KUALA LUMPUR: Analysts have raised Tenaga Nasional Bhd (TNB)'s earnings forecasts following stronger results in the first half of financial year 2024 (1HFY24).
RHB Investment Bank Bhd (RHB Research) upgraded TNB's earnings for financial year 2024 to 2026 (FY24-26) by 5.0 per cent, 1.0 per cent and 3.0 per cent respectively after imputing higher revenue.
It maintained the "buy" call with a target price of RM16.70 for the company's stock.
RHB Research said the 1HFY24 core earnings of RM2.2 billion exceeded expectations at 56 per cent of its own and street FY24 estimates.
This is due to higher contribution from the domestic power generation arm and stronger revenue.
"TNB's strong set of results further reiterates our bullish stance on the stock. We see TNB as a proxy to Malaysia's energy transition growth journey under the National Energy Transition Roadmap (NETR). "It should also continue benefiting from the continuous upgrade in transmission and distribution assets, where the demand for energy can be anchored by the mushrooming data centre (DC) developments," it said in a research note.
Meanwhile, Kenanga Investment Bank Bhd (Kenanga Research) upgraded TNB to "outperform" with a higher target price of RM17, because the company is seen as the long-term beneficiary of the influx of foreign direct investment (FDI) to build data centres in the country.
The research firm also upgraded the FY24-25 earnings forecasts by 2.0 per cent and 4.0 per cent respectively after it raised the electricity sales assumption for FY24-FY25 to 3.5 per cent from 3.0 per cent previously, anticipating a strong demand from data centre.
Kenanga Research said TNB's core proft in 1HFY24 beat its expectation, coming in at 57 per cent of earnings, although in line with market consensus at 52 per cent due to stronger-than-expected electricity sales and lower-than-expected staff cost.
"Electricity sales hit yet another record high in 2QFY24, reinforcing our belief that while there is more than 5000MW (megawatt) data centre target by 2035, the current acceleration phase of data centre build-out over the next 12 to 18 months means electricity demand growth will prove higher than initially envisaged," it said in a research note.