3QFY25 CNP rose to RM1.16bn (+124.9% YoY, +40.2% QoQ), lifting 9MFY25 CNP to RM3.06bn (+0.1% YoY). Results were in line with our expectations at 77% of full-year forecasts, but below consensus at 68%.
Electricity demand increased 1.6% YoY in 9MFY25, supported by strong growth in the Commercial segment (+7.7%) and steady expansion in Others (+4.2%).
3QFY25 CNP more than doubled YoY, underpinned by a 20.2% increase in revenue following the base tariff adjustment effective 1 Jan 2025, which reflects a larger RAB and higher allowed return, alongside lower generation (-7.1%) and non-generation (-8.9%) costs.
On 26 Nov 2025, TENAGA received MoF approval for Investment Allowance (IA) on qualifying capex, deductible against future income. While the quantum approved has not been disclosed, we understand it is partial. This approval reduces future tax payable and significantly narrows uncertainty surrounding the long-standing RM10.7bn tax dispute.
Forecasts maintained. We reiterate BUY with an unchanged TP of RM15.77, based on DCF (WACC: 7.1%, g: 2.0%). With the key tax dispute now substantially resolved, we view this as a meaningful re-rating catalyst, particularly as the market has effectively priced in zero approval under Schedule 7B.
Within Expectations. Excluding net impairment on receivables (+RM263.8m), inventories written off (+RM48.6m), and other adjustments (-RM25.3m), TENAGA reported a 3QFY25 core net profit (CNP) of RM1.16bn (+124.9% YoY, +40.2% QoQ), bringing 9MFY25 CNP to RM3.06bn (+0.1% YoY). The result was in line with our expectations at 77% of full-year forecasts, but below consensus at 68%.
Electricity Demand. Electricity demand grew 1.6% YoY in 9MFY25, driven by strong expansion in the Commercial segment (+7.7%) and steady growth in Others (+4.2%), offsetting weaker Industrial demand (-3.6%). Commercial strength reflected continued load growth from data centres, retail, and business services, while industrial softness was attributed to lower demand from iron & steel and utility electrical subsectors. On a QoQ basis, total demand increased 2.6%, with all segments registering sequential improvement.
QoQ. CNP expanded 40.2%, supported by lower non-TNB IPP costs (-5.1%), reduced staff expenses (-15.5%), and a lower effective tax rate of 25% (2QFY25: 26.7%) following higher capital-allowance claims. The decline in IPP costs likely reflected reduced capacity payments after the expiry of the Prai and Panglima PPAs, as well as the unscheduled outage at Tanjung Bin Energy. Genco’s PAT increased 16.1%, despite wider negative fuel margins, as 2QFY25 had been weighed down by translation losses stemming from the appreciation of the MYR against the JPY.
YoY. 3QFY25 CNP more than doubled (+124.9% YoY), supported by a 20.2% rise in revenue following the base tariff increase effective 1 January 2025, which reflects a larger regulated asset base (RAB) and higher allowed return. Earnings were also lifted by lower generation (-7.1%) and non-generation costs (-8.9%) despite higher tax expenses (+23.6%).
YTD. For 9MFY25, CNP was broadly flattish (+0.1%), as the higher revenue under RP4 (+18.3%) was offset by higher generation (-8.0%) and non-generation operating expenses (-3.6%). The ICPT position swung into an over-recovery of RM1.8bn (vs under-recovery of RM7.4bn in 9MFY24) as actual fuel costs undershot projections. Meanwhile, Genco’s PAT fell 45.5% in 9MFY25, weighed down by forex losses from the stronger MYR against the JPY.
Positive Update on Potential RM10.7bn Tax Liability Dispute. All tax disputes between TENAGA and the IRB relating to reinvestment allowance (RIA) claims have now been concluded at the SCIT, High Court, and Court of Appeal. On 26 Nov 2025, TENAGA received approval from the MoF for Investment Allowance (IA) on qualifying capex, which will be deductible against future income. Although the quantum approved has not been disclosed, we understand that it represents only a portion of the total claims. The approval nonetheless lowers future tax payable and materially reduces uncertainty surrounding the long-standing tax liability dispute. During the quarter, TENAGA recognised substantial tax-related cash outflows totalling RM5.3bn (1HFY25: RM175.6m), which contributed to the decline in its cash balance from RM16.5bn in 2QFY25 to RM10.0bn in 3QFY25.
Outlook. We expect YoY earnings growth to be supported by higher allowed capex under RP4, which expands the RAB and raises the allowed return. Additional upside may arise from the deployment of contingent capex, where management targets securing 60–70% of the allocation. With IA approval reducing future tax liabilities, we anticipate an effective tax rate below management’s 30% guidance. We also flag potential for a one-off tax expense in 4QFY25 for the portion of IA not approved by the MoF.
Earnings Revision. No change to earnings forecasts.
Valuation and Recommendation. We reiterate BUY with an unchanged DCF-derived TP of RM15.77 (WACC: 7.1%, g: 2.0%). No ESG premium or discount is applied, consistent with the Group’s three-star rating. We continue to view the share-price retracement following the 2 July court ruling as an overreaction. Our stance remains unchanged: the market has effectively priced in zero approval under Schedule 7B, with TENAGA trading RM1.72/share below its pre-ruling close of RM14.90, already approximating our worst-case RM1.84/share earnings impact assuming no IA approval. In this context, any level of IA approval, even partial, is a meaningful re-rating catalyst.
Risk. Sharp plunge in coal prices, unplanned shutdowns of power plants, weakening of Ringgit, policy risks.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.116228 | 4.149111 |
| EUR | 4.800323 | 4.805223 |
| CNY | 0.584269 | 0.584863 |
| HKD | 0.528729 | 0.532442 |
| SGD | 3.178741 | 3.201165 |