We maintain our volume forecast for BWE and TDM at a CAGR of 9.6% over 2023-2028F. In Q1 2024, BWE’s volume grew 8% YoY, completing 24% of our 2024 forecast while TDM’s volume grew 4% YoY, completing 21% of our full-year forecast. In 2024, we forecast volume growth of 5% for both companies based on managements’ guidance and our expectation for Vietnam and Binh Duong Province’s GDPs recovering to 6.5% and 8.0%, respectively, which should support water demand.

Binh Duong’s final draft master plan guides for water capacity to double by 2030 which implies huge demand growth. Binh Duong has set its water capacity to rise to 1,500,000 cubic meters per day (cbm/day) by 2030 vs 760,000 at end-2023. This implies a CAGR of 10.7% over the next seven years. The master plan thus poses huge potential growth for both BWE and TDM’s water generation capacity and explains both companies current continued investments in capacity expansion. BWE recently secured a license to increase its Tan Hiep water plant’s capacity from 220,000 cbm/day to 370,000 cbm/day. We forecast TDM’s capacity to nearly triple by 2028. This capacity expansion is not capital intensive as both companies secured cheap land bank years ago.

Water tariff increase of 5% p.a. to be approved at the end of 2024 represents slight upside to our earnings forecast. According to Mr. Thien, Chairman of BWE, their water tariff hike proposal of 5% p.a is expected to be approved at the end of this year, which is slightly higher than our assumption (3% increase p.a.) and six months sooner than our forecast (mid-2025). We see slight upside potential to our 2025-2028F NPAT-MI forecast and valuation because of the sooner-than-expected water tariff hike and higher-than-expected tariff increase rate. However, we still hold a conservative view now, waiting for more developments.

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