POW - 2023 earnings in line with forecast; downside risk to 2024 NPAT-MI projection – Earnings Flash
  • 2024-01-30T00:00:00
  • Company Research
  • POW released its Q4 2023 results with revenue of VND6.4tn (-16% YoY) and reported NPAT-MI of VND332bn (-61% YoY). The YoY plunge in earnings is due to several reasons. First, POW’s sales volume declined 20% YoY in Q4 2023, mainly due to weaker YoY sales volume from POW’s gas-fired power plants, including NT2, Nhon Trach 1, and Ca Mau 1 & 2, which outweighed higher YoY sales volume from the Vung Ang 1 coal-fired power plant. Second, the sector competitive generation market (CGM) prices were weak in Q4 2023, dropping 44% YoY on average. Third, POW’s financial expenses increased by nearly 3x, mainly due to higher FX loss and other financial expenses. Fourth, we believe that POW did not record any FX loss compensation in Q4 2023 vs VND580bn in Q4 2022.
  • In 2023, POW recorded revenue of VND27.9tn (-1% YoY) and reported NPAT-MI of VND1.1tn (-48% YoY), which are equivalent to 95% and 100% of our respective forecasts. The YoY decline in 2023 reported NPAT-MI can be attributed to (1) a 41% YoY plunge in POW’s gross profits resulting from higher maintenance and operations costs for its gas thermal power plants (as they had to run on diesel oil in Q2 2023), (2) low CGM prices (the average sector CGM price declined 9% YoY in 2023), (3) NT2’s major maintenance which was scheduled for most of September and October 2023, (4) POW not recording any FX loss compensation in 2023 vs ~VND1.1tn in 2022, and (5) significant lower YoY profit of  hydropower plants.
  • Recurring NPAT-MI was strong, completing 120% of our 2023 forecast, which we attribute primarily to lower-than-expected G&A expenses and higher-than-expected compensation for non-mobilized contracted volume (2.1 billion kWh in total per our estimate). We note that POW did not book insurance compensation for Vung Ang 1 vs our forecast of VND300bn in 2023.
  • We foresee downside risk to our 2024F sales volume and reported NPAT-MI forecasts for POW, pending a fuller review, as we expect weak performance from NT2 in 2024. We project NT2’s 2024F sales volume of 1.9 billion kWh (-33% YoY) and net loss of VND249bn vs a net profit of VND496bn in 2023 (see more in our NT2 Update report, dated January 23, 2024). For POW, we currently forecast 2024F sales volume of 18.4 billion kWh and reported NPAT-MI of VND1.3tn.

Figure 1: POW's Q4 & 2023 sales volume

VND bn

Q4 2022

Q4 2023

YoY

2022

2023

YoY

% of Vietcap’s 2023F

Output (million kWh)

4,093

3,293

-20%

14,191

14,438

2%

95%

Ca Mau

1,316

1,164

-12%

3,800

5,277

39%

97%

Nhon Trach 1

414

150

-64%

1,403

713

-49%

73%

Nhon Trach 2

992

402

-59%

4,065

2,896

-29%

92%

Vung Ang

880

1,201

36%

3,318

4,337

31%

98%

Hua Na

233

189

-19%

829

588

-29%

98%

Dakdrinh

258

187

-27%

776

627

-19%

100%

Source: POW, Vietcap

Figure 2: POW’s Q4 & 2023 results

VND bn

Q4 2022

Q4 2023

YoY

2022

2023

YoY

% of Vietcap’s 2023F

Revenue

7,658

6,412

-16%

28,224

27,945

-1%

95%

COGS

-6,591

-5,683

-14%

-24,498

-25,761

5%

95%

Gross profit

1,067

728

-32%

3,726

2,183

-41%

104%

Selling exp

0

0

N.M.

0

0

N.M.

N.M.

G&A

-163

-297

82%

-868

-779

-10%

91%

Operating profit

904

431

-52%

2,859

1,404

-51%

113%

Financial income

221

164

-26%

445

550

23%

102%

   Interest income

119

119

0%

319

449

41%

102%

   FX gains

42

26

-40%

56

40

-28%

128%

   Others

60

20

-67%

70

61

-13%

89%

Financial expenses

-51

-191

278%

-592

-680

15%

108%

   Interest expense

-123

-107

-13%

-438

-498

14%

96%

   FX loss

40

-21

-153%

-120

-104

-13%

120%

   Others

32

-63

-295%

-35

-79

127%

315%

Other non-operating income

42

43

3%

97

186

91%

61%

PBT

1,116

448

-60%

2,809

1,459

-48%

100%

  - Income tax exp

-155

-2

-99%

-256

-129

-49%

91%

NPAT before MI

961

446

-54%

2,553

1,329

-48%

101%

  - Minority interests

-111

-113

2%

-492

-254

-48%

110%

Reported NPAT-MI

851

332

-61%

2,061

1,075

-48%

100%

Adjusted NPAT-MI *

676

361

-47%

1,507

1,061

-30%

120%

Source: POW, Vietcap (* Excluding one-off items, compensation for FX loss and insurance; ** mainly due to a VND122bn gain on sales of equipment related to Nhon Trach 1’s 2017 major maintenance).

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