PVS – Stronger M&C business in FY22F – Update

• Despite a 34.5% yoy drop in revenue, 9M21 net profit (NP) only decreased by 9.9% yoy to VND518bn due to a 306% yoy surge in affiliates income.
• We estimate FY22-23F NP CAGR of 23.9% due to the solid contribution of FSO/FPSO affiliates and the improved prospect of M&C segment
• Reiterate ADD with a higher target price (TP) of VND31,200.

Solid FSO/FPSO affiliates income to be a pedestal for PVS’s 2021 results
Though 9M21 revenue dropped 34.5% yoy to VND9,651bn and G&A expenses surged 60% yoy, PVS just posted a 9.9% yoy decline in 9M21 NP to VND518bn thanks to a surge in FSO/FPSO affiliates income (+306% yoy to VND506bn). Following the strong oil price, we believe PVS to award extension contracts for its FSO/FPSO (Lam Son, Ruby), ensuring high-quality income for the company in coming years. For 2021F, we forecast NP to grow 16% yoy on the back of: (1) solid contribution from FSO/FPSO joint ventures, and (2) the recovery in all core businesses in 4Q21F, particularly Mechanics and Construction (M&C) segment when the pandemic is gradually controlled and PVS accelerates to recognise revenue from new projects.
M&C segment to strongly rebound in 2022
After a lackluster performance in 2021 as major projects have passed their peak seasons, we see stronger M&C segment in FY22F thanks to: (1) the newly awarded contract in Gallaf Batch 3 project, and (2) tapping into renewable projects to diversify M&C activity with a signing for Preferred Supplier Agreement (PSA) for two offshore substations including jacket foundations of Hai Long wind farm in Taiwan. Besides, we expect Block B – O Mon giant project to have final investment decision (FID) in 1H21F, setting the stage for this project to kick off in 2H22F. With a total capex for field development and pipeline projects of US$6.7bn and US$1.3bn, respectively, we estimate this project implies huge potential backlog for PVS.
FY22-23F net profit to achieve a CAGR of 23.9%
We cut FY21F EPS forecast by 6.5% to reflect lower-than-expect workload across all segments in 9M21 due to Delta outbreak. However, given the strong oil price rally, we still believe in PVS’s positive outlook with a net profit CAGR of 23.9% in FY22-23F, driven by: (1) strong oil price could trigger a day rate upward revision, (2) the improving prospect of M&C business from 2022.
Reiterated ADD with a slightly higher TP of VND31,200
Our TP is based on an equal weighting of DCF valuation and the target FY22F P/E of 15.4x. Re-rating catalyst is the recovery of current oil price. Downside risks come from lower-than-expected oil price and further delays in projects award

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