{"id":325481,"date":"2023-10-25T22:09:28","date_gmt":"2023-10-25T14:09:28","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=325481"},"modified":"2023-10-25T22:09:30","modified_gmt":"2023-10-25T14:09:30","slug":"stock-in-focus-aboitiz-power-corp-ap-25-oct-2023-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-aboitiz-power-corp-ap-25-oct-2023-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: Aboitiz Power Corp. (AP) – 25 Oct 2023 by RCBC Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>AP<\/td><\/tr>
Company Name<\/strong><\/td>Aboitiz Power Corp.<\/td><\/tr>
Broker<\/strong><\/td>RCBC Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>25 Oct 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 47.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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We raise our target price (TP) for Aboitiz Power Corp. (AP) to Php47.00 primarily due to our higher assumptions on energy sales coming from the overall improved plant availability and higher spot and BCQ prices in the 1st half (1H) of 2023. We upgraded our core net income (CNI) estimate for 2023 by 15% but slightly lowered our 2024 forecast by 2% as we toned down our outlook on WESM prices and plant availability in the medium term. We believe the growth will pick up anew by 2025 onwards. <\/p>\n\n\n\n

Our revised Target Price offers a 32% potential share price upside and a potential total return of 37% inclusive of our 2023 dividend yield estimate of 5%. Hence, we reiterate our BUY rating.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Analysis and Opinion<\/h2>\n\n\n\n

Earnings revisions<\/h3>\n\n\n\n

We increased our 2023 CNI forecast for AP by 15% to Php32.4 billion mainly due to our reduced cost and expense estimates. We also adjusted our forecasts for the company\u2019s other income by 9% and 5% for 2023 and 2024, respectively, to align them with the latest results. For 2024, we slightly cut our CNI forecast by 2%, as we think WESM prices may simmer down due to increasing supply in the grid and as plant availability may be temporarily hindered.<\/p>\n\n\n\n

RE is key to the future<\/h3>\n\n\n\n

In line with the DOE\u2019s plan to increase renewable energy (RE) capacity in the Philippine grid, AP is poised to improve the share of its RE capacity. It targets a balanced power mix, at 50% for thermal and 50% for coal by 2030. Currently, AP\u2019s RE accounts for a little over 20% of its total capacity. It seeks to add over 3.7GWs of RE capacity to its portfolio by 2030.<\/p>\n\n\n\n

Earnings recap<\/h3>\n\n\n\n

AP will release its 9M 2023 earnings results on November 7. We highlight our very conservative estimates for the second half of this year, with our 2023 CNI forecast of Php32.4 billion implying a significant year-on-year (y\/y) drop in earnings. Apart from our tamed outlook on WESM prices and plant availability, we also consider the higher base effects.<\/p>\n\n\n\n

Recall that in the 1st half (1H) 2023, AP reported a net income of Php17.8 billion, +79% y\/y. Excluding non-recurring gains, core net income (CNI) was up 95% y\/y. AP\u2019s generation and RES business beneficial EBITDA reached Php30 billion, 32% higher y\/y, because of the fresh contributions from GNPD and better plant availability
across its portfolio.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>