Tenaga Nasional (TNB) registered 3QFY21 headline net profit of RM1,048.7m (+4.7% YoY, +23.4% YoY) which was within our and consensus estimates. YTD Group core net profit of RM3,384.5m (+18.6% YoY) constituted c.73% and c.72% of our and consensus full year estimates. Electricity revenue grew by 1.1% YoY while subsidiaries’ performance improved as more businesses were allowed to operate during this current Movement Control Order. Correspondingly, EBIDTA margin improved to 40.9 % (as compared to 39.0% in 9MFY20). Gearing is still healthy at 46.3%. No change to our earnings estimates and Outperform call, with DCF-derived TP also unchanged at RM12.42.

• 9MFY21 revenue rose 9.6% mainly due to higher sales of electricity (+9.5% YoY) which included the Imbalanced Cost Pass-Through (‘ICPT’) which was in an under-recovery position of RM1,300.8m as compared to an over-recovery position of RM1,479.2m a year ago. This was mainly due to higher generation cost. During the quarter, higher share of result of associates was contributed mainly by Jimah Energy Venture and full impairment of GMR in 1QFY’21. Meanwhile, higher finance cost was mainly due to the commissioning of Southern Power Generation (SPG) in February 2021

• Generation cost in 3QFY21 rose by 21% QoQ mainly due to rising coal prices. QoQ, coal prices (c.72% of TNB’s fuel cost) rose 33.5% while gas prices (c.28% of fuel cost) were still steady, only increasing marginally by 2.5% QoQ. As such, operating expenses increased from RM9,555.2m in 3QFY20 to RM10,821.6m in the current quarter mainly due to higher generation cost. As for capital expenditure (capex), the Group has spent RM5,326m YTD, out of the RM9.5bn allocated for FY21, of which RM7.3bn is earmarked for regulated recurring capex and the remaining RM2.2bn for others.

Source: PublicInvest Research - 26 Nov 2021