aluation
§ BSC recommends BUY for REE with a target price of VND68,500/share for 2021 (+21.9% compared to March 19, 2020) based on the partial valuation method (SOTP).
Forecasting business results
§ BSC forecasts net revenue and net profit of 2021 will reach VND 6,591 billion (+16.9% yoy) and NPAT = VND 2,045 billion (+19.4% yoy), 2021 FW EPS = VND 6,289/share assuming: (1) Projects new M&E project +20% yoy; (2) Office rent in rental buildings +5% compared to 2020 and (3) Hydropower output reached 4.8 billion kWh (+34% yoy) thanks to La Nina phenomenon.
Investment Thesis
§ M&E and office leasing activities with stable profit margins are "money printing machines" bringing stable cash flow for REE.
§ Power generation segment grows strongly in 2021 thanks to La Nina phenomenon and additional capacity from newly operating factories.
Risks
§ Weather risks affect the output of the Hydropower segment and the construction process of renewable energy power plants.
§ The Thuong Kon Tum project is behind schedule, reducing the amount of electricity mobilized in the year.
Company Update
§ In 2020, REE recorded a revenue of VND 5,640 billion (+15.3% yoy) thanks to (1) electricity revenue +49.2% yoy due to La Nina's return and (2) M&E revenue +9.5% thanks to rooftop solar power EPC project.
§ REE's NPAT reached VND 1,714 billion (-0.3% yoy) due to (1) financial income of VND 221 billion (-49% yoy) and (2) financial expense of VND 475 billion (+23% yoy) due to increased exchange rate loss during the year.
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