The hot season has begun across the country, with increased demand for electricity and good news, and electricity stocks are taking advantage of the situation to “make waves” in the market. The growth momentum of this group’s stocks is expected to continue as demand for electricity tends to increase.
According to observations, in the last few trading sessions, the group of electricity stocks has become the focus of the market when it suddenly "heated up", some codes even recorded record high cash flow.
Race to prosper
Notably, in the session of May 27, the electricity stocks exploded when POW (PV Power) and PGV (Generation 3) stocks were pulled to the ceiling, while other stocks also had positive green colors. Even the hydropower group, which is currently disadvantaged by weather factors and low mobilized output, also saw a surge.
Notably, not only did POW stock hit the ceiling, it also attracted attention when it attracted a record cash flow within 2.5 years with more than 41.2 million shares matched, leading the entire market in terms of liquidity.
The stock's rebound came from the news that insurance companies would compensate 1,000 billion VND for the Vung Ang 1 power plant (exceeding Vietcap's previous forecast of 300 billion VND). In addition, in the first 5 months of the year, PV Power estimated to achieve revenue of 13,052 billion VND and after-tax profit of 669.7 billion VND, respectively completing 41% and 67% of the year's plan.
In fact, electricity stocks seem to have been “forgotten” by cash flow for a long time, because with defensive characteristics, low and stable return on capital, this group is less attractive than other industries in the “uptrend” market period. However, the market is having stories expecting electricity stocks to become “hotter”. That is, the electricity industry is entering the peak dry season and the most stressful period of the year in terms of power supply throughout the system.
One of the notable information affecting the electricity stock group is that the Prime Minister requested the Ministry of Industry and Trade to urgently complete the procedures, documents, and draft Decree regulating the mechanism for direct electricity purchase and sale between large electricity users and power generation units, and submit it to the Government before May 30.
The Ministry of Industry and Trade said that based on the electricity price framework, Vietnam Electricity Group (EVN) and power generation units will negotiate official electricity purchase and sale prices that do not exceed the ceiling price.
Previously, EVN was also approved to adjust retail electricity prices every 3 months, instead of every 6 months as before. With the new mechanism, many organizations predict that EVN can increase electricity prices from now until the end of the year by a minimum of about 5%, contributing to improving the financial health of this group in the short term.
MB Securities believes that the new mechanism will have a positive impact on the electricity industry value chain, especially when EVN plays the role of the main buyer and seller of electricity. The increase in electricity prices will help EVN pay for power plants. Accordingly, thermal power plants such as PV Power, Power Generation 3, Nhon Trach Oil and Gas (NT2), Quang Ninh Thermal Power (QTP) ... are recording a sharp increase in electricity receivables with a high ratio of receivables/total assets, which is expected to relieve financial pressure thanks to this mechanism.
Notably, according to information just released by EVN, in the last days of May 2024, the intense hot and humid weather that recurred in many areas of all three regions caused the national electricity consumption to increase to a record high.
Specifically, the national electricity consumption on May 28 reached a new record peak of 1.0019 billion kWh, the first time in history it exceeded 1 billion kWh/day.
Expect the trend to last
Analysts forecast that electricity consumption in 2024 will grow positively compared to the low base level in 2023. In particular, coal-fired thermal power and hydropower will continue to play an important role in the power system.
In a recent report, TPS Securities assessed that thermal power and hydropower are still the two basic sources of electricity because they create stable power sources and reasonable prices. Both groups contribute 75% of electricity supply to the whole country in 2023 and have been quite stable over the past 10 years.
According to TPS's forecast, with an expected GDP growth rate of 6.51% in 2024, the estimated total mobilized electricity source in the year will range from 298.04 billion kWh (normal load) to 306.36 billion kWh (high load).
In case of normal load, total mobilized power source increases by 6.2% compared to the same period last year. In case of high load, total mobilized power source will increase by 9.2%.
However, the reality of the first 4 months of the year shows that electricity consumption increased by 10-111% compared to the same period last year, higher than the forecast of the Ministry of Industry and Trade in case of high load.
Notably, the industry and construction sector is the largest electricity consumer in the country, always accounting for over 50% of total electricity consumption in recent years. In the first 4 months of 2024 alone, the proportion of newly registered FDI capital of the processing, manufacturing and construction industry in the total newly registered FDI increased to 70.2%, from 57.9% in 2022.
TPS believes that the recovery of the industrial and construction sectors and the strong increase in FDI capital flows into these sectors will boost electricity consumption in the coming time.
Dragon Capital Securities (VDSC) cited data from EVN showing that in 2024, electricity production and import output are expected to grow positively compared to the low base level of 2023, reaching about 6.18%-9.15%, thanks to expectations of industrial production recovery and high residential electricity consumption due to the impact of the El Nino phenomenon in the first half of the year. According to the weather trend assessment of the National Center for Meteorological Forecasting, around June-August 2024, the La Nina phenomenon may return.
In the near future, the North is at risk of peak capacity shortages at some point when the rate of new generation additions is lower than the growth rate of load. Meanwhile, the North-Central transmission line is often overloaded.
To ensure power supply for the North in the coming period, the 500kV North-Central line 3 project with a total length of about 514 km is expected to be completed and put into operation in June 2024. Therefore, enterprises participating in the consulting and design process (TV2) or undertaking construction and supplying materials for the project (PC1) are expected to record additional backlog from the project.
“In 2024, the electricity group is assessed to be positive with the main drivers coming from the recovery of production and construction activities (increased exports will boost production growth, while the warming real estate sector will be the driving force for the construction industry). In addition, there is currently a story about Power Plan 8, in the new year, wind power and gas power will be focused on promoting, which will lead to a sharp increase in total investment in this power plan”, Mr. Le Ngoc Nam, Head of Investment Consulting - Senior Customers, JB Securities Vietnam emphasized.
Source: Vnbusiness
