Outlook Recap:

All eyes on Block B – O Mon project awaiting Final Investment Decision.

• On 28/03/2024, Petrovietnam together with major oil & gas partners signed a series of commerical agreements, marked a remarkable milestone of the progress of implementing Block B – O Mon gas-to-power upstream project.
• Beside two awarded key contracts from Phu Quoc Petroleum Operating Company, EPCI#1 – $493 million & EPCI#2 - $300 million, and another EPC#3 contract for Block B – O Mon midstream gas pipeline, Petrovietnam Technical Services Corporation is currently participating in an auction for a fourth contract with an estimated value of $400 million.

• Brent oil price continues to anchor above 80 USD/barrel, acting as a primary driving force for vibrant oil & gas upstream operations.

PVS confirmed contract renewals for offshore renewable energy projects with a total estimated backlog value of 1.5 billion USD during the period of 2024-2028.

Forecast. Based on recent activities surrounding Block B – O Mon progress, we revise our consolidated PVS revenue forecast by 13% to 24,798 billion VND (+28% YoY) and net income by 7% of 1,166 billion VND (+10.04% YoY) for FY24, slight margins expansion with gross margin and net margin increasing to 5.09% and 4.51%, respectively.  

Valuation. We adjusted our Buy rating with a 12-mo re-based target price of 47,247 VND/share (+15.93% from previous recommendation target price of 40,755 VND/share on 02/26/2024) for PVS on a 5-year forecasted period (24’-28’) using the proportional weight of discounted cash flow method (FCFE) and comparative method (P/B, P/E).

Investment case. We continue to believe in PVS short-term and mid-term potential due to: (i) robust M&C segment prospects with growing backlog from offshore wind power and oil & gas projects, domestically and internationally, (ii) high FPSO/FSO utilization rate providing significant earnings growth, and (iii) a strong cash balance. Maintained BUY.