What propects for PVT?

1H24 recap

PVT’s net profit in 2Q24 increased by 24.8% QoQ but declines 6.7% yoy due to the other expenses of Nord Hakata and Pacific Hope’s accounting policy changes. In 1H24, PVT’s net profit grew by 5.7% yoy. In 3Q24, PVT has liquidated 1 chemical tanker (PVT Synergy) with estimated other income of VND 150 bn.

For fleet expansion, PVT also received 1 LPG carrier (Hai Phong Gas) and 1 bulk carrier (PVT Topaz) in 3Q24, which helps the company’s vessel fleet reach 54 vessels at the end of 3Q24. Relatively firm time charter rates with re-contribution from bulk carrier segment (vessels were on docking in 2023), along with one-off profit from vessel liquidation, are believed to support PVT’s earning growth in 3Q24.

Vessel expansion

In the context of more balanced demand-supply tanker market, MBS expects time charter rates to remain stable (crude tanker, bulk carrier) or slightly decrease (product tanker, LPG carrier) in all transportation segment. The earnings growth driver for PVT in the coming years mainly comes from fleet expansion, as the company has a solid financial position and flexible expansion plan.

As crude tanker prices keep reaching a new high level, PVT has changed their plan to expand the oil/chemical tanker and bulk carrier. MBS expects net profit of PVT to increase 14.3%/4.9%/4.3% in FY24-26F thanks to this reason. It is noted that the other profit from vessel liquidation may support PVT’s earning growth in 2024.

Investment thesis

Increasing long-haul Atlantic-Asia trade and global oil demand may support the crude tanker time charter rate to remain stable at a firm level in the 2024-2025 period. This may help PVT’s gross profit margin for the crude tanker segment in 2024-2026F to reach 35.2%, 34.9%, and 33.7%, respectively.

Besides, PVT’s bulk carrier segment is likely to make a turning point in 2024 thanks to stable time charter rates and vessels are no longer on docking. MBS expects full-year gross profit for PVT’s bulk carrier segment to reach VND 115 bn in 2024 (2023: loss of VND 67 bn), and increase 16.9%/4.6% in 25F-26F.

In addition, fleet expansion speed is anticipated to be better in 2024-2025 thanks to stable prices of oil/chemical tankers and bulk carriers. If the current favourable environment is here to stay, PVT’s fleet may expand to 70 vessels in 2029, with the main contribution from oil/chemical tankers.

PVT stock is currently trading at trailing EV/EBITDA of 4.85x, which are both lower than historical 3-year average (5.25x) and 5-year average (5.00x). Relatively low valuation and firm business outlook in FY24FFY25F may imply favorable timing to invest in this stock. The 1-year target price for PVT is VND 33,400 per share, which is derived from two methods: FCFF and EV/EBITDA, implying a 18.4% upside from the closing price on October 17, 2024.

MBS rolls forward its valuation to mid-year 2025 base and increases its EPS projection for 24F-25F by 1.7% and 9.4%, respectively, thanks to better assumptions of fleet expansion coupled with relatively stable time charter rates of all transportation segments. Target EV/EBITDA ratio used in MBS’s valuation is 3.5x, which is 2 std lower than the average 5-year EV/EBITDA, as it believes the expectation for PVT’s fleet expansion speed has been partly reflected in the market price of PVT. Thanks to growing vessel fleets in the coming years, this company is likely to improve its earnings and EBITDA outlook.