Energy Absolute Public Company Limited (EA) believes that it could accomplish the goal of a 20% increase in earnings this year, with plans to begin manufacturing of a 1 gigawatt lithium-ion battery phase 1 by the third quarter and to deliver 500 electric vehicles this year, ensuring readiness for the New S-Curve of business to sustaining momentum.
Maybank Kim Eng Securities (Thailand) (MBKET) forecasts improving profit momentum HoH on EA due to the power generation season, lower financing costs and earning from the electric vehicle (EV) business since 3Q21 keeps its earnings forecast unchanged. EA still sticks to the global EV trend, leading to demand for the share price being always high. It is priced in as it is trading at 36.8x P/E21F, reflecting PEG 1.6x. Strategically, MBKET recommends BUY on weakness from the previous BUY. The 2021 target price is 47.50 baht, based on 25.5x P/E. The roll-over 2022 target price is not yet processed as it is to keep monitoring of the BMTA bus reform, which will have a significant effect on the 2022 earnings forecast.
EA has revealed plans to penetrate the EV truck market next year. It is currently in negotiations with various car partners which MBKET finds interesting because these are the megatrend of the automotive world and is a big market in Thailand. It is also in line with Thailand’s EV plan, with a target of 31,000 EV trucks & buses by 2025 and 430k units in 2035.
MBKET expects EA’s 3Q21 earnings to climb from the low season as follows: (1) Plans to deliver 100 EV buses (48 buses recently delivered), representing a 15% increase in revenue, or a 5-10% NP from the original profit base and another 400 buses in 4Q21 that are in the process of final negotiations. (2) EA is refinancing debt of 20 billion baht, expected to save interest burden of 70 million baht/quarter, and (3) EA is gradually replacing solar panels for the original 200MW from the contracted capacity of 278MW. Management expects the electricity output to increase net 10% in the beginning of 4Q21. Even if the COD of the battery plant will be delayed across 4Q21 and there will be a disturbance in depreciation, they consider it insignificant.