NT2: 3Q19 results underpinned by FX gain

HOLD – OUTPERFORM

Target price: 29,195

Upside: 25.3%

Event

NT2 just released its 3Q19 financial results. 3Q19 revenue increased by 7.6% YoY to VND 1,745 bn, while PAT reached VND 170bn, 6.4 times that of last year.

Our view

3Q19 revenue increased by 7.6% YoY to reach VND 1,745 bn. However, 3Q19 sales volume growth was stronger at 22% YoY to reach 1.1 bn kWh. This translates to an ASP of VND 1,548 per kWh, or a decline of -12% YoY.

PAT reached VND 170bn, 6.4 times that of last year. 3Q19 gross margin expanded to 10.3%, from 8.2% in 3Q18, mainly attributable to an 8.8% reduction in the average gas price in 3Q19. In addition, net financial income reached 16.1bn vs. a net financial loss of VND 87 bn in 3Q18. The company explained that this was due to a one-off FX gain of VND 49.6 bn in 3Q19 vs. an FX loss of VND 49.2bn in 3Q18. 9M19 net profit slightly rose by 3.8% YoY to VND 548.5bn.

9M19 revenue increased by 1.9% YoY to VND 5,760 bn. However, YTD gross margin contracted to 11.8%, down from 13.4% in 9M18. In addition, net financial expenses fell by 46% YoY to VND 67.8bn, which was partly attributable to the 3Q19 FX gain.

Persistent input constraint risk. NT2 has been unable to run at full capacity due to upstream maintenance at the Cuu Long gas fields affecting the gas input, especially in 2Q19. As mentioned in our initiation report of October 7, gas issues will only be resolved in 2021 after Sao Vang Dai Nguyet delivers its first gas.

We reiterate our HOLD-Outperform rating. Our target price of VND 29,195 is based on a three-part fair valuation approach with weightings of 40% for DDM, 40% for EV/EBITDA, and 10% for the FCFF methodology

Please access the link for our complete report: 20191017 NT2 3Q19 results

Analyst: Binh Truong, binh.truong@yuanta.com.vn