Tenaga Nasional Berhad (TNB) has delivered robust results for the second quarter of FY24, exceeding both expectations and consensus forecasts. The company's core net profit for 2Q24 reached RM1.493 billion, marking a significant 58% year-on-year increase and a 39% quarter-on-quarter rise. This brings the first half of FY24 core net profit to RM2.564 billion, representing 70% and 65% of the full-year estimates by the company's projections and consensus, respectively. The results were bolstered by better-than-expected performance from its generation segment and reduced system losses.

Analysts have maintained a NEUTRAL and HOLD rating on Tenaga Nasional, with a revised target price of RM14.20, up from RM11.52 and RM13.50 to RM14 respectively. This adjustment follows the positive earnings performance and updates to earnings forecasts, which have been increased by 4% for FY24, FY25, and FY26. The revision of the target price reflects a more favourable outlook but remains cautious due to high expectations already factored into the stock's current price.

The improved financial performance was largely attributed to a 3.5% quarter-on-quarter increase in generation units and a corresponding 3.8% growth in demand. The proportion of coal-generated electricity increased to 57.2% during the quarter, driven by a slight decline in coal prices. However, under-recoveries of generation costs rose to RM2.82 billion from RM2.35 billion in the previous quarter. Regulated revenue showed a surplus of RM739 million due to higher realised tariffs and stronger demand.

Despite the strong quarterly results, expectations for elevated grid capital expenditure and new generation projects are considered largely priced in. The company's management is scheduled to provide further insights in a briefing on 2 September 2024. Meanwhile, earnings forecasts have been adjusted upwards to account for lower system losses, which are expected to improve from 9% to 8%.

For the first half of FY24, Tenaga's revenue grew by 7.9% year-on-year to RM28.01 billion, driven by higher sales volumes and significant growth in its UK operations. The company also declared an interim dividend of 25 sen, up from 18 sen in the previous year, reflecting a stronger payout ratio.