BlockBThoughtPiece - 20240520

Sector thought piece
Update Report
Energy Sector
Industry Energy Full EPCI contract award to trigger Block B’s official start
Report Date May 20, 2024
Block B has made several milestones which ensure upstream & midstream execution. 1) On
March 28, 2024, Mitsui Oil Exploration Co., Ltd. (“MOECO”) issued a final investment decision
(FID). Its cash injection of USD740mn encompasses both the upstream and midstream of Block
Phuoc Duong B’s phase 1 (we estimate total capex of USD3.4bn). 2) On April 2, the Government approved the
Analyst execution plan of PDP VIII, which targets COD of O Mon II, III & IV power plants in 2027/2030/2028
phuoc.duong@vietcap.com.vn to use Block B gas feedstock. 3) In addition, in VCB’s recent AGM, it announced plans to disburse
+8428 3914 3588 ext.135
~USD1bn of funds for the Block B project from Q2 onwards. 4) According to PVS’s CEO,
Duong Dinh PetroVietnam Group might proceed with the project without issuing an FID (while information
Associate Director from Thai partner PTTEP is not yet available). 5) According to industry players, related parties
duong.dinh@vietcap.com.vn agreed on Block B’s gas price of USD12-14/MMBTU. Gas contracted volume is ~90%. Meanwhile,
+8428 3914 3588 ext.140
power contracted volume will be solved via revisions to several circulars in 2025-2026, which
allow O Mon power plants to be outside the competitive generation market.
We maintain our forecast for Block B’s official groundbreaking at the end of June 2024. On
May 12, the Prime Minister visited Can Tho Province and stated that investment procedures of
the Block B project have basically been completed and Block B is expected to meet its first gas
deadline.
We expect the signing of full EPCI (Engineering Procurement Construction & Installation)
#1,2,3 to happen before June 30 to trigger Block B’s official start. Previously, in Q4 2023, PVS
was awarded the three contracts of Block B (EPCI#1,2,3, total value of USD1.1bn for PVS) via
receiving a Limited Letter of Agreement (LLOA) (EPCI#1-2 issued by Phu Quoc POC, EPCI#3
issued by Southwest Pipeline Operating Company, SWPOC, the operator of the midstream
segment of the Block B project, page 7). PVS expects the official LOA or full EPCI signing after the
LLOA expires. We note that on May 03, SWPOC released documents pertaining to the EPCI#3
contract for Block B - O Mon. This enables the consortium of PVS and Lilama 18 to commence
work beyond the LLOA starting from May 3, 2024.
The long-awaited Block B project should benefit stocks including PVS, PVD, GAS, PVB, and
PVC. We currently have a BUY rating for PVS (target price of VND50,400), and OUTPERFORM
ratings for PVD and GAS (respective target prices of 36,000/share and VND82,000/share). PVS
is the earliest beneficiary of Block B. We expect PVD to obtain drilling & well-related service
contracts worth USD2bn, which could translate into NPAT of USD267mn in 2026-2050F. GAS is
set to be the biggest beneficiary in the long term, with potential revenue and NPAT of USD3.6bn
and USD2.1bn in 2027-2050F, respectively.
We expect PVB (Non-Rated) to obtain gas pipeline coating contracts worth USD100mn in
2025-2027F from Block B, implying a surge in earnings in these years. PVB, a subsidiary of PV
Gas (HOSE: GAS), is the only Vietnamese company operating in the pipeline coating market with
a 100% market share. PVB’s valuation looks attractive with respective 2025F/26 P/Es of 5.0x and
3.2x, in our view (page 9).
We believe that PVC (Non-Rated) is well-positioned to capture the huge workload from
Block B (estimated USD600mn revenue). PVC is a near-monopoly player in Vietnam’s drilling
fluids market with 100% and 80% market share for local and foreign O&G clients, respectively, via
its subsidiary DMC-WS (100% stake) and joint venture MI-Vietnam, partner with US-based
Schlumberger (51% stake). In our view, PVC look attractive with a projected 2025 P/E of 26.0x,
which implies a PEG of 0.7 based on projected EPS CAGR of 39% for 2023-2026F and an expected
increasing dividend yield (1-8%) (page 21).
Risks: Delay of Block B’s progress after FID to meet first gas deadline (2027), cost overruns;
geopolitical risks; lower oil prices.
