POW: Powerful 3Q19 results

BUY

Current price: 13,200

Target price: 17,457

Upside: +32.3%

Event

3Q19 earnings grew by 4.8x YoY. 3Q19 revenue rose by 13.8% YoY to reach VND 7,924bn. However, PATMI increased 4.8x YoY to reach VND700 bn. As a result, POW’s 9M19 results have achieved 76% our revenue forecast and 88% of our PATMI forecast.

Our view

3Q19 PATMI jumped 4.8 times YoY to reach VND700 bn. This is mainly attributable to its 13.8% YoY quarterly revenue growth to reach VND 7,923bn, slightly higher margin, and reduced interest expenses.

3Q19 gross profit margin expanded by +1ppt YoY to reach 15.1%. In addition, net financial expenses fell by 78% YoY to reach VND 146.6bn, of which interest expenses declined by 16.9% YoY to VND 283bn. Net debt/equity fell to 43% in 3Q19, a 22ppt YoY decline.

9M19 PATMI +59.5% YoY to reach VND 2,222bn. This is partly attributable to the 5.8% YoY increase in revenue (VND 26,238bn) which was underpinned by a 7.3% YoY rise in average selling price to VND 1,532 per kWh. In addition, volumes grew by 2.6% YoY to 16.5 bn kWh. We provide details on the individual power plants in our October 18 update titled “Strong 9M2019 preliminary results”.

9M19 gross margin expanded 0.8ppt YoY to reach 14.7%. Net financial expenses fell by 44% YoY to VND 639bn, of which interest expenses fell by 11% to reach VND 880bn. Notably, POW posted an unrealized net FX gain of VND45bn YTD, a welcome contrast from the 9M18 FX loss of VND415bn. POW has achieved 88% of our 2019 earnings forecast of VND2,521bn. The 9M19 results have achieved 76% our revenue forecast of VND34,453bn.

We reiterate BUY with target price of VND 17,457. Our target implies 2019E PE of 16.2x and 2020E PE of 12.7x, which we view as reasonable. The main downside risk is NT2’s PPA renegotiation, which remains unsettled as far as we know. Continued foreign net selling in line with the broader market is also a possible risk.

Please access the link for our complete report: 20191031 POW 3Q19 results-edited

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