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PVS - Growth potential from the M&C backlog of key projects

Using a combination of 50:50 discounted cash flow and P/E comparison methods, we determine the fair value of PVS shares over the next year to be VND37,900, equivalent to an expected return of 45%.
However, the stock could be valued higher with a higher risk appetite.
In 2025, the main growth driver for PVS will come from the M&C segment as it recognizes revenue from key projects.
• In 2025, we expect PVS to achieve revenue of VND 33,317 billion (+39.5% YoY) and NPAT-MI of VND1,193 billion (+1% YoY). The main growth driver is the M&C segment, while other businesses segments are expected to maintain stable momentum. We estimate that PVS will record revenue of USD937 million from M&C projects, with offshore projects contributing over 96% of the revenue, including key projects such as Block B - O Mon, Yellow Camel, and offshore wind projects (Greater Changhua and Bantical Phase 2).
• However, under a conservative assumption, we estimate that PVS will consolidate nearly VND600 billion in expenses from its subsidiary PSB this year, including VND460 billion in port rental costs at Sao Mai - Ben Dinh and VND140 billion in late payment penalties.
The recognition of these extraordinary expenses will have negative impact on PVS's business results in 2025. Excluding these extraordinary expenses, the company's NPAT-MI is estimated to grow by 13.1% YoY. Profit and loss from joint ventures and associates are expected to grow strongly from 2027 onwards. This item has contributed over 45% of PVS's pre-tax profit over the past 10 years. We estimate that income from this item will grow at a CAGR of 4.8% during 2025-2029, thanks to positive contributions from FSO Yellow Camel and FSO Block B - O Mon, which will come into operation from 2027.
Another bright spot for PVS is the financial income from the company's ample cash reserves. This is estimated to contribute an average of 33.7% of PVS's pre-tax profit during 2025-2029.
Overall, during 2025-2029, we expect PVS to return to its prime with a CAGR of revenue and NPAT-MI of 10.7% and 8.5%, thanks to an attractive M&C backlog and growth from auxiliary business segments in line with M&C activities, creating an overall positive picture for the company in the coming years.
Risks
We believe the biggest risk for PVS is legal risk, in case legal issues at the projects could delay project progress and significantly affect future cash flow.