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POW: Positive long-term prospect (06/05/2022)

(PetroTimes) Petrovietnam Securities Incorporated (PSI) said that POW is a suitable stock to hold for the long-term growth investment strategy. In the future, when POW completes and starts to put LNG plants into operation, POW's output and revenue will have a remarkable growth. In the short term, POW's output may fluctuate due to the influence of world oil prices.In the first quarter of 2022, POW recorded an estimated revenue of VND 6,221 billion, completing 140% of the quarter plan. Profit after tax is estimated at 272 billion dong, completing the quarter plan. The reasons come from: Output from power plants has increased compared to the plan; The price of the total electricity market in the first quarter of 2022 increased sharply.Economic and social recovery is causing the demand for electricity to increase. Industrial production and construction are recovering, the index of industrial production (IIP) has grown well since the beginning of 2022, contributing to the increase in total electricity consumption.Electricity demand will continue to increase because it is entering the peak period of the dry season in 2022. According to the Electricity of Vietnam (EVN), the southern provinces are starting to enter the dry season, electricity consumption output will increase.[caption id="attachment_20022" align="aligncenter" width="700"] Power output from POW's plants in the first quarter increased compared to the plan[/caption]PSI believes that the long-term growth motivation of POW comes from the Nhon Trach 3 & 4 thermal power plant project. In the first quarter of 2022, PV Power signed an EPC contract of the project with a consortium of contractors Samsung C&T Corporation and LILAMA with a value of 940 million USD. It is expected that when starting operation in 2024-2025, the plant will contribute annual output of about 9 billion kWh, contributing to annual revenue of about VND 3,600 billion.In the short term, the risks of POW will come from the lack of coal and the continued high price of input gas, affecting the total contract output (Qc) of power plants. In addition, the price of FO oil is still anchored at a high level, around USD 630/ton, which affects the Qc of POW's gas-fired power plants.PSI adjusts POW's 2022 business result forecast with net revenue and profit after tax of VND 24,431 billion and VND 804.6 billion, respectively, with the assumptions: Mobilized volume from thermal power plants of POW increased well due to the recovery of electricity demand; The selling price of electricity at POW's power plants remained at a high level compared to the same period in 2021 due to the increase in gas prices following the rise of world oil prices.PSI maintains a "Buy" recommendation for POW shares with a target price of VND 21,503/share with an assessment that POW is a suitable stock to hold for the long-term growth investment strategy.