YTL Power (YTLP MK) – Commendable Delivery: Upgrade to BUY

YTL Power‘s (YTLP) 4QFY24 results were in line with expectations as the return to profitability at Wessex helped offset the continued tapering at PowerSeraya.

This should ease investor concerns about the company’s earnings delivery. With the share price having corrected by more than 30% from its peak, we believe the risk-reward profile has become favorable.

Consequently, we are upgrading our recommendation to BUY with a revised sum-of-the-parts (SOP) based target price (TP) of MYR4.70 (down 10%).

Potential catalysts for a re-rating include:
1) Affirmation of Wessex’s recovery over the medium-term.
2) Positive progress on its AI compute business.

Core net profit

Excluding forex and fair-value gains, YTLP’s 4QFY24 core net profit stood at MYR824m (-19% YoY, +23% QoQ), bringing the FY24 core net profit to MYR3,180m (+66% YoY). This was 4%/1% above analysts estimates and consensus forecasts, respectively. While PowerSeraya’s earnings continued to taper, this was counterbalanced by Wessex returning to profitability. Additionally, a 4.0 sen dividend per share (DPS) was declared for the quarter, bringing the total FY24 DPS to 7 sen (FY23: 6 sen).

Results in Line with Expectations

Mixed Performance Across Segments
PowerSeraya’s pre-tax profit declined quarter-on-quarter, primarily due to an increase in operating expenses. In contrast, Wessex returned to profitability, driven by higher tariffs (linked to annual inflation pass-through) and tapering inflation. The mobile segment also turned profitable due to higher project billings (particularly from the point-of-presence project), though this was offset by a sequential decline in associate income caused by deferred taxes at Attarat Power.

Forecast Revisions

“We have trimmed our FY25/26 net profit forecasts by 4%/1% respectively due to housekeeping adjustments and have introduced FY27 forecasts. Our TP has been revised to MYR4.70 (from MYR5.20), reflecting a roll-over of our DCF base year.

“For FY25, we anticipate that further recovery at Wessex will offset the tapering at PowerSeraya. We believe the AI compute segment will realistically begin contributing only in FY26 at the earliest,” says analysts.

Source: Maybank