- We lower our target price for PPC by 14% to VND15,200/share but maintain our OUTPERFORM rating. Our lower TP reflects (1) a 5% lower valuation for PPC’s standalone power generation business, due to a 14% cut in our 2023-2027F aggregate NPAT forecast, (2) a 9% lower valuation for its associate HND, and (3) a 14% lower valuation for its associate QTP. These cuts are mainly driven by our lower sales volume assumptions, lower 2024-2027F CGM price forecasts and higher mixed coal price projections in 2024-2025F, as stated in our Thermal Power Sector Update Report. Additionally, our lower TP is also driven by (4) an increase in our valuation discount from 15% to 20% to account for the risk of REE’s divestment from PPC.

- We revised PPC’s 2023 NPAT-MI upwards by 4% due to the removal of previously incorrect revenue recognition amounting to VND162bn in 2023's revenue. However, we still expect PPC's 2023F NPAT to drop by 24% YoY, mainly due to (1) higher material costs and maintenance expenses and (2) lower CGM (competitive generation market) prices. These factors outweigh (3) the increase in sales volume as Pha Lai 2's S6 generator restarted operation in September 2023 after a two-year technical shutdown.  In contrast, we forecast PPC’s 2024F NPAT to rebound by 90% YoY, driven by (1) a 32% YoY increase in sales volume from the full-year operation of its S6 generator, and (2) a 7% YoY lower average material cost, and (3) a 20% YoY lower maintenance cost that should boost the profit margin.

- We forecast a 20% EPS CAGR in 2022-2025F driven by (1) significantly higher utilization rates for Pha Lai 2 in 2024-2025F due to the re-operation of its S6 generator from September 2023, potential power shortages in the North, (2) higher CGM prices, and (3) declining coal costs.

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