- 2024-01-29T00:00:00
- Company Research
- BWE announced its Q4 2023 results with net revenue of VND1.1tn (+8% YoY) and NPAT-MI of VND145bn (-13% YoY). We attribute the YoY decline in Q4 2023 NPAT-MI mainly to 1) a surge in financial expenses YoY and 2) net loss of the waste treatment and wastewater treatment segments. These outweigh a 42% YoY growth in gross profit (partly from the contribution of newly acquired subsidiary – Biwase Long An) as well as a 195% YoY jump in shared profit from associates.
- In 2023, BWE recorded net revenue of VND3.5tn (+1% YoY) and NPAT-MI of VND672bn (-10% YoY), which are equivalent to 99% and 100% of our respective forecasts. We view the divergence in revenue growth and NPAT-MI growth as caused by 1) 1.7x higher financial expenses YoY (given 35% higher total debts YoY standing at VND5.4tn, mainly for M&A deals, higher interest rates, and FX loss), 2) net loss of the wastewater treatment segment (we note that VND47bn of revenue from the wastewater treatment segment was not recorded in 2023 due to incomplete paperwork), 3) poor performance of the waste treatment segment (due to a higher depreciation expense and interest expense for the new capacity), and 4) 16% YoY higher SG&A expenses (due to M&A).
- Water supply segment delivered resilient gross profit growth despite weak volume. Core NPAT-MI of the water supply segment decreased 11% YoY to VND516bn in 2023, which we attribute to a surge in interest expenses outweighing the resilient gross profit growth of 14% YoY with 1% YoY volume growth. BWE estimated 2023 water sales volume to increase 1% YoY to 184 million cbm, amounting to 99% of our volume forecast (185 million cbm; +2% YoY).
- Waste treatment segment recorded a minimal core NPAT-MI of VND4bn (-67% YoY), achieving 58% of our forecast.
- Wastewater treatment segment suffered from a minimal net loss of VND5bn vs our forecast for a net profit of VND5bn.
- BWE raised its stake in Biwase Long An to 94.54% on December 31, 2023, from 90.1% at the initial acquisition date (May 30, 2023). BWE spent VND320bn on acquiring the additional shares. Biwase Long An executed a rights issue at VND10,000/share to double its share capital and finance for doubling its capacity from 60,000 cbm/day to 120,000 cbm/day. This increased BWE’s total spending on Biwase Long An to VND795bn.
- Biwase Construction – Electricity JSC (BIWELCO) — a 52%-stake subsidiary of BWE — spent VND31bn on acquiring a 41.9% stake in Biwase Quang Binh on October 14, 2023. BWE shares 21.79% of the economic benefit in Biwase Quang Binh.
- BWE announced the date of March 25, 2024, to hold its AGM. The AGM will obtain shareholders’ opinions on raising share capital by using 2023 retained earnings. At the 2023 AGM, BWE planned to pay a 14% stock dividend to retain cash for M&A but expected to resume cash dividend payments from 2024.
- We see slight downside risk to our 2024F NPAT forecast, pending a fuller review due to slightly-lower-than expected 2023 water sales volume. We currently have a BUY rating for BWE with a target price of VND52,100/share.
BWE’s Q4 & 2023 results
VND bn | Q4 2023 | YoY | 2023 | YoY | % of Vietcap’s 2023F |
Water sales volume (million cbm) | 46 | 1.8% | 184 | 1.3% | 99.3% |
Revenue | 1,128 | 8.1% | 3,526 | 1.2% | 99.1% |
Water supply | 623 | 13.7% | 2,321 | 7.5% | 99.8% |
Waste treatment | 320 | 17.5% | 711 | 0.6% | 105.8% |
Wastewater treatment | 8 | -75.0% | 72 | -52.5% | 77.3% |
Trading & others | 177 | -7.5% | 422 | -9.5% | 90.5% |
COGS | -649 | -8.1% | -1,964 | -4.8% | 95.2% |
Gross profit | 479 | 42.1% | 1,561 | 9.9% | 104.6% |
Water supply | 335 | 26.0% | 1,298 | 14.3% | 101.3% |
Waste treatment | 69 | 100.5% | 111 | -2.0% | 129.2% |
Wastewater treatment | -1 | N.M. | 11 | -72.9% | 45.6% |
Trading & others | 76 | 153.4% | 142 | 6.7% | 138.7% |
SG&A expenses | -177 | 24.1% | -582 | 16.0% | 110.2% |
Operating profit | 303 | 55.1% | 979 | 6.5% | 101.5% |
Financial income | 19 | -11.3% | 126 | 21.4% | 91.2% |
Financial expenses | -174 | 396.0% | -394 | 74.8% | 99.5% |
In which: Interest expenses | -129 | 168.9% | -344 | 101.8% | 98.3% |
Shared profit/loss from associates | 22 | 195.1% | 39 | 115.9% | 104.9% |
Other income/loss | 3 | -73.9% | 9 | -61.9% | N.M. |
Profit before tax | 172 | -13.5% | 759 | -9.4% | 102.1% |
NPAT before MI | 151 | -11.4% | 680 | -8.9% | 100.4% |
Reported NPAT-MI | 145 | -13.4% | 672 | -9.5% | 100.4% |
Core NPAT-MI breakdown (*) | 190 | 11.7% | 721 | -9.5% | 100.7% |
Water supply | 87 | -25.5% | 516 | -11.2% | 96.9% |
Waste treatment | -6 | N.M. | 4 | -67.2% | 57.9% |
Wastewater treatment | -4 | N.M. | -5 | N.M. | N.M. |
Trading & others | 113 | 127.4% | 206 | 12.0% | 119.9% |
Source: BWE, Vietcap (* Excluding forex loss and one-off)
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