The company reported Q2 21 revenue of VND3,063bn (-43.6% yoy) while NPATMI came in at VND152bn (-42.8% yoy).
PVS recorded VND10bn for provisions in Q2 21, translating to total provisions of VND20bn in H1 21. Its JV profit was VND151bn in Q2 21, compared to VND129bn in Q2 20.
For 2021, revenue and NPATMI are anticipated at VND13,289bn (-34.1% yoy) and VND796bn (+27.5% yoy), respectively. The company recorded 2021 EPS of VND1,499 and 2021 book value of VND26,256.
We recommend Neutral for the stock with a target price of VND24,400.
Revenue dropped due to the shortage of new EPC contracts while net profit was impacted by the fall of other profit
In Q2 21, revenue decreased by 43.6% to VND3,062bn as the M&C segment had no new EPC contracts. Besides, FSO/FPSO also made an impact on revenue as sales decreased by 65.2% to VND472bn. In term of profit, PVS experienced a drop of 38.3% to VND164bn in Q2, which was impacted by the fall of other profit. Other profit, mainly contributed by the warranty of construction work, came in at only VND10bn, compared to VND154bn in the same period last year. For H1 21, revenue was down 35% yoy to VND5,689bn while NPATMI was VND308bn, down 18.3% yoy. The gross margin improved from 5% (H1 20) to 7.4% (H1 21) but mainly came from the change in booking labour costs. In the first six months, PVS classified some labour costs from COGS to G&A expenses.
Profit from JVs will support 2021 earnings
Without new contracts from the M&C segment and the provision of receivable, we believe that the operating profit will continue to record a loss of VND62bn, which is still than in 2020's loss of VND138bn. On the contrary, profit from JVs will support 2021 earnings as we expect an impressive performance in 2021 of VND674bn thanks to (1) the new contract with FPSO Lam Son (2) full-year contribution from FSO Sao Vang. Besides, PVS will continue to revert the warranty of construction work, supporting other profit to report VND307bn. For 2021, revenue and NPATMI are anticipated at VND13,289bn (-34.1% yoy) and VND796bn (+27.5% yoy), respectively.
Facing gloomy upstream activities in the short term but potential for huge projects in the long term
Recently, PVS was awarded two new projects in Qatar and Myanmar with total expected value of US$500mn. However, the gross margin is likely to be thin in our opinion as PVS is merely a sub-contractor of the Myanmar project while the price for the Qatar project's bid was highly competitive.
However, in the long term, we expect some huge Oil & Gas projects such as Block B, Ca Voi Xanh, Su Tu Trang or Bau Ken, from which PVS can gain thanks to its leading position in the M&C segment. Despite the significant 2021 earnings growth, we see no strong catalysts for PVS in the short term as the company's 2022 prospect is not promising with the current M&C backlog being main profit driver. So we recommend Neutral for the stock with the target price of VND24,400. Plus cash dividend of VND1,000, the total expected return is -2.6%. We not that the oil price rally can push the stock price up, but the fundamentals of the stock remain unchanged.