KUALA LUMPUR: Tenaga Nasional Bhd's (TNB) nine-month FY22 net profit of RM4 billion came in line with Hong Leong Investment Bank Bhd's (HLIB Research) expectation but above market.
The firm said the result highlights the group's earnings sustainability under Regulatory Period 3 (RP3) despite the surge in fuel costs, with the group recognising imbalance cost pass-through (ICPT) of RM15.2 billion.
Further, the drop of 4.4 per cent year-on-year (YoY) in core earnings was due to higher net finance expenses, lower associates' contributions, and higher tax expenses.
HLIB Research noted that TNB recognised accrual of RM15.2 billion ICPT in the first nine months of FY22 as fuel input costs were higher than reference prices.
The gas cost was RM30 per million British thermal units (mmbtu) for Tier 1, averaging RM39.5 per mmbtu, and the coal cost was RM910.50 per tonne.
"The Energy Commission has approved RM7 billion of ICPT in the first half (1H) of FY22 to be recovered in the 2H of FY22.
"Management has guided potential ICPT approval of RM16.4 billion in the second half (2H) of FY22.
"Management is confident the new government will continue to honour the ICPT mechanism (as it has since its implementation in 2014), and TNB will be able to recoup the entire amount within six months," it said in a note today.
Meanwhile, HLIB Research said that given the improved cash flow outlook in 2H FY22, management indicates a potential dividend in the higher range of its 30-60 per cent dividend payout policy.
"This will likely entail 45-50 sen per share for the year," it said.
HLIB Research has maintained its 'Buy' call on TNB, with an unchanged target price of RM11.65.