TPCH - Moving out of the doldrums (TP Bt20.0, OUTPERFORM)
(22/01/2018 - 09:00)
กลุ่มอุตสาหกรรม ทรัพยากร
หุ้น TPCH
มูลค่าพื้นฐาน 20.00
คำแนะนำ BUY
  • Expect 4Q17F profit to reach new high of Bt76m (+14% qoq, +9% yoy) led by full quarter contribution from five power plants
  • Solid FY18F/19F earnings growth of 42%/80% supported 34MW of new capacity or 118% capacity growth 
  • OUTPERFORM, trimmed TP to Bt20 (from Bt23) after reducing long-term gross margin to reflect higher fuel cost given growing demand of raw material from rising number of biomass plants   

 

Expect earnings to continue to grow in 4Q17F

This would be led by full quarter contribution from five power plants. Revenue should grow 5% qoq supported by 90% average utilization. Gross margin fell to 42% from 48% in 4Q16, because MWE renewed its expiring outsourced operation & maintenance contract at a higher price of Bt2.35/kWh vs Bt1.75/kWh since 2Q17. SG&A/Sales should be under control at 7%, down from 9% in previous quarter. TPCH booked Bt30m provision in 3Q17 from its investment in Bill of Exchange (B/E) in one troubled listed company. The anticipated 4Q17 results suggest 11% downside to our full-year forecast with the COD delay of SGP (6th plants) from Nov 2017 to Jan 2018 and loss contribution from Siam Power (SP). 

               

Upside risk from waste power plant and 269MW VSPP Semi-Firm bidding program

TPCH’s share price has underperformed SET Index by 36% in the past year due to disappointing earnings: Bt50m one-time expense, failure to secure PPA for hybrid renewable project, and delayed COD for its plants. However, the worst should be over and earnings should surge 42%/80% in FY18/19F supported by four VSPP plants (SGP, TPCH1, TPCH2, and TPCH5), and one SPP plant (PTG#1) with 34MW total equity capacity, implying 118% capacity growth. It has secured all PPAs and may secure more PPAs for 269MW VSPP Semi-Firm projects and 8MW waste plants under the 78MW Quick Win program - qualifying list should be announced by April 2018.

 

Laggard play with strong growth profile

We maintain an OUTPERFORM rating but trimmed TP to Bt20 (from Bt23) after reducing long-term gross margins for power plants to reflect potentially higher fuel cost given growing demand of woodslab raw material from more biomass plants under Thailand’s latest energy policy. We see more chances for TPCH to secure more PPAs for VSPP, including waste power plants. Current share price implies 15.9x FY18F PE, a deep discount to peers’ average of 20.5x.