Reason for the big rise in PVS's earnings

According to the Q4 2024 consolidated financial statement, PetroVietnam Technical Services Corporation (HoSE: PVS) generated net revenue of almost VND 9,777 billion, up more than 44% from the same time last year. After deducting the cost of goods sold, PVS's gross profit was more than VND 300 billion, a nearly 36% decline year over year.

However, thanks to a sharp increase in other income to over VND 573 billion, representing a more than 582% increase over the same period last year, as well as profit from joint ventures and associates rising nearly 55% year on year to nearly VND 215 billion, the company's overall expenses, including selling and administrative expenses, increased but had no significant impact on business results.

As a result, by the end of the quarter, the oil and gas services company’s net profit after tax reached nearly VND 705 billion, up almost 56% year-on-year, exceeding the full-year 2024 profit target of VND 660 billion.

Explaining the significant increase in Q4 2024 profit compared to the same period last year, the company’s management stated that, besides higher profits from joint ventures and associates in Q4 2024, other income surged due to the reversal of warranty provisions for certain projects that had fulfilled their warranty obligations to customers and the consolidation of income from the liabilities of a subsidiary that had its debt reduced by suppliers.

PVS recorded sales of over VND 23,880 billion in 2024, up more than 23.2% from 2023, while net profit after tax reached approximately VND 1,412 billion, representing a 33.2% increase. With these achievements, the corporation exceeded its revenue objective by 54% and its profit target for 2024 by roughly 114%.

MBS Securities highlighted in a recent oil and gas sector analysis that crude oil prices may face further problems, as higher demand from India may not be sufficient to offset sluggish demand from China and rising production from non-OPEC countries, particularly the United States.

MBS’s forecast is based on a baseline scenario in which the average Brent crude price stands at $70 per barrel in 2025. While geopolitical conflicts are expected to persist, the actual risk of significant supply disruptions remains limited and is unlikely to provide strong support for oil prices.

Outlook for the Oil and Gas Industry in 2025

In assessing the prognosis for the oil and gas industry in 2025, MBS highlighted that domestic projects in the upstream sector will produce considerable workloads for EPCI contractors, as crude oil prices are projected to continue at levels that sustain exploration and production activities. However, drilling businesses may struggle to achieve significant growth if they do not purchase new rigs, as rig rental rates are expected to remain unchanged owing to oversupply.

In the oil and gas transportation sector, charter rates across most segments are expected to remain stable or even decline. Given the high cost of purchasing crude oil tankers, oil transport companies may seek growth by expanding their fleets through more flexible strategies.

For domestic gas distribution companies, the transition to LNG will remain a priority in 2025 and the medium term, as domestic gas sources continue to decline. Meanwhile, refineries may face a bleak outlook, with stable capacity but refining margins (crack spreads) negatively impacted by weak demand. Fuel distributors, however, may benefit from regulatory changes and more stable oil prices, which could support profitability in 2025.

Regarding PVS, MBS stated that the business has been given all EPCI#1 and EPCI#2 contracts under the Block B - O Mon project, rather than the previously limited awards. This will speed up project execution and enhance income in the Mechanical & Construction (M&C) division.

Gross profit margins for the M&C segment are expected to improve in 2025 as a result of contributions from domestic oil and gas projects such as Block B - O Mon and Lac Da Vang, in which PVS has extensive experience, as well as improved efficiency in offshore wind power projects based on previous project experience. The M&C segment's gross profit margin in 2025 is expected to be 2.2%, 0.7 percentage points more than in 2024.

“We expect PVS’s net profit to grow by 38.2% and 12.2% in FY25-26F, respectively, driven by accelerated progress in the Block B project and new workloads from EPCI contracts in the offshore wind power sector. Delays in the FID process and limited contract awards for the Block B project hindered significant growth in 2024, but with full contract awards now in place, the positive effects will become clearer in 2025,” MBS analysts concluded.