See important disclosure at the end of this document www.vietcap.com.vn May 20, 2024| 1
Update Report
Figure 1: Stocks benefiting from Block B project
Code Rating Market State Foreign Foreign ADTV Share Target Target Upside Div 12M
Cap O’ship Limit Avail 30D price price price, % Yield TSR
USD mn % % USD mn USD mn VND ps VND ps updated % %
PVS BUY 862 51.4 49.0 245 10.7 44,700 50,400 5/6/24 12.8 1.6 14.4
PVD O-PF 718 50.4 49.0 220 5.9 32,350 36,000 5/14/24 11.3 0.0 11.3
GAS O-PF 6,891 95.8 49.0 3,246 2.6 76,000 82,000 5/7/24 8.0 4.0 12.0
PVB NR 26 52.9 49.0 12 0.5 29,500 39,700* 5/20/24 34.6 0.0 34.6
PVC NR 51 36.0 0.0 0 1.3 15,700 18,000* 5/20/24 14.6 1.1 15.7
Source: Fiinpro, Vietcap (NR = not rated; data as of May 20, 2024) (*: Fair value)
Figure 2: Valuation summary (based on reported earnings)

Code Share EPS g EPS g EPS g P/E P/E P/E P/E EV/EBITDA ROE P/B Net D/E
price 2023 2024F 2025F TTM 2023 2024F 2025F 2024F 2024F LQ LQ
VND ps % % % x x x x x % x %
PVS 44,700 3.7 18.5 43.2 21.8 23.7 20.0 13.9 10.3 8.7 1.5 -56.7
PVD 32,350 N.M. 59.2 93.6 22.8 35.2 21.5 11.1 7.6 6.2 1.2 0.6
GAS 76,000 -21.6 -4.6 5.4 15.8 15.3 16.1 15.3 9.8 16.8 2.6 -54.3
PVB 29,500 N.M. 211.1 1108.4 76.0 189.4 60.9 5.0 30.7 2.8 1.8 -27.2
PVC 15,700 78.1 32.9 80.3 101.7 62.2 46.8 26.0 27.1 2.6 1.2 0.5
Source: Fiinpro, Vietcap (data as of May 20, 2024)
Update Report
New developments
Japanese partner issued Final Investment Decision for Block B
On March 28, 2024, Mitsui & Co., Ltd. (Mitsui) through its wholly-owned subsidiary Mitsui Oil
Exploration Co., Ltd. (“MOECO”) has reached an FID for the Block B gas – to – power complex
project in Vietnam. The cash injection of USD740mn encompasses both the upstream and
midstream aspects:
• The upstream project - gas field development plan (cash injection of USD560mn,
equivalent to its 23% stake) includes drilling 37 pre-production wells and a total of 861
wells throughout the project's lifespan. It is targeting a gas production of 490 million
cubic feet per day (mmcf/d) or 13.8 million cbm per day.
• The midstream project - gas pipeline development plan (cash injection of USD180mn,
equivalent to its 15% stake) includes constructing a 433 km pipeline (330km offshore
and 103km onshore) with a maximum transportation capacity of 640 mmcf/d or ~18.1
million cbm per day.
In addition, on March 28, 2024, PetroVietnam Group (PVN) signed a series of agreements
which address critical points for the Block B - O Mon Gas-to-power project including gas price
and contracted volume from the O Mon 1, 3 & 4 power plants and EVNGENCO2 participation. As
far as we understand, foreign partners are happy with the guaranteed volume from three out of
the four power plants.
• Gas Sale & Purchase Agreement (GSPA): This agreement establishes the terms for
buying & selling gas, extracted from Block B between the Sellers (including PVN & PVEP,
nearly 70% stake, Japanese MOECO & Thai PTTEP, nearly 30% stake) and the Buyer
(PVN). It specifies the volume of around 5.06 billion cbm p.a. on average. We note that
PVN is the owner of the O Mon 3 & 4 power plants, and this implies O Mon 3 & 4 – capacity
of 1,050 MW each, will buy gas from Block B.
• Gas Sale Agreement for O Mon I (660MW, 17% of O Mon power complex capacity):
This agreement allocates a portion of Block B gas (around 1.265 billion cbm p.a., 25% of
Block B’s gas volume) to the O Mon I Power Plant. PVN will sell Block B gas to the power
plant owned by EVNGENCO2. This shows EVNGENCO2’s strong commitment as such
volume is ~50% higher compared to the average gas feedstock that a gas-fired plant
usually consumes.
• Gas Transportation Agreement (GTA): This agreement details the transportation of
Block B gas to the O Mon facilities, with GAS (51% stake), PVN, MOECO & PTTEP as the
transporters.
