PETALING JAYA: Tenaga Nasional Bhd
(TNB) has a strong demand trend based on its first-quarter results, says Maybank Investment Bank (Maybank IB) Bhd.
The utility giant’s electricity generation grew by 1.7% quarter-on-quarter (q-o-q) in the first quarter of 2024 (1Q24) and its proportion of coal generation declined by 3.1% q-o-q to 52.5% in the same quarter as coal prices increased by 1% q-o-q.
Maybank IB said that TNB’s under-recoveries of electricity generation cost increased to RM2.35bil from RM2.1bil in 4Q23.
Meanwhile, regulated revenue was at a bigger surplus position which was at RM468mil in 1Q24, a combination of higher realised tariff and higher-than-budgeted demand, it said.
The research house said, “Although there will be increased demand for TNB’s services, we still expect a generally-suppressed financial year ending Dec 31, 2024 earnings.
“The longer-term outlook appears more optimistic with potential accretion from elevated grid capital expenditure for renewable energy transition – and new generation projects to cater to elevated demand from data centres,” it added.
Meanwhile, the research house said TNB’s results were in line with its valuations.
“Excluding the Malaysian Financial Reporting Standard 16 (MFRS16) effects, the 1Q24 core net profit of RM1.071bil represents 27% to 29% of our full-year forecasts,” it highlighted.
Maybank IB said, “The fourth quarter is usually a weak quarter for TNB’s earnings due to the back-loading of general expenses, hence the sharp q-o-q earnings recovery in 1Q24 and why TNB’s 1Q24 results were in line with our valuations.”
MFRS16 raised 1Q24 earnings before interest, taxes, depreciation and amortisation by RM1.04bil and lowered net profit by RM159mil.
According to Maybank IB, TNB will host a briefing soon to potentially discuss the National Energy Transition Roadmap progress, Regulatory Period 4 negotiations and Genco outages.
The research house maintained its “hold” rating on the stock with a higher discounted cash flow-based target price of RM13.50 per share.
