is expected to increase. However, we need to be careful that the hydrographic conditions may not be favorable for hydropower enterprises in 2015 and SHP’s cost of maintenance and repair may increase if the company conducts the restoration for 2 factories: Da Siat and Da Dang 2.

SHP’s business result is predicted to increase slightly in 2015: BSC forecasts the Southern Hydropower JSC will reach VND 632 billion in revenue and VND 226 billion in profit after tax, a slight growth of 6% and 3% respectively compared to 2014. This is equivalent to 2015 EPS of VND 2,417 /share.