• REE released its Q2 2024 results with revenue of VND2.2tn (flat YoY) and reported NPAT-MI of VND355bn (-27% YoY). Despite overall flat YoY revenue, we attribute the 27% YoY decrease in the reported NPAT-MI to (1) a substantial decrease of 56% YoY in the power earnings segment, primarily due to a 74% YoY decrease in 50%-stake Vinh Son Hydro (HSX: VSH), a 44% YoY decrease in 24%-stake Pha Lai thermal (HSX: PPC), and a 43% decrease in 43%-stake Thac Mo Hydro (HSX: TMP); and (2) the 22% YoY decline in water earnings due to a higher depreciation from the Song Da Water volume expansion phase 2. 
• REE’s H1 2024 revenue and NPAT-MI were VND4tn (-12% YoY) and VND835bn (-32% YoY), completing 43% and 36% of our respective full-year forecasts. We maintain our view for REE to record earnings from the Light Square project sales in Thai Binh Province in H2 and reverse the provision in the M&E segment, recording stronger revenue in H2 from its robust backlog of VND3.1tn (+4.0x YoY) to meet our earnings forecast for these two segments.
• We see downside risk to our 2024 NPAT-MI forecast for the power segment due to (1) despite an expected slight improvement in hydro output in H2 vs H1, high contracted volume still limits earnings, and (2) weaker-than-expected performance in PPC, coming from its weak H1 result as well as our expectation that REE will switch from the equity method to the cost method for its PPC investment in the near future, pending a fuller review. On the bright side, REE announced the success of the 70%-stake acquisition of Duyen Hai Wind Power JSC (Tra Vinh Province)- 48MW.
• We currently have an OUTPERFROM rating for REE with a target price of VND63,300/share.

M&E H1 revenue and NPAT-MI increased 13%/30% YoY and complete 49%/24% of our respective full-year forecasts. The divergence between the top line and bottom line was mainly due to the provision for bad debt in Q2. REE also signed a contract value of VND3.1tn (+4.0x YoY), mainly from Long Thanh International Airport.  

The office leasing & real estate segment’s H1 revenue and NPAT-MI increased 11%/3% YoY and complete 28%/32% of our respective full-year forecasts. The office leasing results are in line with our forecast with the occupancy rate by H1-end decreasing by 3.4% compared to the previous year, which was offset by the price increase. We expect REE to record earnings from the sales of the Light Square project in H2 2024 to meet our forecast.

 Power segment revenue and NPAT-MI decreased 28%/53% YoY and complete 46%/31% of our respective full-year projections. These earnings trail our forecast due to (1) weaker-than-expected earnings from hydropower plants including VSH, TBC, and SBH due to low water inflow and high contracted volume and (2) lower-than-expected earnings from PPC resulting from its loss-generating Pha Lai 1 power plant. Additionally, REE announced the acquisition of a 48 MW wind power project license in Tra Vinh Province with an expected CoD in Q1/2026, which confirms our forecast.

Water segment H1 NPAT-MI fell 32% YoY due to higher depreciation from the Song Da Water phase 2 expansion project. This completes 45% of our 2024F projection and is in line with our expectation.  

Figure 1: REE’s H1 2024 results 

Source: REE, Vietcap

Figure 2: REE’s H1 2024 power revenue and NPAT-MI

Source: REE, Vietcap (* Revenue and NPAT-MI from the Tra Vinh Electric Development JSC – UPCoM: DTV)

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