BWE - Higher-than-expected Q2 2021 earnings - Earnings Flas
  • 2021-07-22T00:00:00
  • Company Research

- BWE released Q2 2021 financial results with revenue of VND774bn (USD34mn; +12% YoY) and NPAT of VND169bn (USD7mn; +44% YoY), which were due to strong growth in the water segment as it was driven by 13% YoY sales volume growth, a 5% YoY increase in the water tariff and lower financial expenses (thanks to not having provision expenses for financial investments this quarter).
- H1 2021 revenue increased 2% YoY to VND1.5tn (USD63mn) while NPAT jumped 37% YoY to VND341bn (USD15mn). We attribute these solid earnings results to 1) strong growth of the water segment (water sales volume growth of 8% YoY and a 5% increase in the water tariff), 2) a lower loss ratio and 3) provision reversals for the financial investment in Binh Duong Production and Trading Goods Corporation (UPCoM: PRT).
- Core NPAT and reported NPAT in 6M 2021 completed 54% and 56% of our respective full-year forecasts. We see potential upside risk to our 2021 forecast due to lower-than-expected depreciation expenses, pending for a fuller review.
- In its Q2 2021 newsletter, BWE announced that it targets 2021 revenue of VND3.5tn (USD152mn; +16% YoY) and reported NPAT of VND600bn (USD26mn; +12% YoY) vs its AGM guidance of VND550bn and our current NPAT forecast of VND608bn (USD26mn).
 

Q2 2021 sales volume recovered with a growth rate of 13% YoY vs 3% YoY in Q1 2021 (H1 2021: 8% YoY) thanks to a recovery of manufacturing actitivies in Binh Duong Province. Despite the potential negative impact of the current resurgence COVID-19 on water sales volume, we still expect water sales volume to accelerate in Q4 2021, leading to full-year 2021 sales volume growth of 10% YoY with 182 million cubic meters.

The waste treatment segment’s earnings trailed our forecast due to delayed revenue booking. The company stated there is ~VND100bn (USD4.3mn) of revenue from this segment to be booked in future quarters.

The wastewater treatment segment’s earnings were in line with our expectation as its gross profit completed 48% of our full-year forecast. 

Depreciation expenses were lower than our estimates. H1 2021 experienced depreciation expenses of VND229bn (USD10mn), accounting for 41% of our full-year forecast.

BWE successfully acquired an additional 20% stake of Gia Tan Water Supply JSC (GIWACO) in Q2 2021. BWE now has a 32% stake in GIWACO. GIWACO has an existing designed capacity of 20,000 cbm/day and targets for 50,000 cbm/day in 2025. GIWACO also provided its 2021-2025 earnings guidance in which it targets to be profitable by 2024.