PVS – Long-term driver from offshore windfarms development – Update

• 1Q23 net profit (NP) was almost flat yoy to VND215bn, fulfilling 21.5% of our full-year forecast.
• PDP8 highlights the priority in developing domestic gas-fired power and offshore wind power, implying the huge potential backlog for the leading offshore facilities contractor like PVS.
• Reiterate ADD with a higher target price (TP) of VND33,800.

1Q23 net profit was supported from higher net financial income

PVS posted a 1.7% decrease in 1Q23 net revenue to VND3,704bn. However, 1Q23 gross profit rose 5.8% yoy mainly thanks to higher M&C segment GM (+1.6% pts) as some major projects have been turming into the end of construction cycle. At the bottom line, 1Q23 NP was almost flat yoy to VND215bn (-0.7% yoy) on the back of: (1) higher G&A expenses (+13% yoy), (2) no asset liquidation inccured like 1Q22, but (3) higher net financial income (+48.5% you).

A key beneficiary from PDP8 approval

The Government has approved Power Development Plan 8 (PDP8) this month. PDP8 highlights the priority in gas-generated electricity development using domestic sources to reduce the dependence on imported LNG, which could boost long-stalled, multibillion-dollar gas field projects like Block B and Blue Whale. Meantime, wind power will become the main target in both short and long term. In which, there will be the first 6,000MW offshore wind power on board in 2030F, before surging 15% CAGR in 2030-50F, accounting for 16% total capacity. Recently, PVS has signed the contract to manufacture 33 turbine foundations for Orsted’s windfarm in Taiwan. Fundamentally, we think these should benefit PVS’s core business as the leading offshore facilities contractors in Vietnam.

We estimate PVS to achieve a NP CAGR of 16.7% in FY23-25F

We raise our FY23-25F EPS forecasts by 4.7%/3.8%/10.8% on the mixed impact of: (1) the delay of kickoff Block B – O Mon project to late-2023F, but taking new windfarm project into our forecasts, (2) higher net financial income, and (3) lower affiliate income. Overall, we expect PVS’s NP to attain a CAGR of 16.7% in FY23-25F, driven by: (1) stronger M&C segment coming from newly awarded contracts in international market as well as potential contracts like Block B – O Mon, and (2) the solid contribution of FSO/FPSO affiliates.

Reiterate ADD with higher TP of VND33,800

We reiterate ADD rating for PVS with a higher DCF-based TP of VND33,800 (+6.6% versus previous forecast) due to FY23-25F EPS forecasts adjustments and rolling our DCF model to 2023F. Upside catalysts are higher-than-expected oil price and the kickoff of Block B project. Downside risks include the decline in oil price and further delays in major projects award.

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