ACE: Better Gross Margin but We Stay on HOLD

We maintain our HOLD recommendation on ACE based on a slightly increased target price of Bt3.73 (previously Bt3.49), implying an upside of 3% from the current price. We think ACE deserves to trade at a premium to Thai Utilities due to its pronounced growth prospects and target a 2021E PE of 26.4x.

Investment thesis:

• Power producer with high growth potential but already priced in
• Long-term contracts and supply control drive high profitability
• Government driven demand can pose a risk

Interim: ACE’s revenue grew by 9% YoY in 4Q20 due to its gas plants’ planned shutdown. The good progress in expansion projects makes us revise our forecast upward. Despite increased SG&A and finance costs, our EPS for 2021E and forward increase.

Risks: Adverse regulatory changes, reliance on a few customers, volatility in fuel prices, unexpected disruptions in production, delays in project execution, change in political leadership can sometimes impact companies.