• Tie-in Operation Service Agreement (TOSA): This agreement facilitates the
connection of the transporter's equipment to the Block B gas exploitation platform. It
acts as a service contract between the field owners (PVN, PVEP, MOECO, PTTEP) and
the transporter (GAS, PVN, MOECO, PTTEP), with the field owner providing ongoing
support services.
While further details of the agreements have not been disclosed yet, via discussion with industry
players, we understand that the related parties agreed on Block B’s gas price of USD12-
14/MMBTU. In addition, the gas contracted volume is ~90%.
One remaining obstacle for Block B is finalizing a Power Purchase Agreement (PPA) with “power
contracted volume.” This will be solved via some revisions to several circulars and regulations of
the competitive generation market (which the Government requested the Ministry of Industry &
Trade, MOIT, to resolve). We note that previously a passthrough mechanism (gas price to
electricity price) was approved by the MOIT. We also understand that the GSA for O Mon 2 will be
signed after the FID. The O Mon 2 power plant (1,050MW) is developed by Marubeni (Japan) and
Trading Construction Works Organization (Vietnam).
Update Report
Government approved Execution plan of Power Master Plan VIII on April 2,

with COD timeline for Block B’s power plants
The execution plan targets COD (Commercial Operation Date) of O Mon II, III & IV in
2027/2030/2028, respectively, to use Block B gas feedstock. This re-enforces our forecast for an
official groundbreaking for Block B in H1 2024.
Update Report
For comprehensive information, the contents of pages 5-8 in this report are reproduced from our
Sector Update, published July 24, 2023..
Overview of Block B project

Block B is a giant project (capex of ~USD14bn) that includes three segments: 1) upstream
segment (gas field development), 2) midstream segment (gas transportation), and 3)
downstream segment (power generation). Block B & 48/95 and Block 52/97 include the Kim Long,
Ac Quy, Ca Voi, Thien Ha and Vang Den gas fields (referred to hereafter as the Block B gas fields),
which are in Malay Tho Chu basin (250 km southwest of Vietnam). Gas from the Block B gas fields
is transported though the Block B – O Mon gas pipeline to four gas-fired power plants including
O Mon I, II, III and IV in Can Tho (400 km from the gas fields). The estimated total reserve of Block
B gas fields is 107 bcm of gas and 12.65 million barrels of condensate. The estimated gas volume
output is 5-7 bcm p.a. over the project’s 23-year lifespan. The purpose of the Block B project is to
meet electricity demand in southwestern Vietnam as the gas reserve of the existing PM3 gas
field is becoming exhausted.
For the upstream segment, the estimated capex is USD7.9bn from four investors, including
PVN (42.9%), PVEP (26.8%), MOECO (22.6%), and Thailand’s PTTEP (7.7%). Phu Quoc Petroleum
Operation Company (PQPOC), which is a subsidiary of PVN, is the operator of the upstream
segment of the Block B project.
The estimated capex for the midstream segment is USD1.3bn and is funded by PetroVietnam
Gas (HOSE: GAS) (51%), PVN (28.7%), and MOECO & PTTEP (20.3%). The operator of the Block B
– O Mon gas pipeline is another subsidiary of PVN, Southwest Pipeline Operating Company
(SWPOC).
The major gas consumers of the Block B gas fields are four thermal power plants in Can Tho
(total capex of USD4.6bn) — O Mon I (capacity of 660 MW), O Mon II (capacity of 1,050 MW), O
Mon III (capacity of 1,050 MW), and O Mon IV (capacity of 1,050 MW). EVNGENCO2’s O Mon I power
plant is running on fuel oil and is planned to be switched to gas from Block B. The remaining three
O Mon power plants have not yet been constructed. The O Mon II power plant is developed by
Marubeni (Japan) and Trading Construction Works Organization (Vietnam). On October 9, 2023,
the Can Tho City People's Committee approved to transfer the ownership of the O Mon III & IV
power plants from Vietnam Electricity Group (EVN) to PVN.
Figure 3: Block B project value chain
Central production Gas feedstock

platform to extract supplied to four
gas O Mon power plants
Gas pipeline
Source: PVN
Update Report
Workload from Block B

The Block B project has a lifespan of 23 years and is planned to be executed in two phases:
- Phase 1: Construction (2024-2027)
- Phase 2: Production & expansion (2028-2050)
We expect the Block B project to provide a sustainable workload for PVS (BUY), PVD
(OUTPERFORM), and GAS (OUTPERFORM). We expect PVS (the earliest beneficiary) and PVD
to benefit from Block B in Phases 1 and 2. Meanwhile, GAS (the biggest beneficiary) should
benefit significantly in Phase 2. We believe PVB (Non-Rated) will benefit during a specific
duration of the project (2025-2027F). Details are presented in Figures 4-7.
