PVT – Gearing up for near-term growth – Update

• PVT’s net profit (NP) doubled to VND136.4bn in 1Q21, mainly driven by financial activities and vessel liquidation.
• We expect a FY21-23F CAPEX of VND4,900bn for fleet expansion in order to capture opportunities arising from petroleum transport demand recovery.
• Reiterate Add with a higher target price of VND24,100 (+21.7%).

1Q21 net profit doubled due to financial activities and vessel liquidation
PVT reported an 8.8% year-on-year (yoy) increase in 1Q21 revenue to VND1,717bn, mainly thanks to a 94.7% yoy surge in trading & services revenue. Meanwhile, transportation revenue slightly rose 6.5% yoy to VND1230bn as the charter rate rebounded at a slower pace compared to oil price rally. However, we expect stronger quarters when hahead igher oil price can boost transportation demand, leading to potential upward revision in charter rate.

1Q21 gross profit margin (GPM) improved 0.7% pts to 15% thanks to the expense reduction from the high expenses due to employee quarantine in 1Q20 and the decrease in provisions overhaul of fixed assets in 1Q21. Additionally, 1Q21 financial expenses significantly dropped 88% yoy to VND6.5bn thanks to higher cash balance in 2020 and stable foreign exchange (FX) in 1Q21, combined with a profit of VND34.2bn from vessel liquidation, leading to the double in 1Q21 NP to VND136.4bn, completing 20.8% of our full-year forecasts.

Starting to disburse capital for the fleet expansion plan
In 2020, PVT announced the capex plan of over VND7,400bn to rejuvenate its tanker fleet, strengthening the company competitiveness in the transportation market. However, this plan was delayed due to the pandemic. In 1Q21, PVT has restarted its ambitious capex plan by disbursing VND477bn to acquire 2 clean tankers. Hence, we expect PVT to disburse over VND4,900bn in FY21-23F to capture the low-price environment in tanker acquisition market and get ready for the recovery of petroleum transportation demand after the pandemic.

Raise FY21-23F EPS forecast by 15.9%-19.4%
We raise our FY21-23F EPS forecast by 15.9%-19.4% to reflect: (1) FY21-23F transport revenue increased at a CAGR of 13.1% thanks to the fleet expansion, and (2) GPM improved thanks to higher efficiency of transportation segment.

Reiterate Add with a higher target price of VN24,100
We reiterate our Add rating with a higher target price (TP) of VND24,100 on the FY21-23F EPS forecast upward revision and the applying the lower risk free rate of 3%. Our TP is based on DCF valuation and the target FY21-23F P/E of 9.4x, weighted equally. Potential re-rating catalyst is higher transportation volumes. Downside risk comes from lower-than-expected oil price which could hamper the transportation demand and charter rate recovery.

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