Nguyen Thi Thu Huong Student ID 31201022306 Major Financial Investment University of Economic Ho Chi Minh City Email huongmich2104@gmail com Tel (+84)988376609 Current price 29,300 Target price 27,352[.]
EQUITY RESEARCH REPORT ELECTRICAL INDUSTRY APRIL 18, 2023 PETROVIETNAM POWER NHON TRACH (HOSE: NT2) Nguyen Thi Thu Huong Student ID: 31201022306 Major: Financial Investment University of Economic Ho Chi Minh City Email: huongmich2104@gmail.com Tel: (+84)988376609 Current price: 29,300 Target price: 27,352 % Increase/Decrease: -6.65% Recommendation: HOLD Investment Recommendation Trade Information Current price 29,300 52-week high price 30,500 52-week low price 18,500 Listing shares 287,876,029 Outstanding shares 287,876,029 Average volume 30 days (cp/day) 485,386 State Ownership Ratio 61.85% Market capitalization (billion 8,434.77 VND) P/E trailing 11.42 EPS trailing 2,535 Businness Overview Name PetroVietNam Power Nhon Trach Address Phuoc Khanh Commune, Nhon Trach District, Dong Nai Province Key Power Purchase Agreement with revenue EVN Key Natural gas expense Key risk Competing with businesses to selling electricity Cơ cấu cổ đông PetroVietnam Power 59.37% Corporation Technology Development 8.27% Company Limited The other shareholder 32.36% We conduct the initial valuation of NT2 shares of PetroVietnam Power Nhon Trach 2, listed on HOSE By using the discounted cash flow FCFF method and the comparison method, we determine the target price of NT2 at 27,352 VND/share, 6.65% lower than the current price We estimate that the commercial electricity output in 2023 will reach about 4,697 million kWh (+15.57% yoy), the electricity price will drop to 1,700 VND/kWh (-19.05% yoy), NT2's revenue in 2023 will reach about 7,985 billions VND (-9.14% yoy), profit after tax reached 793 billions VND (-10.19% yoy) equivalent to EPS of 2,756 VND/share We recommend HOLD on NT2 stock, our analysis is based on the following points: In long term: NT2 owns and operates a large gas-fired power plant of the Oil and Gas industry: Nhon Trach Thermal Power Plant is a large gas-fired power plant of the Oil and Gas industry The plant has a capacity of 750MW, including two gas turbines with a capacity of 500MW and a steam tail with a capacity of 250MW, synchronous machinery and equipment of Siemens, the world's leading manufacturer of electrical machinery and equipment Safe and stable electricity production and business: Since its operation, NT2 has provided about 4.5 - billions kWh per year for the national electricity grid Báo cáo phân tích: Cơng ty Cổ phần Điện lực Dầu khí Nhơn Trạch – NT2 The demand for electricity is increasing day by day: The economy is growing again after the Covid-19 pandemic, the demand for electricity for production and business is stable and tends to increase High capacity to mobilize capacity due to the company is located in the southern key economic region The Goverment promotes electricity production from gas-fired thermal power and renewable energy: According to the Power Plan VIII in the 2021-2030 period with a vision to 2045, the Government prioritizes the development of power sources from renewable energy, reducing the mobilization of electricity from coal-fired and hydroelectric power plants, but gas-fired thermal power can still ensure the proportion of capacity until 2045 (2022 - 21%; 2030 - 21%; 2045 - 24%) Attractive dividend policy: The company pays cash dividends at a high level, maintaining around 2,5003,000 VND/share In short term: El Nino is expected to return at the end of 2023: The La Nina cycle has started from the end of 2020 and lasted until now, La Nina has passed its peak and may reverse to the opposite phenomenon by the end of 2023 We expect thermal power to benefit when the El Nino cycle returns, thermal power plants will be mobilized more in the coming period Input gas prices tend to decrease since the beginning of 2023 : Compared to 2022, natural gas prices (future contracts) are on a strong downward trend, down about 75% from the record high from August 2022 This stimulates the price of electricity from gas fuel to decrease, increasing the competitiveness of gas-fired enterprises Business description PetroVietnam Power Nhon Trach (NT2) was established on June 15, 2007 according to Resolution No 01/NQ-ĐH of the General Meeting of Shareholders with initial charter capital of 2,560 billion VND Currently, PetroVietnam Power Nhon Trach has a charter capital of about VND 2,878 billion The main activities of the Company are to manage, operate and exploit Nhon Trach Combined Cycle Gas Turbine Power Plant (Nhon Trach