- PVS released Q1 2023 results with revenue of VND3.7tn (USD157mn; -2% YoY) and reported NPAT-MI of VND215bn (USD9.1mn; -1% YoY). The decline in reported NPAT-MI was due to PVS not having significant one-off profit in Q1 2023 as in Q1 2022, which included one-off NPAT of ~VND48bn (USD2.0mn) from asset liquidation.

- Notably, PVS recorded strong Q1 2023 recurring NPAT-MI of VND214bn (USD9.0mn; +27% YoY) due to 1) the gross profit margin of mechanical & construction segment improving to 3.3% in Q1 2023 vs 1.8% in Q1 2022, 2) resilient income from floating oil storage joint ventures (FSO/FPSO JVs) and 3) a 71% YoY increase in financial income. These factors outweighed 1) higher selling, general & administrative expenses (required for developing the offshore wind power business) and 2) a 137% YoY increase in financial expenses that were mainly due to higher interest rates.

- We note that VND157bn (USD6.7mn) of income from FSO/FPSO JVs in Q1 2023 beat our forecast and completed 45% of our full-year projection. As the contract negotiation for FPSO Ruby II is ongoing, we therefore see risk for a retrospective adjustment if the final day rate is lower than the current rate of USD92,500. We conservatively forecast the FPSO Ruby II’s day rate at USD40,000 in 2023. As a result, if PVS extends this contract at the current day rate, it would represent upside to our NPAT forecasts.

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