X-Alpha | POW 18,500 +26%: El Niño boosts thermal power, driving surging profits

VALUATION VIEW

BSC maintains a BUY recommendation on POW with a target price of VND 18,500/share, implying 25% upside from the closing price on July 6, 2026, based on the discounted cash flow method. We raise our target price by 8% compared with our latest report, mainly due to a 118% upward revision to our 2026 NPAT-MI forecast.

EARNINGS FORECAST

BSC forecasts POW’s 2026 net revenue and NPAT-MI at VND 58,729bn (+57% YoY) and VND 5,854bn (+150% YoY), respectively, equivalent to EPS of VND 1,908/share, a 2026F forward P/E of 7.7x and a 2026F forward EV/EBITDA of 5.8x.

Compared with our latest report, our revenue and net profit forecasts are revised upward by 16% and 117%, respectively, mainly due to:

(i) The inclusion of a one-off FX compensation of approximately VND 1,600bn from EVN, accounting for 51% of the change in our earnings forecast;

(ii) A 7.4% upward revision to commercial electricity output to 23,608mn kWh, driven by higher generation forecasts for Vung Ang 1 (+25%) and Nhon Trach 1 (+8%); and

(iii) A 5% increase in the estimated average selling price, mainly due to a 33% upward revision to our competitive generation market (CGM) price assumption.

COMPANY UPDATE

2026 AGM update

• 2026 business plan: Net revenue of VND 49,916bn (+46% YoY), supported by full-year operations of NT3 & NT4, and PBT of VND 1,324bn (-57% YoY).

• Profit distribution plan: No cash dividend. The Company plans to allocate 50% and 15% of distributable profit to the Development Investment Fund and the Bonus & Welfare Fund, respectively.

Investment view update

We maintain our positive view on POW, in line with our latest update, based on two key investment highlights:

(i) Solid long-term growth supported by macro policy: System load is expected to remain high, while supportive policies for gas-fired power development provide substantial valuation potential for the Nhon Trach 3 & 4 complex; and

(ii) Short-term recovery catalysts from cash flow and weather conditions: A prolonged El Niño cycle is expected to support maximum thermal power dispatch and lift our CGM price forecast to VND 1,260/kWh. Meanwhile, cash flow should be strengthened by the recognition of a one-off FX compensation of VND 1,600bn from EVN.

RISKS

(1) Commercial electricity output and the actual contracted output (Qc) ratio come in below expectations;

(2) Higher financial and interest expenses at Nhon Trach 3 & 4; and

(3) Volatility in input fuel prices (LNG and coal) and unfavorable weather conditions, particularly La Niña, which could limit thermal power dispatch.