I.

ANALYSIS OF THE ELECTRIC SECTOR

1.1. The special of country topography leads to the asymmetric supply and demand of electricity

•Due to special factors of topography, fuels distribution is uneven: while water and coal resources mainly
distribute in the Middle region and the North, the natural gas mainly distribute in the South and to ensure
the efficiency of investment, many kinds of electric factory were built near the reserves of energy resources.
•~ 70% of the total capacity of the system is focused on the Middle and the North of Vietnam.
•The Southern region are always in power shortages and receiving the transmission from the North and
Central regions.
 I. ANALYSIS OF THE ELECTRIC SECTOR
1.2. Electricity demand pressure is increasing in
the current economic recovery context
The process of transforming national economy
into industrialized economy has created huge
demand for electricity that leads to the situation
that Vietnam always in power shortages

1.3. The asymmetry of supply and demand of

electricity and the advantages of electric factory
NT2
The South is always in shortage of electricity

Advantage of NT2
The geographical location is considered a major advantage of NT2 at the center of the quadrangle southern
key economy.
NT2 uses the technology CCGT generation F of Siemens-leading supplier of this technology
NT2 owns and operates large gas thermal power plant of the petroleum industry.
 II. COMPANY ANALYSIS
2.1. The position of stock in the industry
• NT2 accounts for 7.5% of total electricity demand of the South, meets the electricity needs of
about 3.5% of the country.
• With the direct comparison, only Pha Lai Thermoelectricity (PPC) has a similar capitalization-scale
and revenues to NT2. Pha Lai Thermoelectricity is run primarily by coal, while Nhon Trach
Thermoelectricity is run by gas.
• Nhon Trach 2 Power Join Stock Company is ranked 166th in VNR 500 ranking - the top 500 largest
enterprises in Vietnam and ranked No. 2 among the joint stock company of manufacturing,
trading and electricity distribution.
• Relative Strength Index
II. COMPANY ANALYSIS
A technical momentum indicator that
compares the magnitude of recent
gains to recent losses in an attempt to
determine overbought and
oversold conditions of an asset. It is
calculated using the following formula:
RSI = 100 - 100/(1 + RS*)
*Where RS = Average of x days' up
closes / Average of x days' down
closes.
According to data within one year of
the NT2, RS = 88. This is the index
showed strong growth in the near
future.
II. COMPANY ANALYSIS
2.2 Captial structure

MAJOR SHAREHOLDERS
Name Number of shares Rate % Last updated on
PV Power 164,352,000 60.0 12/08/2015
Company
For Technology
22,880,880 8.35 12/08/2015
Development,
Vietnam (CFTD)

Electric Power
Development 13,375,000 4.88 12/08/2015
Co.,Ltd
 II. COMPANY ANALYSIS
2.3 Market direction

• Large number of shareholders -> large supply for NT2, but the market was able to absort it all.
=> proved the attraction of this electrical share.
• PV Power sold 7.166 million shares, VNPT also sold 4.9 million shares.
• 3/8, Vinacomin Power Corporation sold the entire 12.8 million shares -> no longer the majority
shareholder of this company.
• Two major funds Dragon Capital and VFM that hold a large proportion of this shares.
• From 3-7 / 8, foreign investors has bought more than 4 million NT2 shares with a value up to 108
billion VND.
• 12/8, NT2 was bought by foreigners for more than 1 million shares
• Total cumulative revenue for the first 6 months was 3,744 billion, 19% higher than last year. 6
month profit gained 622 billion VND , completed 99,28% of plan.
 II. COMPANY ANALYSIS
-> NT2 will become one of the 20 companies with the largest capitalization on HOSE
and will be the focal point to attract the cash flow from:

1)Closed Fund
2)The ETF Fund in the next 6 months
3)Domestic index funds such as VFMVN30, and investors in other countries

