PC1_BUY_TP 45,900 VND_Upside 17%_Hydropower remains positive_BSC Company Update

Valuation

§  BSC offers a BUY recommendation for PC1 stock with a target price of VND 45,900/share for 2022 (equivalent to an upside of 17.0% compared to June 23, 2022) based on the partial valuation method (SOTP).

Forecasting business results

§  BSC forecasts that revenue and net profit of 2022 will reach VND 10,233 billion (+4% yoy) and VND 919 billion (+20% yoy), respectively, EPS FW 2022 = VND 3,714/share with the assumption: (1) value of newly signed EPC contract in 2022 +30% yoy, (2) hydroelectricity's electricity production increased by 14.3% thanks to the still positive hydrological situation,  and (3) the amount of electricity produced by the wind power segment increased sharply by +242.9% thanks to the operation throughout 2022.

Investment Thesis

§  Hydropower segment continues to benefit from favorable hydrological conditions.

§  Wind power segment is positive thanks to additional capacity when operating full-time in 2022.

Catalyst

§  Real estate project PC1 Gia Lam and PC1 Dinh Cong are likely to be completed in the fourth quarter of 2022. Copper-Nickel mining project is expected to operate from the fourth quarter of 2022.

Risks

§  Construction segment dropped more than estimated when renewable projects lacked strong growth momentum like 2021.

§  Wind power production is lower than estimated.  

Updated business results

In 1Q2022, PC1 recorded net revenue = 1,478 billion VND (-5% yoy) and net profit = 179 billion VND (+125% yoy), thanks to: (1) Revenue from electricity segment increased strongly (+299% yoy), (2) Revenue from industrial segment increased strongly (+932%), although (3) Net revenue and Gross profit from construction activities fell sharply (-57% yoy and -69% yoy),  and (4) financial expenses increased sharply (+102% yoy).