Electric stocks expected to benefit from Power Plan

May 19, 2023 - 11:42
The approval of the Power Development Plan VIII is a positive factor to the domestic stock market, especially electric utility stocks. 
Rooftop solar power system in Nha Trang City. — VNS Photo Ly Ly Cao

By Ly Ly Cao

HÀ NỘI — The recently passed Power Development Plan VIII (PDP8) is expected to have positive impacts on the Vietnamese stock market, electric utility stocks, as well as related industries’ ticker symbols, said experts. 

The Government on Monday approved the PDP8, which guides the growth of renewable energy sources, including rooftop solar power. 

The plan aims at providing sufficient supply for domestic electricity demand, meeting the socio-economic development target with an average GDP growth rate of about 7 per cent a year during 2021-2030 and about 6.5-7.5 per cent a year in 2031-2050.

The ambitious plan also sets out a roadmap to drastically cut coal power to convert and replace it with clean energy sources, especially wind and gas power. The share of renewable energy will increase to 30.9-39.2 per cent by 2030 and 67.5-71.5 per cent by 2050.

Offshore wind power capacity is expected to reach at least 6,000 MW by the end of this decade and 70,000-91,500 MW by 2050.

Nguyễn Minh Hoàng, director of the Analysis Department at VietFirst Securities, said that the approval of the Power Development Plan VIII is a positive factor to the domestic stock market, especially electric utility stocks. 

“Stock markets are driven by futures factors and these elements will be priced in at the present. And obviously, the plan gives a clear orientation about the development of the power sector, benefiting electric utility stocks,” Hoàng told Việt Nam News. 

According to Agriseco Research, given the priority in wind power development, leading companies in the industry, such as Refrigeration Electrical Engineering Corporation and Gia Lai Electricity JSC, will have advantages in developing and operating projects, helping these enterprises access cheap capital and reduce production and business expenses. 

As liquefied natural gas (LNG) power has been considered one of the key solutions for replacing coal-fired power, with the share in the energy mix expected to increase from 0 per cent in 2022 to 14 per cent in 2030, companies like PV Power, LNG Nhon Trạch 3 & 4 and LNG Quang Ninh projects, will also benefit from PDP8.

In addition, businesses that supply input gas to domestic thermal power plants, such as PV Gas, stand to gain.

Hoàng said that other sectors will also benefit from the plan.

“The plan will also boost public investment, helping related construction companies,” Hoàng added. 

PDP8 targets to invest US$134.7 billion, of which investment in power source is about $119.8 billion, and the transmission grid is about $15 billion, creating growth momentum for power construction enterprises such as PC1 Group and Power Engineering Consulting JSC 2.

It is also expected to promote credit growth in the banking sector, according to Agriseco Research.

Positive prospects in 2nd half

The expert from VietFirst Securities said that the plan is another factor cushioning the stock market, improving investor sentiment. 

“Given supportive monetary and fiscal policies from the Government, I think the stock market had hit bottom in the period of 2022-23,” said Hoàng.

“Therefore, the market now will move up and trade sideways to digest bad news. After that, it will continue to edge higher.”

He also said that it is unlikely for the market to hit below 900 points as it did earlier, unless there was a black swan event. 

"Amid the economy's struggles, measures like fiscal policies and money injections are carried out to support the stock market. So it is not easy for the market to set another bottom like it did at the end of 2022 and early 2023," Hoàng said. —VNS