Tenaga Nasional Berhad’s (TNB) 2QFY23 reported core net profit of RM662.6m, dipped by 26.7% QoQ and 41.5% YoY respectively. Cumulatively, the Group recorded core net profit of RM1,566.9m in 1HFY23, weaker by 20.1% YoY and lagging our and consensus full year estimates at 36% and 34% respectively. The weak performance was mainly dragged by negative fuel margin from its domestic generation business arising from the difference between Applicable Coal Price (ACP) and Moving Average Price (MAP) of its inventory. To quantify the impact, its domestic generation business EBIT reduced to RM408.6m in 1HFY23, dropping by 74.5% from RM1,601.6 in 1HFY22. Management guided that the situation may prolong until 4QFY23 with narrower negative fuel margin over the period on the back of stable coal prices. All in, we cut our earnings by 25% and 12% for FY23F-24F to account for the normalized fuel price. We retain our Outperform call though with lower DCF-derived TP of RM11.50 (from RM12.42).
Source: PublicInvest Research - 28 Aug 2023
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