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HND – 4Q23 recorded a significant loss due to a shift in accounting for major repair costs

• In Q4 2023, HND recorded an electricity production volume of 1.768 bn kWh (-4% QoQ, +30% YoY). NPAT reached VND 2,238 bn/USD 91 mn (-9% QoQ, +17% YoY), with a significant drop in the ASP during Q4. Despite a gradual reduction in total debt and low-interest expenses, HND reported a net loss of VND 115 bn/USD 5 mn, compared to a loss of VND 7.5 bn in Q4 2022. This was primarily due to a change in the accounting for major repair costs (recording expenses for the overhaul of the S1 unit at VND 267 bn, moving away from previous years' practice of pre-allocation and reversal). Overall, for FY23, HND posted net revenues and NPAT of VND 11,142 bn/USD 43 mn (+9% YoY), and VND 417 bn/USD 17 mn (-24% YoY), respectively, aligning with our earlier forecasts. The corresponding EPS for 2023 stood at 1,111 VND per share.

• Based on the electricity operation plan and the business strategy outlined by the company, we forecast HND's electricity production in 2024 to register 7.5 bn kWh, a 5% increase YoY. Assuming an average decrease of 7% YoY in the cost of mixed coal input for 2024, we project a 5% YoY reduction in HND's average selling price. Consequently, we forecast HND's net revenue and NPAT in 2024 to reach VND 11,376 bn/USD 463 mn (-1% YoY) and VND 555 bn/USD 23 mn (+33% YoY), respectively. The corresponding EPS is projected at 1,234 VND per share.

• For the dividend payout plan for 2023, in addition to funds from operational results, HND will also allocate from the Development Investment Fund (dedicating VND 276 bn for a dividend of 552 VND/share). This decision was approved at the EGM in 2023. We expect the total cash dividend payout in 2024 for FY2023 to reach 1,552 VND/share. We maintain an ACCUMULATE recommendation with a target price of 15,500 VND/share, corresponding to an expected return of 14% based on the closing price as of January 25, 2024.