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NT2 – Earnings will turnaround in 2024, but valuation looks fair

• We forecast a negative YoY growth in Q4 2023 earnings for NT2, influenced by (1) a major overhaul in October and (2) lower FMP prices compared to the Pc. We expect that NT2's Q4 earnings will primarily derive from Contract for Differences (CfD), while earnings from the spot market are expected to be minimal. Consequently, we project NT2's Q4 2023 revenue and NPAT to be approximately VND 1,133 bn (+39% QoQ and -41% YoY) and VND 8.3 bn (-95% YoY), respectively. Accordingly, the revenue and NPAT for FY23 are expected to reach VND 6,315 bn (-28% YoY) and VND 263 bn (-70% YoY), with an EPS of 898 VND per share.
• We expect NT2 to record a reimbursement for realized FX losses of VND 155.3 bn in 2024 instead of 4Q23 as previously forecast. For FY24, we project an increase in electricity production, reaching 3.449 bn kWh (+15% YoY). This projection is based on the assumption of output at 80% of designed capacity, lower than the multi-year average, due to uncertainties in domestic gas supply for electricity production in the Southeast region during 2024–2025. With an assumed average gas price of 9.1 USD/mm BTU (+1% YoY) and these factors, we forecast NT2's 2024 revenue and net income to be VND 7,594 bn (+20% YoY) and VND 417 bn (+59% YoY), respectively, resulting in an EPS of 1,426 VND per share.
• We maintain a NEUTRAL recommendation for NT2 with a one-year target price of 23,900 VND/share, including an expected cash dividend of 1,500 VND/share over the next 12 months. This corresponds to a total expected return of 4% based on the closing price as of November 24, 2023