- We cut our target price by 7% to VND23,000/share due to a downward revision in our earnings forecast for 2021-2022F and unchanged forecast for 2023-2025F. In addition, we maintain our BUY rating for NT2. We view NT2 as a good dividend play as we expect its DPS to rise from VND1,500 in 2021F to VND2,000 in 2022F and VND3,000 in 2023F.
- We cut our 2021 and 2022F earnings forecasts by ~20% on average mainly due to respective 13% and 5% cuts in sales volume for these two years and higher gas price assumptions.  
- We maintain our dividend assumption for 2021. NT2 had VND420bn (USD20mn) of bank deposits as of June 30, 2021, after finish repaying all of its long-term debt. However, we cut 2022F dividend per share from VND2,500 to VND2,000 following our lower earnings forecast.
- Based on our forecast, NT2 is trading at a 2021F projected EV/EBITDA of 5.0x — ~50% cheaper compared to the regional peer TTM median EV/EBITDA (for single power plants).
- Key upside risk: Receipt of EVN’s payment for the forex loss in 2016-2020.
- Key downside risk: Lower-than-expected CGM price and volume in Q4 2021.

We expect weak earnings in Q3 2021, followed by a rebound in Q4. On June 18, NT2 signed an agreement with Vietnam Electricity Group (EVN) regarding its PPA review. The new PPA price was applied retrospectively from January 1, 2021; therefore, Q2 2021 NPAT was a multi-year low due to the retrospective profit adjustment of Q1. We expect NT2 will have weak earnings in Q3 — peak rainfall season — but they will improve from Q2 partly due to high-contracted volume in Q3 2021 (+25% YoY). We forecast profit to rebound in Q4 with estimated volume growth of 45% YoY.

We forecast NPAT to bounce back in 2022. In 2021, NT2 will be impacted due to a 12% cut in contracted volume, nearly flat total sales volume, a 24% YoY increase in gas price and a downward revision in its fixed component PPA from VND497/kWh to VND460/kWh. In 2022, we expect NPAT to grow 67% to VND584bn (USD25mn), driven by a 16% YoY increase in sales volume (record high growth since NT2’s inception), 13% YoY growth in contracted volume and a limited YoY gas price increase. We expect NT2 to benefit from stronger electricity consumption in 2022F vs 2021F. 

NT2 is negotiating with EPTC regarding forex losses. NT2 expects to receive a VND400bn (USD17mn) payment from EVN Power Trading Company (EPTC) for the forex losses on its USD/EUR-denominated debt in 2016-2020 due to a difference between the signed and actual exchange rate. 

Higher gas price assumption. We raise our industry gas price assumption by ~3% for 2021-2022F following our upward revision to our Brent oil price forecast in our Energy Sector Update, dated July 27, 2021. See more on page 10.