HLIB expects TNB to report stronger 1QFY2023, raises target price to RM12.20

KUALA LUMPUR (May 3): Hong Leong Investment Bank (HLIB) Research has maintained its “buy" rating for Tenaga Nasional Bhd (TNB) at RM8.97 with a higher target price of RM12.20 (from RM11.65), and said it remains upbeat on TNB’s outlook for 2023.

In a note on Wednesday (May 3), the research house said the recent drop in global fuel prices bodes well for TNB’s cash flow due to lower working capital requirements.

“ICPT (the Imbalance Cost Pass-Through mechanism) remains intact, with approved RM16.2 billion for the first half ending June 30, 2023, with RM10.8 billion being subsidised by government, and the remaining RM5.4 billion being passed through to non-domestic end users.

“We expect TNB to report a stronger 1QFY2023 performance (for the first quarter ended March 31, 2023) after a disappointing 4QFY2022 [due to accelerated expenses] and a stronger balance sheet position,” it said.

HLIB said there was earnings disappointment in the previous 4QFY2022 results, mainly due to accelerated expenses and adjusted expenses during the quarter.

“Post an update from management, we expect earnings to again normalise in 1QFY2023.

“Combined with an improved balance sheet and cash flow position (due to the drop in fuel costs and higher approved ICPT), we expect investors to regain confidence in TNB post 1QFY2023 results announcement,” it said.