- REE released Q3 2023 results with revenue of VND1.9tn (-12% YoY) and reported NPAT-MI of VND450bn (-34% YoY). The YoY decrease in reported NPAT-MI can be attributed primarily to a 48% YoY decline in power earnings as many of REE’s hydropower plants recorded YoY decreases in NPAT in Q3 2023, including the 52%-stake Vinh Son-Song Hinh Hydropower JSC (HOSE: VSH), the 60%-stake Thac Ba hydropower plant (HOSE: TBC), the 43%-stake Thac Mo hydropower plant (HOSE: TMP), and the 24%-stake Central Hydropower JSC (HOSE: CHP) whose respective NPAT plunged by 88% YoY, 78% YoY, 35% YoY and 81% YoY. In addition, Pha Lai Thermal Power JSC (HOSE: PPC) (REE currently has a 23.5% stake in PPC) also reported a 45% YoY decline in NPAT in Q3 2023. In addition, Q3 2023 NPAT-MI from the office leasing & real estate segment declined by 20% YoY mainly due to REE not recording profit from its residential real estate projects in Q3 2023 vs a significant contribution from the 29%-stake associate company – Saigonres Group – in Q3 2022. 

- REE’s 9M 2023 revenue and reported NPAT-MI were VND6.5tn (+3% YoY) and VND1.7tn (-15% YoY), completing 66% and 65% of our respective full-year forecasts. We foresee slight downside risk to our 2023F NPAT-MI projection, pending a more comprehensive review, as we expect strong performance from the power segment in Q4 and REE to record sales of units at the Light Square residential real estate project in Thai Binh province at end-2023. 

- We see potential downside risk to our 2023F NPAT-MI projection for the power segment as the 9M 2023 figure only fulfilled 64% of our full-year forecast. We attribute the weaker-than-expected result primarily to lower-than-expected competitive generation market (CGM) prices in August and September due to unexpectedly high rainfall in these months. We note that the sector’s average CGM prices dropped by 48% YoY and 44% YoY in August and September 2023, respectively.

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