•In May, NT2 has decided to make dividends in cash at the rate of 13%.
•All Genco power plants have a large number of operating assets, in which each
power station contributed 10% - 12% of electricity of the total country.
•As to the date of 03.31.2014, the Genco 3 has the largest number of assets ($ 3.7
billion), followed by Genco 1 ($ 3.1 billion) and Genco 2 ($ 1.3 billion).
 II. COMPANY ANALYSIS
Table 2:

Company Equity (Billions VND) Output Capacity IPO plan

Srok Phu Miêng Hydroelectric Joint

450 51 Listed on 08/06/2015, ISH
stock Company

Genco 3 12.327 4.013 Plan to IPO in March 2016

Genco 1 13.858 4.505 IPO after Genco 3
Genco 2 10.272 3.549 IPO after Genco 3

PETROVIETNAM POWER CORPORATION 13.078 2.768 After 2016

Đa Nhim – Ham Thuan Hydroelectric

1.056 642 IPO in 2011 but failed
Comp

Vinacomin 2.360 1.460 IPO in April 2015 but failed

Sources: The mentioned Companies and VSCS

 III. MANUFACTURING BUSINESS
ACTIVITIES
3.1. Manufacturing business activity from the period of 2011-2014 and
the first 9 months of 2015
•In general, NT2 produce efficiently in the power industry, especially in comparison
with other power plants.
•The comparison in the effects of NT2 production with thermal power companies in
the same industry in 2014:
NT2 BTP PPC
Gross profit margin 23.38% 6.23% 6.65%
Net profit margin 22.51% 6.35% 13.96%
ROA 12.74% 6.75% 9.23%
ROE 37.47% 12.87% 18.42%

 The evaluation criteria of effectiveness in business activities of NT2 always

remain consistently high, exceeding 2 or 3 times larger than other plants.
III. MANUFACTURING BUSINESS
ACTIVITIES
Results in manufacturing business activity
2011 2012 2013 2014 9 months/ 2015
Net sales 951,974 5,450,715 5,880,998 7,064,917 5,021,138
Cost of capital 853,174 4,820,085 5,074,176 5,413,264 3,901,402
Gross profit 98,800 630,630 806,822 1,651,653 1,119,736
Financial Income 180,022 95,425 52,970 450,492 39,653
Financial expenses 214,060 658,370 786,579 437,193 367,114
Cost of sales 23 241 306 221 102
Enterprise management
expenses 41,385 53,948 65,817 74,704 64,790
Net profit in operating 23,354 13,496 7,090 1,590,027 727,383
Other profits -5251 -5814 1130 935 624
Profit before tax 18,103 7,682 8,220 1,590,962 728,007
Profit after tax 15,417 7,682 8,220 1,590,962 691,520
 III. MANUFACTURING BUSINESS
ACTIVITIES
• In 2011, the plant has not been fully put into operation however in the period of
2012-2014 NT2 power plants always reach maximum output, exceeded the target
of 10% in both volume and annual revenue.
• In 2014, NT2 also recorded a financial revenue due to differences in interest rate
are not recognized 403 billion VND, in this year prices in EUR tend to decline
while during the 2012 and 2013, NT2 must recognized the loss of foreign
currency exchange rate when foreign currency prices increased affecting the
foreign currency loans (accounted for 75% of long-term debt of NT2). This
contributed to increase the revenue as well as the after tax profit margin of the
company.
• For the first 9 months of 2015 the revenue of NT2 significantly increased
compared to the same period last year. Revenue of 9 months reached 5021
billion VND, reaching 84% compared with the 5970 billion VND in the plan.
• As for the cost: Financial costs from 2014 to current time have reduced
 III. MANUFACTURING BUSINESS
ACTIVITIES
The table about allocating the assets of NT2 in 2013-2014:
2013 2014
Assets
Total current assets 1,983,307 3,261,470
Fixed assets 9,135,696 8,305,932
Accumulated depreciation -2,179,550 -3,018,272
Total long term assets 10,201,140 9,221,775
Total assets 12,184,447 12,483,245
Debt to pay
Short term debt 2,082,537 2,376,612
Long term debt 7,315,966 5,860,253
Total debts 9,398,503 8,236,865
Equity 2,785,944 4,246,380
Total liabilities 12,184,447 12,483,245
Fixed assets/Total assets 74.98% 66.54%
Debt/Total assets 77.14% 65.98%
Long term debt/ Total assets 60.04% 46.94%
 Fixed assets accounted for a substantial share in the structure of corporate fixed assets. Debts also
took up for high proportion of the total capital of NT2, however this ratio has been decreasing over
the years. However, the debts of the NT2 is the long-term loans, so NT2 still assure its affordability
 V. FORECAST
Earning model

