Volume continues to grow, supporting BWE and TDM’s 2023 profit. This growth will be led by strong residential water demand. We lower our projected 2023 volume growth for BWE from 12% YoY to 7% YoY, which is driven by 9% YoY residential water volume growth and 5% YoY industrial water volume growth. For TDM, we raise our projected 2023 volume to 79 million cbm (+13% YoY) following its 2022 results that beat our expectations. We attribute the stronger volume growth for TDM vs BWE in 2022-2023 to 1) TDM being impacted more severely compared to BWE in 2020-2021, and 2) TDM’s major water plants being in the most populated industrial hub of Binh Duong Province (Di An District), which faces less risk of an economic slowdown compared to other districts.

BWE to acquire a 20%-100% stake in four water companies in Long An Province and one water company in Quang Binh Province, providing potential upside to our valuation. On February 8, BWE announced a BOD resolution to acquire a 20%-100% stake of DNP Long An Water Infrastructure JSC (Long An Water), which possesses the Nhi Thanh water processing plant (capacity of 60,000 cbm/day) and has secured land bank to double its capacity to 120,000 cbm/day — ~15% of BWE’s capacity. According to BWE, Long An Water has a ~50%-60% market share. The price and timeline for this acquisition have not been specified. On February 10, BWE  announced it would acquire 50%-100% stakes in four additional water companies in order to consolidate revenue and profit when these deals are successful. These companies include three in Long An Province (Chau Thanh Urban Construction JSC, Can Giuoc Urban Construction JSC and Bang Tam Water & Environment JSC) and one in Quang Binh Province (DNP Quang Binh Water Infra JSC). Additional details about these acquisitions were not disclosed. The acquisitions are in line with BWE’s strategy to expand its water business beyond southeastern Vietnam to the southwestern and central regions. According to BWE, Long An’s water industry has bright prospects from rapid urbanization and population growth, increasing frequency of drought and saltwater intrusion leading to strong demand for clean water, and a projected 2020-2030F CAGR of 5%. In addition, BWE expects that industrial water demand could double over the next 10 years.  

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