Nhon Trach 3&4 will drive POW’s future growth

In 3Q2024, POW recorded revenue and NPAT of VND6,061 billion (6.7% YoY) and VND453.26 billion (765.3% YoY), respectively. The 36% QoQ decline in revenue compared to the high base set in 2Q was attributed to lower thermal power output, driven by increased hydropower generation. Specifically, Ca Mau 1&2 experienced the smallest decline, producing 1.2 billion kWh (-17% YoY and -30% QoQ), while Vung Ang coal-fired power plant saw the steepest drop of 67.5% QoQ due to its scheduled maintenance from August 15 to October 4, generating 602.9 million kWh. The electricity output of NT2 in 3Q2024 recovered significantly compared to the same period in 2023, thanks to stable prices and supply of input gas.

In 3Q2024, the Vung Ang 1&2 coal-fired power plants underwent maintenance from August 15 to October 17, completing two weeks ahead of schedule. As a result, the average monthly Qc for 3Q2024 was relatively low at 201 million kWh (-41% YoY), but it recovered in October to 419 million kWh (15% YoY). In the final quarter of 2024, coal-fired power Qc is expected to rebound as the rainy season ends in the northern and north-central regions, while rainfall remains concentrated in the south-central region. Coal-fired plants in the north-central region, such as Vung Ang, will face less competition from hydropower, enabling their sales volume to recover and remain strong through the end of 2024. Accordingly, we project 4Q2024 revenue and sales volume to reach VND2,730 billion and 1,269 million kWh, respectively, bringing full-year totals to VND10,552 billion (23% YoY) and 5,465 million kWh (26% YoY).

The El Nino phase, which brought extreme heat and severe weather conditions, concluded in 2Q2024. This transition should lead to improved rainfall and increased water inflows into hydropower reservoirs, supporting enhanced production (Figure 7). In Nghe An, the Hua Na hydropower plant, with a capacity of 180 MW and a 17.18% market share, stands to benefit from the increased water flow in the region’s main river, boosting reservoir inflows.

In 3Q2024, the average monthly rainfall measured at the Hua Na reservoir reached 290 mm (15% YoY) and is expected to remain high throughout 4Q2024 (Figure 8). This is projected to drive annual production to 615 million kWh (4.6% YoY). In Quang Ngai, November rainfall reached 356 mm, 68% higher than the average monthly rainfall of 3Q2024 (Figure 9), supporting a surge in 4Q2024 electricity sales volume. Full-year sales volume is estimated at 602 million kWh (-3.98% YoY), with projected revenues of VND666 billion and VND613 billion for the Hua Na and Dakdrinh hydropower plants, respectively.

In 4Q2024, POW, through its subsidiary Hua Na Hydropower JSC, finalized the acquisition of the Nam Non hydropower plant (20 MW) for VND700 billion, increasing POW's total hydropower capacity to 325 MW. In KBSV’s view, the plant is expected to complete the transfer process within 4Q2024 and begin contributing to Hua Na's revenue, with an estimated annual average sales volume of 89 million kWh, representing a 7.5% increase in the company's current sales volume. For 2025, the hydropower segment is projected to generate revenue of VND1,385 billion (11% YoY) and electricity sales volume of 1,325 million kWh (12% YoY).

For 4Q2024, we maintain the view that the NT1&2 power plants will continue stable operations, supported by active GSAs with PV Gas (GAS) for the supply of low-cost domestic gas. This will reduce competitive pressure for Qc allocation from other gas-fired plants with expired PPAs (such as Phu My 3, Phu My 2.2) and those relying on high-cost LNG input (like NT3&4). Accordingly, we expect NT1&2’s sales volume, utilizing gas from the Southeast region’s fields, to reach 926 million kWh (67% YoY) in 4Q2024, bringing the full-year total for 2024 to 3,064 million kWh (-15% YoY). For the Ca Mau 1&2 thermal plants, KBSV  expects higher Qc, with 4Q2024 sales volume increasing by 15% YoY, underpinned by stable gas supply and the plants running at full capacity following the completion of scheduled maintenance. KBSV forecasts total gas-fired electricity sales volume at 8,637 million kWh (-2.3% YoY), with revenue of VND18,361 billion (-6.0% YoY).

By 4Q2024, key issues related to the NT3&4 gas-fired plants, including negotiations for PPAs, GSAs, and land lease handover procedures, were successfully resolved. However, commissioning of the NT3 unit is now expected to be delayed until June 2025, later than our previous forecast of 1Q2025, due to additional time required to complete transmission lines and substations. Per POW, the projected Qc ratio for 2025 is 35%, with NT3 expected to operate at 70% of its designed capacity. Therefore, we estimate gas-fired power revenue and sales volume for the full year to reach VND25,126 billion and 11,309 million kWh, assuming an average electricity sale price of VND2,436/kWh. “We expect the plant to incur losses during its initial years of operation, with the Qc ratio gradually rising to 75% by 2027, reaching breakeven. For the NT4 project, trial operations are scheduled to begin in April 2025, with commercial operations starting in September 2025”, said KBSV.

“We utilized two valuation methods, sum of the parts (SOTP) and EV/EBITDA, with equal weighting (50/50) to determine a fair value for POW. Based on this analysis, we recommend BUY for POW, with a target price of VND14,500 per share, implying a 16% upside from the closing price on December 11, 2024. The target EV/EBITDA multiple is set at 8x, exceeding 1 standard deviation above the 5-year average (2019–2024), reflecting POW's competitive edge as a pioneer in commissioning LNG-fired power plants”, recommended KBSV.