Ratchaburi Electricity Generating Holding

Ratchaburi Electricity Generating Holding Plc (RATCH) 

 

- 1Q15 profit skyrockets over tenfold qoq 

RATCH posted 1Q15 net profit of B1.16bn, skyrocketing by tenfold from 4Q14 because every plant resumed working at full capacity, low season already passed, and no impairment loss was booked like in 4Q14, thus negating the following negative factors: 1) Nam Ngeum 2 plant underwent an annual maintenance shutdown; and 2) RATCH booked shared loss from Hongsa plant, which was under construction. Overall, 1Q15 net profit made up 16.8% of our FY2015 earnings forecast. 

 

- Profit to grow continuously throughout 2015 

We maintain our FY2015-2016 earnings forecast. RATCH's profit is expected to grow continuously throughout 2015. 2Q15 is a high season (summer), so the EGAT would order full-capacity electricity generation to meet soaring electricity demand. In 2H15, RATCH would start recognizing profit from coal-fired 1,800 MW Hongsa plant (RATCH holding 40%), of which Phase 1, Phase 2, and Phase 3 will start the commercial runs in June 2015, November 2015, and March 2016, respectively. Overall, RATCH's profit is expected to advance by 10.3%yoy in 2015 and 20.7%qoq in 2016, mainly from Hongsa plant, RW Cogen, Nava Nakhon Electricity Generating, and the solar farm in Japan. 

 

- BUY for upside from new pending projects 

FY2015 fair value is B68. We recommend BUY as RATCH is a defensive stock with potential growth in the long run; 3.7%p.a average dividend yield can be expected; upside from new pending projects are not included in our forecast yet: Kengtung and Myeik.