BANPU

Focusing more on power plants business for long-term added value HOLD

BANPU Plc

- Focusing more on power plants business

BANPU has been focusing more on power plant business, which is a good

strategy because coal business has been depressed by declining coal price.

BANPU has entered a joint venture agreement to study and co-develop

1,200-MW Shanxi Lu Guang power project; its construction cost is

US$735m or US$0.6m/MW. BANPU holds 30% stake in the project. Initially,

the project is anticipated to start its commercial run in June and August

2017.

- 2015 to be supported by Hongsa power plant

3Q14 net profit was reported at B131m, plunging 80.8%qoq (as expected)

as a result of high extraordinary expense. Excluding extraordinary items,

3Q14 normalized profit was B1.25bn, rising 82.3%qoq, making the highest

quarterly profit of 2014. Overall, 9M14 net profit was B2.6bn, rising

40.3%yoy, making up 86% of FY2014 forecast. We maintain our FY2014-

2015 earnings forecast. 4Q14 normalized profit is projected to drop from

3Q14. BANPU's net profit is estimated to drop by 3.3%yoy in 2014, but

projected to revive by 20.5%yoy as income from coal-fired Hongsa power

plant (BANPU holds 40% stake) would be recognized.

- HOLD for dividend

We switch to use FY2015 fair value (DCF) of B30.50. Joint venture in Shanxi

Lu Guang power project is not included in our forecast yet because approval

from the China's government is still needed (projected in mid-2015).

BANPU's earnings are projected to stay weak in 4Q14 and 1H15. We

recommend holding for dividend because its dividend yield is 4-5%p.a.