NT2: Preliminary earnings -3% YoY

Event

POW released its preliminary (unaudited) 4Q2019 and FY2019 financial statements. FY2019 PATMI slid by 2.9% YoY to VND 759 bn, exceeding our forecast by 3%.

Key highlights

4Q2019 revenue decreased by 6.2% YoY to VND 1,893 bn. This is despite the sales volume increasing by 3.8% YoY to 1,264 mn kWh, according to POW’s recent operational update. NT2 did not disclose further detail regarding its ASP. 4Q19 gross margin, however, expanded to 15.5% from 12.8% in 4Q18. 4Q19 PATMI decreased by 16.9% YoY to VND 210.8 bn, worse than the revenue decline, partly due to a VND 25.4 bn unrealized FX loss vs a 38.1bn gain in 4Q18.

FY2019 PBT decreased by 2.9% YoY to VND 759 bn, exceeding our forecast by 3%. This is mainly attributable to the 0.2% YoY slide in FY2019 revenue to VND 7,653 bn. NT2 did not disclose its sales volume but POW has disclosed that NT2’s sales volume rose by 4.5% YoY to 4,952 mn kWh. FY2019 gross margin contracted 0.5 percentage points to 12.7%.

Significant deleveraging. NT2 has reduced its long-term debt by 68% to VND 492 bn as at 4Q19, in line with our forecast. Net debt/equity fell to 28.8% at end-2019 from 78.8% at end-2018.

Noise regarding Nhon Trach 2 PPA renegotiation persists but we believe that the market has overreacted to this news. In a recent meeting with parent company POW (which holds 59.4% of NT2), management said they do not expect a big reduction to the current PPA price. Please see our NT2 initiation report for scenario analysis. Another risk is input gas supply, which is a concern that should be resolved by 2021 as GAS (not rated) launches its LNG stations.

Our view

We maintain our HOLD-Outperform rating with target price of VND 29,195. NT2 is trading at 1.4x 2020E P/B with forecast dividend yield of 13.6%.

Please access the link for our complete report:20200120 NT2 FY2019

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