We suppose that :
•Annual average power output of NT2 is 4.5 billion kWh
•For electricity prices , annual growth of electricity prices by 2%
•For gas input prices, We still assume that gas prices are about VND130,000 / mil BTU
•Operating expenses are stable and equivalent to operating expenses in 2014
•Financial expenses include primary interest expense of about 222 billion of debt in 2015, loan
insurance premiums of 61 billion and foreign exchange loss of 90 billion based on the assumption
that the euro increased by 1% and dollar by 2%
•Corporate income tax in 2015 is 5%
•since 2015 will EBIT increase mainly because we suppose that profits from differences between
official electricity price and temporary electricity price calculated in the previous year
•Since 2015, we expect profits from foreign exchange rate differences , euro will make up for
foreign exchange losses from the dollar.
V. FORECAST
Earning model (bilVND) 2015F 2016F 2017F
Net sales 6348 6424 6553
COGS (5.364) (5.418) (5472)
Gross profit 984 1006 1081
Operating and Management cost (76) (75) (75)
EBIT 910 931 1006
Investment revenue 101 114 125
Financial cost (372) (264) (190)
In which: interest expenses 220 188 158
Other profit 3 3 3
Earning before tax 639 787 944
Tax expenses (5%) 32 40 48
Earning after tax 607 747 896
Minority interest
Earnings 607 747 896
EPS (VND) 2.372 2.92 3.5
 VI. VALUATION
The comparison method (P/E) and discounted cash flow method (FCFE)
• P/E valuation method
P/E of the companies in the same industry and prediction for NT2

Company P/E Capital ( billion VND )

BTP 50.80 647.20

NBP 6.23 189.12
PPC 8.23 5,854.04
NT2 11.12 7,395.84
 VI. VALUATION

Predicted business results of NT2 during the period of • Free Cashflow to Equity method
2015-2018
Earning after tax 607 747
2015 2016 (+) Depreciation 808
Net sales 6.348 6.424 (-) Investment (8.1)
COGS (5.364) (5.418) (-) Change in Working Capital 146.2
Free CF to firm 2754
Gross profit 984 1006
Free CF to Equity 8893
Operating cost (76) (75) Value 34.741
Operating income 908 931
Other Expens (269) (144) • The value of NT2 according to the two valuation method
Earning before tax 639 787
Method Value Percentage
Earning after tax 607 747 P/E 26.36 30%
P/E ratio 11.12 FCFE 34.741 70%
Value 26.36 Value of NT2 stock 32.23
 VII. QUESTIONS
7.1. How EPS changes if oil prices increase 10%?
2015 2016
• Oil prices rose 10 % leads to alternative goods in Net sales 6665 6731
electricity production as fuel gas increased to COGS (5632) (5688)
approximately 10 % . Fuel gas is an essential raw material Gross profit 1033 1043
in the production of electricity for NT2. Operating cost (80) (75)
• An increase in gas prices will impact significantly on the Operating income 953 931
production activities of the company. But with gas Other profit 3 3
purchase contract signed for 25 years and gas price being Earning before tax 956 928
adjusted not over 2% / year, it can be said that NT2 had Earning after tax 908.2 747
an effective method of avoiding oil price increase EPS 3.54

