Water Sector - Sector to see limited impact from US reciprocal tariff

We lower our projection for both BWE & TDM’s 2025-2029F aggregate volume by 2%. BWE had Q1 2025 volume slightly weaker than our expectation. Specifically, BWE’s Q1 2025 volume was 49.3 million cubic meters (+4.8% YoY), compared to our previous full-year forecast of 10%. TDM’s Q1 sales volume was 15.7 million cubic meters, +3% YoY vs our previous full-year forecast of +5% YoY, completing 21% of our previous 2025 forecast.

Management expects limited impact from the US reciprocal tariff on water consumption. 1) Even though FDI plays an important role in Binh Duong’s economy (~50% of investment capital), management expects solid consumption from the residential segment as well as the domestic industrial segment. 2) Furthermore, they expect a reasonable tariff for Vietnam vs peers after negotiations.

We increase our target price (TP) for BWE by 1% to VND53,200/share but downgrade our rating from OUTPERFORM to MARKET PERFORM. Our higher TP is mainly due to the positive impact of rolling our TP horizon from end-2025 to mid-2026, which outweighs a 5.9% decrease in our aggregate NPAT-MI forecast (respective cuts of -4%/-7%/-6%/-6%/-5% in 2025/26/27/28/29F). Our lower aggregate 2025-2029F NPAT-MI forecast reflects a 2% reduction in water sales volume in 2025, resulting in a 2% decrease in aggregate sales volume for the forecast period and higher projected G&A. These factors outweigh a 16.7% reduction in the 2025 input price from TDM (~30% of BWE’s water volume input) (details on page 7).

We decrease our target price (TP) for TDM by 1% to VND57,300/share and downgrade our rating from OUTPERFORM to MARKET PERFORM. The revised TP reflects (1) an 18.6% decrease in our aggregate 2025-2029F NPAT-MI forecast with respective changes of -27%/-13%/-15%/-18%/-21% for 2025/26/27/28/29F, which slightly outweighs (2) a new contribution from Phu My Vinh, (3) a 1.1% higher valuation for BWE, and (4) a higher valuation for DNW and GIWACO. Our lower aggregate 2025-2029F NPAT-MI forecast is primarily due to a 2% decrease in water sales volume in 2025, resulting in a 2% decrease in aggregate sales volume for the period, and combined with a 16.7% decrease in 2025 ASP for BWE (details on page 19).