NT2_PV Power Nhon Trach 2 - JSC_BSC_Company Update_EN

Valuation
In 2018, BSC forecast NT2 will reach EPS of 2,949 VND/share, EBITDA of VND 1,685 billion, and trading value of 29,300 VND/share, equivalent to PE of 10x. This is a higher valuation than the current average.
Therefore, over the next year, we are recommending HOLD with NT2 shares with a target price of 30,217 VND/share, corresponds to 6.5x EV/EBITDA in 2018 of VND 6.5x (the highest level in 3 years).
NT2 is one of the enterprises operating in the most efficient power sector, have high defense properties (beta 3 years at 0.69). At the current price, the percentage of cash dividend by 25%, the profit margin  of dividend reached 8.5%.
Earning forecast
In 2018, we expect NT2 will record VND 8.071 billion of revenue (+ 19% yoy), VND 849 billion of EBT (+4.8% yoy). Assumption:
(1) In 2018, with the planned capacity increase of 24 MW, commercial electricity output is forecasted to reach 5.35 million kWh, corresponding to 80% utilization. QCs of NT2 in 2018 will reduce by about 10% compared to 2017. In 2018, BSC forecasts that NT2 will not be able to record extraordinary revenue from the difference of QC delivered in the year and the amount of deposits from EVN as 2017.
(2) The average selling price of electricity is 1,508 VND/kWh, slightly lower than the average price in 2017 due to the increase in the proportion of electricity sold on the CGM. In addition, we expected that gas prices wil increase about 10% from 2017 at $ 6.61/mil BTU.
(3) The EURVND exchange rate is expected to increase by 2% in 2018 while the USD/VND will remain stable
Catalyst
(1) EURVND estimated to increase by 2% in 2018 to help foreign exchange losses decrease sharply
(2) Complete restoration to increase capacity from 750MW to 774MW.
Investment highlights
(1) The business results are expected to improve in 2018 thanks to the EUR/VND exchange rate will not increase sharply as in 2017. In addition, due to complete restoration unit, NT2 is expected to operate stable in the next 3 years
(2) NT2 located in an area with high electrical load (Dong Nai), which keeps the demand of the plant is guaranteed.
Investment risks: (1) QC in 2018 of most of the thermal power plants decreased by 10% compared to 2017, so NT2 may be accelerated sale of electricity on the competitive electricity market. (2) The EUR/USD exchange rate increased stronger than forecasted. (3) From 2022, input prices of NT2 could increase sharply due to the import of gas at mines with high operating costs.