We attended BWE and Thu Dau Mot Water’s (HOSE: TDM) analyst meeting on November 7. The meeting discussed 9M 2022 results, Q4 2022-2023 guidance and the latest developments on BWE and TDM’s associate Gia Tan Water Supply JSC (GIWACO) in Dong Nai Province. Below are our key takeaways.

BWE maintains its FY2022 guidance despite significant VND/USD depreciation risk on its USD-denominated debt (USD45mn). BWE targets revenue of VND3.9tn (+8% YoY) and NPAT-MI of VND750bn (unchanged YoY) in 2022. Moreover, BWE guides for Q4 2022 water sales volume of 46 million cbm (+2% YoY), which is mainly driven by strong residential water volume of 22 million cbm (+11% YoY) thanks to solid demand in Di An Ward, Binh Duong Province that is backed by recent demand from Vietnam National University of HCMC. In 9M 2022, water consumption from the residential and industrial segments increased 9% and 2.5%, respectively. In addition, BWE estimates revenue for and NPAT for the water segment of VND2.3tn and VND583bn, respectively, in 2022. For the waste treatment segment, BWE estimates 2022 revenue and NPAT of VND929bn and VND58bn, respectively. Finally, for the waste water and trading & others segments, BWE estimates NPAT of VND27bn and VND82bn, respectively, which are broadly in line with our current forecasts.

For FY2023, BWE sets conservative guidance for revenue of VND4tn and NPAT-MI of VND760bn. According to BWE, the discrepancy between the increasing revenue (on its 7% YoY sales volume growth assumption) and flat YoY earnings is due to its own provision for further FX translation losses. We believe 2023’s guidance is conservative; however, we see potential downside risk to our 2023 earnings forecast due to a possible slowdown of manufacturing, pending a fuller review. Meanwhile, BWE maintains its expectations for the residential waste treatment tariff to increase 10% in 2023 and water tariff in Binh Duong to increase 3% in 2024. 

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