BWE - Strong water segment outweighs low waste segment profitability - Earnings Flash
  • 2024-10-28T00:00:00
  • Company Research
  • BWE released its 9M 2024 results with revenue of VND2.7tn (+15% YoY) and reported NPAT-MI of VND497bn (-6% YoY). These figures are equivalent to 70% and 65% of our respective full-year forecasts. 
  • Excluding forex losses, we estimate BWE’s 9M core NPAT-MI to be VND564bn (+7% YoY), completing 67% of our full-year forecast and is broadly in line our expectation as there was VND239bn of unrecorded revenue from the wastewater and waste treatment segments due to incomplete paperwork, which we expect to be recorded in Q4.
  • 9M core NPAT grew 7% YoY as the water segment’s NPAT increased 9% YoY and the trading & other segment’s NPAT increased 39% YoY. These results outweigh the temporary loss of the waste and wastewater segment. 
  • Regarding Q3 2024 results, revenue was VND942bn (+12% YoY) and reported NPAT-MI was VND182bn (+3% YoY). The strong growth in Q3 2024 was also driven by the water supply segment, with NPAT from water supply increasing by 9% YoY due to an 8.8% rise in water sales volume.
  • We foresee slight downside risk to our 2024 earnings forecast, pending a fuller review. This is mainly due to (1) lower-than-expected earnings from waste treatment’s NPAT-MI with a delay in the water tariff hike and (2) higher-than-expected SG&A outweighing (3) higher-than-expected NPAT-MI from the water supply segment, supported by higher-than-expected water sales volume (9M volume completes 76% of our full-year forecast). In our June 2024 Update Report, we expected the residential waste tariff for waste treatment segments to increase 20% in early Q4. However, there have been no signs of the anticipated tariff increase to date, so we have to factor in the potential delay of the residential waste tariff hike into our upcoming earnings forecast.
  • M&A Saigon-Can Tho Water JSC to increase its market share in Can Tho further: In August, BWE spent VND23bn to acquire a 47% stake in this company. In addition, on October 23, 2024, BWE & its partner raised their stake to 65%, renaming it BIWASE Can Tho (Biwaco). BWE & its partner also double the share capital of Biwase Can Tho to VND100bn to construct a water plant in Can Tho with a capacity of 50,000 cbm/day, starting with Phase 1 at 25,000 cbm/day and with commercial operation scheduled by 2025. 
  • We currently have an OUTPERFORM rating for BWE with a target price of VND48,500/share.

BWE’s 9M 2024 results

VND bn

(unless stated)

Q3 2023

Q3 2024

YoY %

9M 
 
2023

9M
 
2024

YoY %

% of Vietcap’s 2024F

Water sales volume 

(million cbm) 

46

50

7.5%

137

149

8.8%

76%

Revenue

840

942

12.1%

2,398

2,768

15.4%

70%

      Water supply & distribution 

596

617

3.4%

1,698

1,945

14.5%

77%

      Waste treatment 

156

146

-6.7%

391

382

-2.2%

51%

      Wastewater treatment 

6

0

-95.3%

64

1

-98.9%

1%

      Trading & others 

82

180

118.9%

246

441

79.6%

87%

COGS 

-474

-548

15.6%

-1,316

-1,570

19.3%

71%

Gross profit 

367

395

7.6%

1,082

1,198

10.7%

70%

      Water supply & distribution 

338

354

4.6%

963

1,117

16.0%

77%

      Waste treatment 

9

7

-18.9%

42

19

-55.5%

13%

      Wastewater treatment 

0

0

360.4%

11

-1

-112.7%

-3%

      Trading & others 

20

34

70.2%

67

64

-3.6%

70%

SG&A expenses 

-142

-171

20.5%

-406

-469

15.6%

78%

Operating profit 

225

223

-0.5%

676

729

7.8%

65%

Financial income 

44

53

19.8%

107

116

8.3%

96%

Financial expenses 

-86

-79

-7.8%

-220

-301

36.7%

71%

In which: Interest expenses 

-86

-70

-17.7%

-215

-217

0.9%

63%

In which: FX loss 

4

8

93.4%

-1

-67

7821.6%

84%

Shared profit from associates 

10

14

40.6%

17

18

3.5%

48%

Other income/loss 

2

2

22.9%

6

7

18.5%

N.M

Profit before tax 

195

214

9.6%

587

569

-3.0%

67%

Income tax expense 

-17

-22

32.5%

-58

-58

0.6%

75%

NPAT before MI 

178

191

7.5%

529

511

-3.4%

66%

Minority interest 

-1

-9

729.0%

-2

-14

598.1%

156%

Reported NPAT-MI 

177

182

2.9%

527

497

-5.7%

65%

Core NPAT breakdown, excluding FX loss and one-off

173

175

0.8%

528

564

6.9%

67%

      Water supply & distribution 

143

156

9.1%

429

467

8.9%

81%

      Waste treatment 

3

-17

-644%

10

-14

-233%

-30%

      Wastewater treatment 

-4

-5

N.M.

-1

-14

N.M

N.M.

      Trading & others 

30

39

30.5%

90

125

39.2%

59%

Source: BWE, Vietcap


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