KUALA LUMPUR (Nov 28): Analysts maintained a "buy" call on Tenaga Nasional Bhd (TNB) but lowered their target prices for the stock, after the group posted a lower net profit in the third financial quarter (3QFY18) of RM501 million, which fell below expectations.

RHB Research Institute Sdn Bhd lowered its target price to RM16.51 from RM17, while Affin Hwang Capital Research revised its target to RM18 from RM18.70 previously.

TNB's share price is currently the top loser on the bourse, having fallen 3.53% or 52 sen this morning. As at 10am the counter is trading at RM14.20.

Yesterday the utility giant said it registered a net profit of RM501 million for the third quarter ended Sept 30, 2018 on revenue of RM13.07 billion. TNB does not have a comparative figure as the group has changed its financial year end from Aug 31 to Dec 31.

However, compared with the preceding quarter, there was a 59.5% fall in net profit from RM1.24 billion, which the group attributed to higher operating expenses and higher loss in share of associates. TNB reported a 4.6% quarter-on-quarter increase in revenue from RM12.5 billion.

Despite this, RHB Research said TNB remains its top pick in the Malaysian utilities sector.

"We revise earnings for FY18-FY20 by 6.5%-14% to account for the higher effective tax rate and partial non-pass-through of higher fuel costs. TNB's recent share price adjustment, in our opinion, reflects the weak earnings. We also believe the partial non-pass-through of higher fuel costs will be reversed, as it approaches an agreement with the Energy Commission," it said in a note today.

Meanwhile, Affin Hwang said it also made an earnings cut of 3.1%-10% for FY18-FY20E to factor in higher operating costs.

"We continue to believe that the government will maintain the current ICPT (imbalance cost pass-through) mechanism, and the increase in fuel costs will continue to be earnings neutral to Tenaga," said Affin Hwang.