PVC [NON-RATED] - Well-positioned to fully capture huge workload from Block B

- We issue a Non-Rated report for PVC with a fair value of VND18,000/share. Our investment thesis consists of (1) near-monopoly drilling fluid supplier benefiting from Block B project, with potential revenue of VND16tn (USD640mn) during 2024-2049; (2) 30% revenue CAGR of technical services (including well-related services & industrial-related services) during 2023-2028F, and (3) a stable & increasing dividend payout due to its net cash position.

- We forecast PVC’s 2024/25F NPAT-MI to jump 33%/80% YoY due to: (1) the recovery in the number of drilling wells from 15 to 17 due to PVN’s guidance of 54% YoY in 2024’s Exploration & Production (E&P) capex, (2) estimated VND130bn contract for Dung Quat Refinery’s 5th Maintenance Plan Package, and (3) expected VND658bn revenue from Block B.

- We forecast PVC’s 2024-28F revenue and reported NPAT-MI CAGR to reach 12% and 38%, respectively, which is fueled by (1) total revenue of VND1.4tn (USD56mn) in drilling fluids services for the Block B project, including 16/17 wells in 2025/26F and 34 wells p.a in 2027-28F, and (2) the further contributions of technical services contracts for oil & gas clients ranging from upstream to midstream and downstream, (3) a GPM assumption of 28% for the drilling fluid segment vs 30-35% in the peak period (2014-2015).