Figure 4: Estimated capex/workload of Block B project by involved company
(USD mn) Estimated capex

GAS 0
PVS 5,800
PVD 2,074
PVB 130
Other M&C contractors 500
Power plants 4,600
Others 696
Total 13,800
Source: Vietcap
Figure 5: Estimated potential workload of ~USD14bn (including capex and operating costs)
of Block B project in Phases 1 and 2
Event Completed Final First Gas Closing Workload
component investment (USD mn)
decision
Year 2015 ... 2024 2025 2026 2027 2028 … 2041 … 2050
Phase 1: Construction (USD7.9bn)
Upstream Engineering, procurement, construction, and 1,300
(USD2bn) installation (EPCI) of 1 central production platform
(CPP), 1 living quarters platform, 1 flare tower, and 4
wellhead platforms (WHPs)
Floating oil storage (FSO) 250
Drilling & well-related services 350
Others 100
Midstream EPCI for 330 km of offshore gas pipeline 450
(USD1.3bn) EPCI for 103 km of onshore gas pipeline 350
Gas pipeline coating 100-130
Land clearance fees & others 370
Downstream EPC of O Mon I 800
(USD4.6bn) EPC of O Mon II 1,200
EPC of O Mon III 1,300
EPC of O Mon IV 1,300
Phase 2: Production & Expansion (USD5.9bn)
Upstream EPCI of 42 WHPs 4,200
(USD5.9bn) Drilling & well-related services 1,700
Source: Public media, Vietcap
Update Report
PVS is set to be the earliest beneficiary of Block B as we expect it to gain USD5.8bn of M&C
contracts starting in 2024 and an FSO leasing contract starting in 2028 (Figure 6). In addition,
there will be demand for offshore support vessels and operation & maintenance (O&M) services
for the FSO, which would be another potential source of profit for PVS over the project’s lifespan.
PVD to have potential to lease two rigs and gain drilling-related service contracts for the
Block B project (total estimated contract value of USD2bn). There are 944 wells in the gas
fields of the Block B project, and these wells should be drilled by two rigs in 2026-2050F. As PVD
has not yet provided a detailed plan regarding the rigs used for the Block B project, we illustrate
two scenarios for PVD to conduct drilling for the Block B gas fields. Meanwhile, we expect the
potential revenue from PVD’s well-related services to be the same in both scenarios in the 2026-
2050F period. The average profit from drilling and well-related services of the two scenarios is
USD267mn in 2026-2050F (Figure 7).
We estimate that GAS will earn potential revenue and NPAT of USD3.6bn and USD2.1bn,
respectively, from gas transportation for the Block B project. We understand the gas
transportation tariff for Block B will be USD1.9/MMBTU in 2027. This tariff is subject to a 2%
increase p.a. In addition, a gas volume of 5-7 bcm p.a. could be exploited in 2027-2050F. We note
that GAS owns a 51% stake in the Block B – O Mon gas pipeline.
PVB should experience a surge in 2025-2027F earnings from the potential USD100-130mn
gas pipeline coating contract for Block B. PVB, which is a subsidiary of GAS, is the only
Vietnamese company operating in the pipeline coating market. We believe PVB will deliver
surprisingly positive earnings in 2025-2027F if new domestic oil & gas projects such as the White
Lion – Phase 2B and Block B gas fields start in 2024. We note that in the years that PVB had no
significant jobs, its earnings were minimal (around VND30bn). However, when PVB had a large
workload in 2014, its earnings hit a record high of VND148bn. We expect PVB to have the potential
to win a pipeline coating contract worth USD130mn for the Block B project, implying that its
earnings could surge in 2025-2027F, potentially approaching its 2014 historical peak. In addition,
PVB has a debt-free balance sheet and records minimal depreciation expenses as most of its
machinery is nearly fully depreciated.
Figure 6: Estimated revenue and NPAT for beneficiaries of Block B (USD mn)
Beneficiaries Potential revenue Potential NPAT Details

PVS 5,800 330 We forecast profit from the below six contracts of at least USD330mn in
2024-2050F. We also forecast these contracts to contribute 8%-37% to
PVS’s 2023-2027F NPAT-MI. We have not yet included any contract
value from gas field clearance at the end of the project’s life cycle.
