Opportunity to accumulate
We see GPSC’s share price decline over the past three months as an opportunity to accumulate due to upcoming catalysts: 1) additional capacity, especially at AVAADA (leading renewable play in India), 2) the award from the ERC in the first round of the phase 2 renewable scheme, 3) no impact from the Global Minimum Tax (GMT) and 4) little impact from a delay in the ERC/CFP project. We maintain our three-month tactical call of Outperform with a mid-2025 target price of Bt60 based on DCF valuation (WACC: 5.3%, terminal growth: 1.5%).
Strong committed capacity portfolio. GPSC plans to raise its total committed equity capacity to 11,852MW by 2026, up from 6,855MW in 3Q24, with the share of renewable energy expected to rise to 65% in 2026 from 38% currently. Fueling the growth is the expansion of renewable energy capacity in India through AVAADA, in which GPSC holds 41.6%. AVAADA is expected to gain from India’s aggressive renewable energy expansion. GPSC's investment is projected to enable AVAADA to reach a capacity of ~10GW (from the current 6.6GW) by 2026. Following this, AVAADA plans to raise funds through an IPO, planned for some time in 1H26.
Update on upcoming projects. Apart from AVAADA, GPSC has 2-3 key projects in the pipeline. 1) The CFXD offshore wind farm (GPSC holds 25%) has obtained all necessary licenses for its 62 turbines, with commercial startup scheduled by end-4Q24. 2) New capacity from the first round of Phase 2 in renewable energy, in which GPSC and partner have been awarded 192.88MW: Helios 1 (48.6MW), Helios 2 (61.4MW), Helios 4 (8MW) and IRPC-CP (74.88MW). Since GPSC holds ~50%, it gets 97.19MW in this round under FiT. Initially we estimate annual earnings contribution to GPSC at Bt100-150mn after full commercial operation is achieved between 2026-30. 3) GPSC is currently in discussions with several data center providers. In the short term, this is expected to increase electricity demand for GPSC by 250-300MW, with long-term plans still being evaluated.
Limited downside risk from a delay in TOP’s CFP project. The Energy Recovery Unit (ERU) power generation unit (budgeted at US$757mn) will generate 250MW of electricity and 175 tons of steam per hour for TOP’s CFP project. GPSC reported to SET that the increase in TOP’s CPF investment cost, which includes the ERU, has no impact on GPSC’s investment return under the agreement made between GPSC and TOP in 2019. The transfer of ownership of the ERU project will occur upon the completion of construction and the granting of the Provisional Acceptance Certificate (PAC), tentatively around 1Q29 (postponed from end 2025). To date, 20% of the investment has been disbursed, with the remaining payment made upon commercial startup.
Action and recommendation. We maintain our Outperform rating on GPSC as we see it as laggard compared with peers, particularly as it will benefit from the expected step down in interest rates, plus Phase 2 of renewable energy bids and PDP2024, plus is unaffected by GMT implementation. Our TP is Bt60 based on DCF valuation (WACC: 5.3%, terminal growth: 1.5%).
Key risks: Higher than expected fuel cost, delays in Ft adjustment, lower return on new investments and regulatory changes regarding GHG emissions. Key ESG risk is the environmental impact from its exposure to fossil fuels.
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