Despite a more than 6% loss in price on Monday, B.Grimm Power Pcl. (SET: BGRIM) shares are progressively regaining value thanks to robust fundamentals and long-term growth potential; analysts advise keeping BGRIM in the portfolio.
Daol Securities continues to recommend buying BGRIM with a target price of THB50.00 based on DCF analysis, with a WACC of 5% and no terminal growth value assumed.
BGRIM said at an analyst meeting on Wednesday that it plans to announce additional projects after further details regarding the Vietnamese Master Plan VIII have been released.
BGRIM forecasted continued profit growth for 2Q-3Q23 due to reducing fuel costs and gas prices, which would more than offset the negative effects of a lower Ft rate. CODs for the BGPAT 2, 3, and U-Tapao projects are set to commence later this year, as planned, and the company hopes to attract 50-60 MW more in industrial clients.
The forecast for a 2023 core profit remained unchanged at THB2.1 billion, which indicates a robust growth rate of +459% YoY. “The Vietnamese Master Plan VIII will not only provide positive sentiment to the power sector but also presents an opportunity for new investment,” the brokerage said.
BGRIM has underperformed the SET Index by 2% over the past month due to the uncertainty caused by the current political campaigns calling for a reduction in electricity bills.
DAOL recommended increasing BGRIM’s position because 1) a reduction in Ft rate is likely to have a limited impact on BGRIM given a moderate 20% industrial customers of the total, 2) the company’s profitability will strengthen given a downturn in gas prices, 3) the potential bids for 3.6 GW renewable energy (phase 2) will act as a catalyst for the share price, and 4) we forecast profits to grow in 2Q-4Q23.