PC1 Update – OUTPERFORM

PC1 GROUP JOINT STOCK COMPANY (HOSE: PC1)

PC1’s business performance in 2023 was lackluster, with revenue reaching VND7,775 bn, -7.0% YoY, achieving 82.3% of the plan. NPAT was VND303 bn, -43.6% YoY, achieving 59.3% of the plan. This poor performance was attributed to the general economic downturn, which impacted most of the group’s business segments, including (1) construction and installation of power projects: only gained momentum from the second half of the year, (2) energy and hydropower: negatively affected by the El Nino weather phenomenon, and (3) mining: faced with rock-bottom nickel prices. Despite the challenges in 2023, we are optimistic about PC1’s business recovery in 2024, with expectation of a strong rebound in most segments, leading to a 26.0% increase in revenue and a 49.4% increase in NPAT. Our 12-month target price for PC1 is VND32,800 per share, rating OUTPERFOM.

In 2023, although the consolidated revenue and NPAT decreased, there were still bright spots among PC1’s business picture, such as bringing a new project – nickel mining in Cao Bang – into operation and recognizing full-year revenue for the Industrial Park segment. Specifically, IP revenue reached VND614 bn, +667.5% YoY; and mining’s revenue reached VND705 bn.

By the end of Q1/2024, PC1 reported results with revenue reaching VND2,165 bn, +43.9% YoY, completing 20.0% of the 2024 plan; NPAT reached VND129 bn, +63.3% YoY, completing 24.6% of the plan. 

We expect PC1’s performance to improve significantly during the period 2024-2026 driven by several factors:

(1) End of the El Nino cycle: With the expectation of increased precipitation, hydropower is anticipated to resume positive production results.

(2) Improved revenue from power substation and transmission line construction: Revenue from this segment is expected to benefit from large projects such as the 500kV Pho Noi – Quang Trach project, as well as the trend of public investment in power infrastructure.

(3) Recognition of revenue from remaining real estate projects: The company is poised to recognize revenue from remaining projects such as the Dinh Cong.

(4) Stabilization of nickel mining operations with the recovery of nickel prices: Nickel mining operations are expected to stabilize with the recovery of nickel prices from their lows.

(5) Expansion into diversified business segments: PC1 plans to expand into diversified business segments such as industrial parks, mining, and logistics.