Petaling Jaya: Tenaga Nasional BhdNet profit (TNB) of RM893.1 million in the first quarter ended March 31, 2022 (Q1 22), which fell 6.84% year-on-year due to higher tax expenditures, was within analyst expectations.
They noted that electricity demand in Peninsular Malaysia continued to recover in the first quarter of 2022, achieving a 4% year-on-year increase, led by improved commercial and domestic consumption.
Meanwhile, ambitious renewable energy (RE) targets could spur growth in the medium to long term.
The management of TNB, according to research by Hong Leong Investment Bank (HLIB), directed fiscal year 2022 (FY22) to maintain projected growth in energy demand at 1.7% year-on-year, along with the recovery of the economy.
The research firm added that the group’s profits would also remain sustainable under the third regulatory period, or RP3 framework, despite rising global fuel prices.
However, HLIB noted that TNB’s receivables ballooned further to RM14.1 billion in Q122, from RM10.5 billion in Q421, mainly due to the time delay effect of the approved fuel cost – during the first half From fiscal year 22 only. Recognizing the imbalanced fuel cost of RM4.5 billion in the second half of fiscal year 21.
“We expect cash flow to be impacted by the ongoing fuel cost mismatch in the near term.
“Nevertheless, we expect the government to continue to honor the RP3-ICPT (imbalance cost) mechanism,” the research firm said in a note to clients.
HLIB said it revised profit for fiscal year 22 to minus 2.6% and for fiscal year 23 to minus 0.9%, while providing a profit forecast for fiscal year 24 of RM5.7 billion.
Meanwhile, CGS-CIMB Research said its capital expenditure guidance (capex) for fiscal year 22 is RM11.8 billion with average annual regulated capital expenditure at RM6.9 billion.
The research firm added: “We aggregate that structured capital spending is on track at RM1.2 billion in Q122, which is 16% use of the RM7.4 billion approved for fiscal year 22 under incentive-based regulations (IBR). )”.
It also indicated that the group is progressing well towards achieving its renewable energy target of 8,300 MW by 2025. Its renewable energy capacity as of April 2022 was 3,596 MW compared to 3,402 MW in March 2021.
To achieve this, analysts believe there could be more mergers and acquisitions in this area.
RHB Research also said that TNB is repurposing its coal plant into a combined cycle gas turbine plant with co-burning capabilities, while gradually applying emerging technologies to reduce carbon emissions.
“In parallel with Malaysia’s transition to low-carbon mobility, TNB has either entered into a Memorandum of Understanding or collaborated with prominent e-mobility partners, which includes joint planning and joint deployment with charging point operators to ensure charging devices are optimized.
“TNB will open an electric vehicle charging station in Bangsar by the end of 2023,” RHB Research said in its report, holding the stock “buy” at a target price of RM11.50.
It said the stock is trading near a seven-year low and foreign stocks were at 12.1% as of March 2022 versus 12.9% in December 2020.
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