- 2024-01-31T00:00:00
- Company Research
- PC1 released its Q4 2023 results with revenue of VND2.6tn (+10% YoY) and reported NPAT-MI of VND71bn (-64% YoY). The YoY increase in revenue is due to (1) electric steel pole manufacturing revenue expanding by nearly 4x, (2) the contribution from the nickel mining segment, and (3) substantially higher YoY real estate revenue, which we attribute primarily to commercial real estate sales of ~VND130bn in Q4 2023 vs none in Q4 2022. These factors outweighed 24% YoY lower revenue from the power construction segment amid the sector slowdown, as well as a 12% YoY drop in power generation revenue. Meanwhile, PC1’s earnings plunged YoY in Q4 2023 due to (1) gross profit margins of the power construction and electric steel pole manufacturing segments slumping ~660 bps and ~890 bps, respectively, (2) SG&A expenses more than doubling YoY, and (3) financial expenses increasing 30% YoY.
- In 2023, PC1 recorded revenue of VND7.8tn (-7% YoY) and reported NPAT-MI of VND137bn (-70% YoY), which are equivalent to 99% and 40% of our respective forecasts. We attribute the YoY decline in earnings to (1) lower YoY gross profits from the power construction and power generation segments, which outweighed higher gross profits from the other segments and the addition from the nickel mining business, (2) SG&A expenses increasing 41% YoY due to the full-year consolidation of the Nomura Industrial Park (IP) and the commercial operation of the nickel mine, and (3) 28% YoY higher financial expenses mainly due to the interest expense of the nickel mine and higher interest rates.
- PC1’s 2023 earnings trailed our forecast due to the underperformance of most segments, particularly the nickel mining, power generation, and power construction segments. According to PC1, it exported ~35,000 tonnes of nickel ore and recorded VND722bn in revenue in 2023 vs our forecasts of ~24,000 tonnes (based on our 2023 forecast for pure nickel volume of ~1,800 tonnes and PC1’s guidance for a pure nickel percentage of 7.5% and VND937bn in revenue. We attribute the weak performance to lower accounting volume vs the exported volume as well as a significantly lower price vs the market price (due to the low quality of nickel products which do not meet the standards of PC1’s client). We note that the average LME nickel three-month futures price was ~USD17,500/tonne in Q4 2023 vs USD20,600/tonne in Q3 2023.
- We foresee significant downside risk to our 2024F reported NPAT-MI projection for PC1, pending a fuller review, following weaker-than-expected 2023 results. We currently forecast 2024F revenue of VND10.4tn and reported NPAT-MI of VND675bn.
PC1’s Q4 & 2023 results
VND bn | Q4 2022 | Q4 2023 | YoY | 2022 | 2023 | YoY | % of Vietcap’s 2023F |
Revenue | 2,363 | 2,605 | 10% | 8,358 | 7,803 | -7% | 99% |
Power construction* | 1,499 | 1,137 | -24% | 4,864 | 2,618 | -46% | 109% |
Electric steel pole manufacturing | 88 | 420 | 379% | 645 | 1,165 | 80% | 106% |
Power generation | 471 | 414 | -12% | 1,715 | 1,461 | -15% | 94% |
Real estate | 7 | 133 | 1852% | 51 | 187 | 268% | 82% |
Nickel (57% stake) | 0 | 124 | N.M. | 0 | 722 | N.M. | 77% |
Nomura IP (70% stake) | 80 | 140 | 76% | 80 | 614 | 672% | 96% |
Others | 219 | 237 | 8% | 1,003 | 1,036 | 3% | 103% |
Gross profit | 503 | 449 | -11% | 1,595 | 1,574 | -1% | 87% |
Power construction* | 186 | 66 | -65% | 517 | 237 | -54% | 88% |
Electric steel pole manufacturing | 17 | 44 | 159% | 54 | 116 | 116% | 111% |
Power generation | 284 | 223 | -21% | 961 | 736 | -23% | 93% |
Real estate | 6 | 53 | 790% | 27 | 79 | 192% | 83% |
Nickel (57% stake) | 0 | 34 | N.M. | 0 | 231 | N.M. | 66% |
Nomura IP (70% stake) | 13 | 22 | 63% | 13 | 139 | 938% | 88% |
Others | -2 | 8 | N.M. | 22 | 36 | 64% | 104% |
SG&A expense | -63 | -136 | 114% | -277 | -391 | 41% | 106% |
Operating income | 441 | 313 | -29% | 1,318 | 1,182 | -10% | 82% |
Financial income | 42 | 58 | 38% | 95 | 195 | 105% | 103% |
Financial expense | -165 | -215 | 30% | -767 | -980 | 28% | 98% |
i/w: interest expense | -194 | -208 | 7% | -605 | -844 | 39% | 97% |
i/w: FX loss | 43 | 0 | N.M. | -138 | -108 | -21% | 81% |
Income from JVs | -7 | 4 | N.M. | 1 | 2 | 126% | N.M. |
Other income | -8 | -4 | N.M. | -41 | -18 | -57% | 128% |
PBT | 302 | 156 | -48% | 605 | 381 | -37% | 62% |
NPAT before MI | 285 | 137 | -52% | 537 | 297 | -45% | 56% |
Minorities interest | -88 | -67 | -24% | -77 | -160 | 108% | 88% |
NPAT-MI | 197 | 71 | -64% | 460 | 137 | -70% | 40% |
NPAT-MI, adjusted for one-off gain/loss | 163 | 71 | -56% | 597 | 223 | -63% | 49% |
Source: PC1, Vietcap (* Power-related construction segment includes grid erection & installing activities and EPC contracts for renewable energy projects. ‘Others’ mainly includes low-margin machinery trading).
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