REE_BUY_TP 68,500 VND_Upside 21.9__Luminous Energy_BSC Company Update

aluation

§  BSC recommends BUY for REE with a target price of VND68,500/share for 2021 (+21.9% compared to March 19, 2020) based on the partial valuation method (SOTP).

Forecasting business results

§  BSC forecasts net revenue and net profit of 2021 will reach VND 6,591 billion (+16.9% yoy) and NPAT = VND 2,045 billion (+19.4% yoy), 2021 FW EPS = VND 6,289/share assuming: (1) Projects new M&E project +20% yoy; (2) Office rent in rental buildings +5% compared to 2020 and (3) Hydropower output reached 4.8 billion kWh (+34% yoy) thanks to La Nina phenomenon.

Investment Thesis

§  M&E and office leasing activities with stable profit margins are "money printing machines" bringing stable cash flow for REE.

§  Power generation segment grows strongly in 2021 thanks to La Nina phenomenon and additional capacity from newly operating factories.

Risks

§  Weather risks affect the output of the Hydropower segment and the construction process of renewable energy power plants.

§  The Thuong Kon Tum project is behind schedule, reducing the amount of electricity mobilized in the year.

Company Update

§  In 2020, REE recorded a revenue of VND 5,640 billion (+15.3% yoy) thanks to (1) electricity revenue +49.2% yoy due to La Nina's return and (2) M&E revenue +9.5% thanks to rooftop solar power EPC project.

§  REE's NPAT reached VND 1,714 billion (-0.3% yoy) due to (1) financial income of VND 221 billion (-49% yoy) and (2) financial expense of VND 475 billion (+23% yoy) due to increased exchange rate loss during the year.