FSSIA Expects Power Stocks to Outperform as Thailand Poised to Rise FT Rate in Early 2022

The Energy Regulatory Commission (ERC) announced on Friday (November 19) that it will raise the FT tariff by 16.71 satang per unit or roughly 5% from January to April 2022, marking the first increase in two years owing to rising fuel costs.

Electricity prices will be set at 3.78 baht per unit for the first four months of next year.

Mr. Suwat Sinsadok, Managing Director of FSS International Investment Advisory (FSSIA), said that ERC’s announcement to raise the FT tariff rate would boost sentiment in power equities, particularly BGRIM, GULF, GPSC, BPP, EGCO, and RATCH.

Power stock prices have fallen sharply in recent weeks as investors fear the ERC would cut the FT rate, with BGRIM‘s stock price plunging sharply in comparison to its peers. If the FT rate had lowered, the margin of SPP power plant’s selling price would have downsized. BGRIM’s share price is expected to gain the most following the ERC’s announcement of a rate hike.

Besides that, catalysts for the BGRIM’s share price include the following: 1) a recovery in electricity demand following Thailand’s reopening of borders; 2) the COD of five SPP projects in 2022; 3) profit recognition from three new acquisition deals; and 4) LNG imports in 2022 are expected to be cheaper than current contracts. Recommend “BUY” with a 58 baht target price.

Meanwhile, GULF would be a second gainer from the aforementioned factor, as well as following factors: 1) LNG imports that will lower the cost of electricity generation, 2) more production capacity to be added in 2022 and 3) Thailand and Vietnam’s PDP plans.  So FSSIA recommends “BUY” rating on GULF with a target price of 62 baht.