• According to the signed power sales contracts, the price of electricity is calculated based on the formula to help businesses
move material risks to the selling price.
• NT2 has used the gas turbine technology generation F by Siemens Vendor, we believe, with this new IT system, when
achieving 100% capacity material consumption used when produce electricity will be reduced more.
• Furthermore, saving more cos of input that other competitors also help us take advantage of the market and offer the
most competitive rates compared to our competitors. As we predicted, with the evolution, NT2 revenue will reach 105%
compared with the previous prediction, input costs will increase by 5% in comparison with the forecast
 VII. QUESTIONS
7.2 How EPS changes if VND depreciates 10% against USD?
• NT2 pay this debt cyclically 6 months per time, current loan balances is about 134 million USD and 123
million EUR.
• VND lost 10% of its value against the Dollar, it is probably that VND will fall with an equivalent rate
against the euro, so the financial cost used to pay foreign interest will also increase by 10 %.
• Besides a part of the fuel costs and the revenue from exporting, importing electricity tools also affect
costs and revenues. But this proportion is not too large according to the principle of prudence we still
predict that 10% of the cost will be increased due to inputs and 7% other income will go down by 10%.
2015 2016
Net sales 6.348 6.424
COGS (5418) (5472)
Gross profit 930 952
Operating cost (76) (75)
Operating income 854 877
Other expense (285) (153)
Earning before tax 569 724
Earning after tax 541 690
EPS 2.11
 VII. QUESTIONS
7.3 How EPS changes if growth rate of GDP decreases 2%?
• Over the years, the demand for electricity has increased twice higher than the GDP growth. The reason
is that Vietnam is taking steps to move vigorously from agriculture to industry. However the use of
electricity in Vietnam is not really effective, resilient power indicator / GDP has always been
maintained at 2 - 2.5 times.
• In the case that GDP growth of Vietnam fell by 2%, the growth rate of electricity would also be
affected. However, due to irrational mechanism use of power, we think that the demand for electricity
consumption only fell by 1%.
 VII. QUESTIONS
7.4. How will EPS change by TPP?
• The price of crude oil continued to fall and Vietnam 2015 2016
are on the process of joining TPP, import of fuel Net sales 6.348 6.424
inputs become big advantage for the electricity COGS (5096) (5147)
sector in general and NT2 in particular Gross profit 1252 1277
• Besides, abroad investment opportunities with the Operating cost (53.2) (53)
export of electricity items are also significant Operating income 1200 1224
revenue in the future. Currently, the income from Other Expense (269) (144)
exports of NT2 make up small proportion accounted Earning before tax 931 1080
for only 0.47% . Therefore, in the near future , the Earning after tax 885 1026
increase of revenue from exports accounted for the EPS 3.45
small proportion
• The price of oil, fuels decrease by TPP, NT2 can gain a huge benefit from in put reductions. Under the
principle of caution, we predict in the future, input costs will be reduced by 5% compared to the previous
• Moreover, the current operating cost of NT2 is relatively high, accounting for 20% of total costs. Joining TPP
facilitate funding from abroad, which makes NT2 approach to more effective business model and save up to
30% operating cost in the long term
 VII. QUESTIONS
7.5. What are the risks of the stock?
• Regarding the debt:
Long-term Liabilities of NT2 made up large proportion in the capital structure of the business, the debt
consists of 2 parts. The foreign currency debt, borrow in dollars and EUR was influenced by the change of
exchange rates, the company annually record any gain / loss from unrealized exchange rate differences
which create instability in results of business activities, these debts are being paid by NT2 every 6 months,
current loan balance is about 134 million USD and 123 million EUR. In the future when NT2 continued
payment of debts , it will also reduce the risk from exchange rate. According to forecasts in 2016, USD will
increase by 2%, but the euro will continue to record unrealized exchange rate profits. Currency debts with
VP Bank with 214 billion outstanding debt is under floating rates, when the bank enhance interest rates
recently, it will also increase financial expenses

• Input:
In the structure of COGS , COGS account for 70%, the changes in raw materials will affect profitability of the
company. However, as electricity sales contract was signed, the price of electricity is calculated according to
the formula which helps businesses transfer the material risks to selling price