PC1_BUY_TP32800_Upside 22_ Breakthrough Energy_BSC Company Update

Valuation

§  BSC offers a BUY recommendation for PC1 stocks with a target price of VND32,800 per share for 2021 (equivalent to 22.4% upside compared to the price on June 7, 2021) based on a partial valuation method (SOTP).

Forecasting business results

§  BSC forecasts Gross profit and After-tax profit 2021 to reach VND 7,928 billion (+19% yoy) and VND 590 billion (+9% yoy), EPS FW 2021 = 2,934 VND/CP with the assumption: (1) New EPC wind contract value signed in 2021 +40% yoy; (2) The hydroelectric sector continues to benefit from the favorable hydrological situation and (3) Wind power projects start operation from November 2021, bringing PC1 revenue = VND 142 billion.

Investment perspective

§  The power construction and installation segment benefited from the wave of wind power investment and the need to invest in power transmission systems.

§  Hydropower segment grew strongly in 2021 thanks to favorable hydroelectric situation and increased capacity from new plants.

Catalyst

§  Three PC1 wind power plants (144 MW) are expected to be operational in Q3/2021.

Investment risk

§  Weather risks affect hydroelectric array output and the construction of wind powerprojects.

Business update

§  In Q1/2021, PC1 recorded  Gross profit reaching VND1,548 billion (+13% yoy) and After-tax profit reaching VND 80 billion (-10% yoy). Revenue increased due to (1) recording of EPC wind power projects and (2) Revenue of commercial segment +157% yoy thanks to the sale of steel billet.

§  After tax profit in the period decreased by 10% compared to Q1/2020, mainly due to financial costs +17% yoy due to increased borrowing on wind power projects and stopped the interest rate capitalization for hydropower projects in 2020.