- 2024-01-30T00:00:00
- Company Research
Q4 2023 & 2023 results:
- PVD announced robust Q4 2023 results with net revenue of USD73.8mn (VND1.7tn, +17.8% YoY) and reported NPAT-MI of USD8.2mn (VND195bn, +2.6x YoY). We attribute strong earnings growth in Q4 2023 to 1) PVD’s average jack-up (JU) day rate increasing 35% YoY to USD92,700 in Q4 2023 and 2) shared profit from associates jumping 55% YoY to USD1.7mn.
- Q4 2023 drilling gross profit margin improved to 26.7% (higher than the peak 2013 level at 25.7%), which is due to the high day rate in Q4 2023 and clients’ payments for the costs of rig mobilization and demobilization.
- 2023 reported NPAT-MI fulfilled 143% of our 2023F forecast. In 2023, PVD recorded net revenue of USD245.5mn (VND5.8tn, +5% YoY) and reported NPAT-MI of USD24.5mn (VND579bn) vs a net loss of USD4.4mn (VND103bn) in 2022. PVD’s average JU day rate rose 30% YoY to USD78,700 in 2023 (equivalent to 99% of our forecast), while its drilling fleet operated at 98% in 2023 vs 85% in 2022. We attribute PVD’s outperformance vs our forecast to 1) a lower-than-expected depreciation expense (USD36mn vs projected USD40mn), 2) good operating cost management of the drilling segment, and 3) the surge in shared profit from associates in Q4 2023.
- We estimate recurring NPAT-MI of USD24.4mn in 2023 vs a minimal recurring NPAT-MI of USD3.8mn in 2022, completing 142% of our forecast.
Analyst Meeting Note: Investment to boost growth further
- Management has a strong view of PVD’s bright outlook and the Block B project. In 2024, PVD will focus on investment in 1-2 new rigs which beat our expectation due to current scarce rig supply. In 2025-2026, management expects a strong recovery of domestic oil & gas projects, contributing to earnings of PVD and its joint ventures (especially PVD Baker Hughes – a 52%-stake joint venture of PVD). Furthermore, management is confident that the Block B project will be carried out.
- Anticipated in Q4 2024, the near-term launch of new rig investment is projected to yield a four-year payback period with approval from PetroVietnam Group imminent.
- PVD plans to invest in 1-2 rigs vs one rig as announced in early 2023.
- Management is confident the company will be able to buy one new jack-up rig soon. The estimated capex for this new rig (second-hand) is less than USD90mn (which is 25% lower than our estimates). The company expects to lease this rig in 2024 at an estimated day rate of USD120,000 (~10% higher than our estimates). PVD expects a payback period of 3-4 years.
- PVD plans to establish a joint venture based in either Vietnam or a foreign country to invest in another rig. Further details have not yet been released.
- PVD plans to invest in equipment for the growing well-related services segment, which is to prepare for potential well-related jobs from Block B and overseas market. There are around 900 wells in the gas fields of the Block B project, which represents strong demand for well-related services.
- Continued upbeat global jack-up market outlook. According to PVD, the global jack-up rig utilization rate reached a record high at 86% as of January 2024. This is due to increasing drilling demand (mostly from national oil companies in the Middle East) amid continued limited rig supply. The projected rig surplus in the global jack-up market is around 30 rigs throughout April 2024 to August 2025 (the historical bottom), which should boost day rates further.
- We see upside potential to our 2024-2028F NPAT forecast, pending a fuller review. PVD expects nominal impacts of the risk of the plunge in the price of oil on its earnings as most of its rigs have secured long-term contracts at nearly fixed day rates. We currently have an OUTPERFORM rating for PVD with a target price of VND31,000/share.
PVD’s Q4 & 2023 results
USD mn (unless stated) | Q4 2022 | Q4 2023 | YoY | 2022 | 2023 | YoY | % of Vietcap’s 2023F |
Average Brent oil price (USD/bbl) | 89 | 83 | -7% | 99 | 82 | -17% | 99% |
Average jack-up day rate (USD/day) | 68,700 | 92,700 | 35% | 60,700 | 78,700 | 30% | 99% |
Jack-up utilization rate % | 92% | 91% | -0.5 ppts | 85% | 98% | 13.3 ppts | 102% |
Revenue | 62.7 | 73.8 | 18% | 233.4 | 245.5 | 5% | 112% |
COGS | -51.5 | -57.0 | 11% | -208.5 | -190.6 | -9% | 110% |
Gross profit | 11.2 | 16.8 | 51% | 24.8 | 54.9 | 121% | 119% |
Sales & marketing exp | -0.4 | -0.5 | 29% | -0.8 | -1.0 | 36% | 167% |
General admin exp | -7.7 | -6.4 | -16% | -21.2 | -22.0 | 4% | 111% |
Operating profit (EBIT) | 3.1 | 9.9 | 221% | 2.9 | 32.0 | 1010% | 124% |
Financial income | 1.5 | 1.5 | 3% | 5.1 | 5.7 | 12% | 94% |
Financial expenses | -3.7 | -3.3 | -12% | -13.4 | -16.6 | 23% | 85% |
In which: interest expense | -2.6 | -2.6 | 1% | -7.2 | -10.6 | 47% | 97% |
Shared profit from associates | 1.1 | 1.7 | 55% | 1.9 | 2.8 | 44% | 145% |
Net other income/loss | -0.5 | -0.4 | -12% | -2.4 | 3.9 | N.M. | 90% |
Profit before tax (PBT) | 1.6 | 9.3 | 497% | -6.0 | 27.7 | N.M. | 149% |
Income tax expenses | 0.7 | -1.1 | N.M. | -0.7 | -4.9 | 594% | 131% |
NPAT | 2.3 | 8.2 | 258% | -6.7 | 22.8 | N.M. | 154% |
Minority interest (MI) | 0.0 | 0.0 | N.M. | 2.2 | 1.6 | -27% | 70% |
Reported NPAT-MI | 2.3 | 8.2 | 264% | -4.4 | 24.5 | N.M. | 143% |
Recurring NPAT-MI (*) | 4.0 | 8.7 | 115% | 3.8 | 24.4 | 549% | 142% |
EBITDA | 3.1 | 18.7 | 510% | 36.5 | 68.1 | 87% | 103% |
Source: PVD, Vietcap. Note: (*) Recurring NPAT-MI excludes the impact of provisions for PVEP’s bad debts, reversal of withholding tax (which occurs when jack-up rigs work in Malaysia), science fund reversal, forex losses, and one-off profit.
Powered by Froala Editor