PVS Update – OUTPERFORM

PetroVietnam Technical Services Corporation (HNX: PVS)

PVS announced business results for Q2/2024, with a NPAT-MI of VND195 billion (-13% YoY and -35.2% QoQ), in line with our expectations. Accumulated 6M2024, NPAT-MI increased by 12.9% YoY, reaching VND495 billion, completing 78% of PVS’s annual plan and 44% of our forecast. Using DCF method, we derive the fair value of PVS by the end of 2025 at VND46,800/share, implying 16.9% potential upside from the current market price, rated Outperform.

PVS recorded revenue in Q2/2023 of VND5,577 billion (+18.4% YoY) and NPAT-MI of VND195 billion (-13% YoY and -35.2% QoQ). Revenue increased mainly due to the increase in revenue of the Offshore support vessels (OSV) segment and the Operations & Maintenance (O&M) segment. The increase in these two segments offset the decrease in revenue from the Mechanical and Construction (M&C) segment (-8% YoY). Meanwhile, the decrease in profit was due to:

• Gross margin of -1% of the M&C segment compared to 1% in the same period.

• G&A expenses increased by 32.6% YoY to VND308 billion due to increased labor and outsourcing costs.

• Financial income decreased by 10.7% YoY to VND139 billion due to a decrease in deposit interest while financial expenses increased 102.7% YoY to VND30.3 billion.

The above factors overshadowed the positive impact from Profit from joint ventures and associates with an increase of 26.4% YoY to VND223 billion. This increase was due to (1) PVS signing a higher rental price for the FSO Bien Dong contract extension and (2) the increase in USD/VND exchange rate.

With this result, in 6M2024, PVS recorded revenue of VND9,287 billion (+10.4% YoY) and NPAT-MI of VND495 billion (+12.9% YoY), respectively completing 37% and 44% of our full-year forecast. This development is partly due to the fact that the M&C segment usually records revenue/profit mainly in Q4.

In addition, regarding the Block B O Mon project, up to now, PVS has been awarded limited leasehold (LLOA) for the EPCI#1, EPCI#2 and 3 contracts with a total value of 1.2 billion USD. However, as this project has not received the Final Investment Decision (FID), the implementation speed as well as the growth of revenue/profit in the M&C segment is still slow.

Conclusion: We increase PVS’s revenue forecast by 7% from VND23,846 billion to VND25,538 billion (+32% YoY), however, we maintain our net profit forecast of VND1,139 billion (+11% YoY) for the whole year 2024. Offshore oil and gas projects (Block B O Mon, Yellow camel, White lion II) and wind power are considered potential factors that will actively support PVS’s business activities in the period 2024-2030.