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HND – 1Q23 earnings in line, poor power output & high coal prices hit the bottom line

• HND announced its 1Q22 electricity sales volume of 1,334 mn kWh (+21% QoQ, -21% YoY), in line with our expectations. Power output fell sharply YoY mainly due to (1) poor coal supply (insufficient coal for Qc production in several months), (2) low electricity demand for consumption, and (3) lower contract power output YoY with the alpha Qc at 75% in March.
• Power output dropped YoY, while net revenue recorded VND2,571 bn)/ USD 109 mn (+1% YoY), owing mostly to the high ASP (+29% YoY) (as thermal coal prices remained high). Depreciation expenses decreased by VND71 bn )/ USD 3 mn (-24% YoY) in 1Q23, while NPAT recorded just VND10 bn)/ USD 0.4 mn (-96% YoY), primarily due to poor power output (Qc&Qm) and high coal prices (equivalent to Q4/2022), preventing HND from benefitting in the competitive general market (CGM).
• We retain our ACCUMULATE rating with the one-year target price of VND 15,800/share (adjusted up 1% from the price of VND 15,600 due to the downward adjustment of the risk-free rate). With an expected cash dividend of VND 1,000/share in the next 12 months, it implies a total return of 17%, based on the closing price of Apr 19^th, 2023.