Power Plant - capacity 750MW), capable of supplying to the national power grid about 4.5-4.8 billion kWh/year, equivalent to over 7,000 billion VND in revenue The company develops synchronously, focuses on the main areas of operation, is stable, in the right direction, ensures benefits for shareholders and investors PetroVietnam Power Nhon Trach is one of the main gas-fired power plants of the Vietnam National Oil and Gas Group (PVN) belonging to the Ca Mau and Nhon Trach power plants cluster 2.1 Development history 2007: PetroVietnam Power Nhon Trach was established with a charter capital of 2,560 billions VND (initial capital contribution 140.8 billions VND) 2009: Officially started construction of Nhon Trach Power Plant on June 27, 2009 2010: Shares of PetroVietnam Power Nhon Trach (MCK: NT2) officially traded on UPCOM stock exchange on January 22, 2010 2011: official power generation and commercial operation of Nhon Trach Power Plant 2014: signed an official electricity purchase and sale contract with the Electricity Trading Company (EPTC) Page | Báo cáo phân tích: Cơng ty Cổ phần Điện lực Dầu khí Nhơn Trạch – NT2 2015: approved to register for the first listing, traded for the first time on HOSE, closing price was 25,800 VND/share 2017: Increase charter capital to 2,878,760,290,000 VND, complete the overhaul and increase the plant capacity to 774MW 2.2 Organizational structure 2.3 Shareholder structure (March 24, 2023) In the current shareholder structure, PetroVietnam Power Corporation (POW) is holding about 59.4% of the shares of NT2 POW is a subsidiary of Vietnam Oil and Gas Group Therefore, NT2 is considered a state-owned enterprise In addition, Technology Development Company Limited is the company that owns the second highest percentage of shares after PV Power and currently holds 8% of the shares, and 32% belongs to other organizations and small shareholders 2.4 Fields & Areas of operation NT2 is the unit that manages and operates the power plant, generates electricity and sells commercial electricity directly through a long-term contract (PPA) and generates electricity in the competitive electricity market (VCGM) Nhon Trach power plant operates in an electricity complex in Phuoc Khanh commune, Nhon Trach district, Dong Nai province, located in the central location of the South and mainly provides electricity for the Southeast region - where electricity is consumed highest electricity in the country By the end of 2022, the commercial electricity output generated by NT2 has reached 51.77 billion kWh Business: Generation, transmission and distribution of electricity Management of investment in construction and operation of electrical works Importing fuel and exporting materials and spare parts for electricity production and business Providing commercial technical services in the field of electricity production and trading Training human resources on operation management, maintenance and repair of thermal power plants Industry overview competitive positioning and 3.1 Evolution of the electricity industry in 2022 Power output recovered from the low base level of the same period: Commercial electricity output recovered thanks to production and business activities returning to normal after the pandemic: Page | Báo cáo phân tích: Cơng ty Cổ phần Điện lực Dầu khí Nhơn Trạch – NT2 Hydropower output increased sharply due to strong La Nina activity, which increased the amount of water in reservoirs (29.7% yoy) ); Coal power output decreased due to coal shortage (-14.1% yoy); Gas power output increased slightly over the same period (6.4% yoy); Electricity production from renewable energy (mainly wind power) increased (23.9% yoy) The price of input materials for thermal power plants increased due to the lack of coal from the beginning of the year and the high price of input gas, which increased the selling price of electricity in the competitive market Hydroelectric: The La Nina phenomenon helps the hydrological situation to be favorable, making the business results in 2022 of the hydropower enterprises to grow strongly Along with that, the selling price in the competitive electricity market increased sharply, helping to improve profit margin Up to now, Hydropower currently has a capacity of about 22,345 MW, accounting for 28.2% of the total capacity However, according to the Electricity and Renewable Energy Department, Hydropower currently does not have much potential for future development Medium and large hydropower potential in Vietnam is about 75-80 billions kWh, equivalent to 20,000 MW of installed capacity Small hydropower projects (