PVD_BUY_TP 27,100_Upside 32.2_Transformed by the recovery of the drilling market _BSC_Vietnam company update

Valuation

• BSC changed its recommendation for PVD from track to BUY, with a target price for 2023 of 27,100 VND/CP (equivalent to an upside of 32% compared to the closing price on 09/09/2022 of 20,500 VND/CP) based on the P/B and EV/EBITDA methods with a weighting of 50% - 50%.

Forecast business results

• BSC forecasts PVD's DTT and LNST in 2022 to reach VND 5,698 billion (+43% YoY) and VND 47 billion (+28% YoY), EPS FW = VND 60/CP assuming (1) The performance of self-lifting rigs will reach an average of 81%, (2) The average rig rental price in 2022 will reach 67,000 USD/day (+30% YoY), respectively, and (3) Set aside an additional VND 54 billion receivable from KrisEnergy partners.
• In 2023, BSC forecasts PVD's DTT and LNST to reach VND 6,681 billion (+17% YoY) and VND 218 billion (+364% YoY) respectively, EPS FW = VND 281/CP assuming (1) The average oil price in 2023 will reach USD 90/barrel (-10% YoY), (2) The performance of self-lifting rigs will reach an average of 88% for the whole year, and (3) The average rig rental price in 2022 increased to $78,000/day (+15% YoY).

Invesment perspectives

• Self-lifting rig performance rebounded thanks to improved demand, while supply was difficult to add in the short term.
• Self-lifting rig day rents are expected to increase to over $70,000 from the end of 2022
• The Block B – O Mon project chain, if implemented, can bring a great source of work for PVD in the period of 2023 – 2024.

Risk

• The sharp fluctuations in oil prices affect PVD's rig rents and profits.
• On average, self-lifting rigs were lower than expected.

Business update

• In Q2/2022, PVD recorded a DTT of VND 1,505 billion (+35% YoY), and a loss after tax of VND 74 billion (same period profit of VND 43 billion) due to (1) a sharp decrease in gross profit, even the drilling services segment had a gross loss of nearly VND 40 billion, (2) profit from LDLK decreased by 61% YoY due to reduced workload, and (3) financing costs increased by VND 36 billion (+84% YoY) due to exchange rate losses.
• Accumulated in 6M2022, PVD's DTT reached VND 2,651 billion (+60% YoY), completed 56% of customers in terms of revenue, and recorded a net loss of VND 149 billion (same period loss).