• We attended PC1’s annual general meeting (AGM) on April 26, 2024. Overall, management is confident in achieving and beating its 2024 guidance.
• PC1 set its 2024 business guidance with revenue of VND10.8tn (+39% YoY) and conservative NPAT before MI of VND525bn (+73% YoY), fulfilling 99%/66% of our respective forecasts. The divergence between its bottom-line guidance and our forecast is mainly due to management’s conservative assumptions on forex loss. Its Q1 core NPAT is VND147bn (+9x YoY) and completes 24% of our full-year forecast while reported NPAT completes 14% of our 2024F projection due to significant forex loss.
• We see slight downside risk to our 2024 reported NPAT forecast due to potentially lower revenue and margin from the power construction segment as well as higher-than-expected forex loss, which might outweigh stronger-than-expected nickel earnings and shared profit in Q1 (completing 46% of our full-year forecast), pending a fuller review. Specifically, the urgency in meeting the deadline of the 500kv line project may drive higher costs, resulting in a lower GPM for the power-related construction segment. 
• At the AGM, the Chairman shared information about the 2023- 2030 strategy, in which the company’s first priority is developing more industrial parks and commercial real estate, its second priority is expanding EPC contracting services of renewable energy projects abroad (i.e., Australia, Laos), and the third priority is renewables power capacity expansion. We maintain our forecast for an additional 150 MW of wind power in 2026 as we expect the release of new mechanism prices in H2 2024 to attract investment return to the renewable power sector.
• Shareholders approved to pay 2023 dividends in stock (15% ratio, a shareholder of 100 shares will receive 15 additional shares) to be implemented in Q4 2024.
• PC1 set its 2024 dividend ratio of 15% (not specified whether it would be cash or stock but likely to be stock according to the Chairman) vs our forecast of no dividend.
• We currently have a MARKET PERFORM rating for PC1 with a target price of VND28,600.

Weak power-related construction in Q1. Power construction gross profit increased by 24% YoY to VND54bn, completing 12% of our full-year forecast while its GPM slightly increased by 10bps to 9.6%. Gross profit of electricity steel pole manufacturing surged by 11.0x times to VND29bn from Q1 2023’s low base, fulfilling 18% of our full-year projection. In the AGM, power construction revenue was guided at VND5tn, achieving 100% of our full-year forecast, whereas VND2.1tn will be recorded in Q2 2024 for the completion of PC1’s workload for the 500kv line 3 project. However, despite consistently being the earliest contractor to complete milestones in the 500kV project, PC1 is currently limiting signing new contracts in this project due to concerns about not meeting the deadline, amidst tremendous scheduling pressure from the investor as well as strained material supply. Overall, we foresee moderate downside risk to our 2024F earnings forecast for the power construction segment which might be due to lower-than-expected revenue from the third national transmission line. 

Strong nickel segment in Q1. PC1 guides for revenue and NPAT of VND1tn and ~VND200bn for the nickel segment in 2024. The guided NPAT of VND200tn is 63% higher than our projection mainly due to the expected higher quality and   6% higher ASP (guided USD17,000/tonne vs projected USD16,000/tonne). In Q1 2024, the nickel segment achieved revenue and gross profit of VND478bn and VND135bn, respectively, fulfilling 44% and 46% of our respective 2024F projections.

PC1’s Q1 2024 results 

Source: PC1, Vietcap (* Power-related construction segment includes grid erection & installing activities and EPC contracts for renewable energy projects. ‘Others’ mainly includes low-margin machinery trading.)

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