Contract details:
1. EPCI#1 of 1 CPP + 1 living quarters platform + 1 flare tower
(USD500mm)
2. EPCI#2 of 4 WHPs (USD400mn)
3. EPCI #3 of onshore gas pipeline (USD257mn)
4.EPCI #4 of offshore gas pipeline (USD400mn)
5. EPCI of 42 WHPs (USD4.2bn)
6. FSO leasing contract
PVD 2,074 267 We estimate profit from drilling & well-related services to contribute
USD44mn to PVD’s NPAT-MI in 2026-2027F (16% of its 2026-2027F
aggregate NPAT-MI). We expect profit from Block B to contribute
USD223mn to PVD’s NPAT-MI in 2028-2050F.
GAS 3,575 2,100 We estimate profit from gas transportation to account for an average of
~6% of GAS’s NPAT-MI in 2028-2033F.
PVB 100-130 13 Contract for gas pipeline coating.
Source: Vietcap
Update Report
Figure 7: Potential profit of PVD in Block B in 2026-2050F for two scenarios
(USD mn) Scenario 1. Lease two of PVD’s Scenario 2. Hire two jack-up rigs from Average
existing jack-up rigs for Block B other drillers to lease for Block B
Profit from drilling 218 75 147
Profit from well-related services 121 121 121
Total profit 339 196 267
Source: Vietcap
Non-rated
Update Report
PetroVietnam Coating (PVB)
Industry Oil & Gas 2023 2024F 2025F 2026F
Report Date May 20, 2024 Revenue (VND bn) 244 241 841 1,202
Current Price VND29,500 Revenue % YoY 611% -2% 249% 43%
Fair value VND39,700 NPAT-MI (VND bn) 3 10 126 198
Upside to FV 34.6% NPAT-MI % YoY N.M. 211% 1,108% 56%
Dividend yield 0.0% EPS % YoY N.M. 211.1% 1,108% 56%
TSR 34.6% GPM 7.4% 14.9% 22.8% 23.5%
NPM 1.4% 4.3% 15.0% 16.5%
Market Cap USD26mn ROE 0.9% 2.8% 28.5% 33.3%
Foreign Room USD12mn Net D/E -7.9% -15.8% -39.6% -37.5%
30D ADTV USD0.5mn Dividend yield 0.0% 0.0% 3.4% 5.1%
State Ownership 52.9% DPS (VND) 0 0 1,000 1,500
Outstanding Shares P/E 189.4x 60.9x 5.0x 3.2x
21.6 mn
P/B 1.7x 1.7x 1.3x 0.9x
Fully Diluted O/S 21.6 mn
EV/EBITDA 579.1x 30.7x 2.7x 1.6x
PVB VNI
P/E (ttm) 76.0x 15.9x
Block B to spearhead new growth trajectory
P/B (cur.) 1.8x 1.8x • We issue a Non-Rated report for PVB with a fair value of VND39,700/share. We have high regard
ROE 6.4% 12.1%
for PVB as we believe significant earnings growth from 2025-27F when new domestic oil & gas
ROA 2.3% 1.9%
projects, including the Block B gas field, officially break ground in H2 2024.
• We like PVB due to (1) its pure-monopoly position in the market of pipeline coating, (2) its
Company overview European-standard production capability ranging from 100km to 480km p.a., and (3) its proven
PVB, a subsidiary of PV Gas (HOSE: track record with an accumulated backlog of VND5.6tn.
GAS), is the only Vietnamese • During 2013-15, PVB had a large workload with total revenue of VND2.4tn, resulting in reported
company operating in the pipeline NPAT-MI of VND281bn. Management guides that PVB is to secure a pipeline coating contract
coating market with a 100% market
worth USD100mn (VND2.5tn). Based on this, we project total revenue of VND3.2tn and NPAT-
share. PVB’s revenue comes from
MI of VND519bn in 2025-2027 (1.8x vs 2013-15 period).
its self-seeking ones and those
• We project 2024 reported NPAT-MI to jump 3.4x driven by (1) our expectation for PVB to
appointed by PV GAS (most oil and
gas projects need a coating for the complete the remaining backlog from the Kinh Ngu Trang project, and (2) an increase in
pipeline system). PVB also provides pipeline coating’s GPM to 16.9% from 7.4% in 2023, driven by lower pipeline transportation
other services including field costs.
jointing coating, anti-corrosion • We forecast PVB’s 2025/26/27F reported NPAT-MI to surge to
painting, laboratory services. VND126bn/VND198bn/VND194bn, respectively, driven by (1) the VND2.5tn pipeline coating
Share price performance
contract value from Block B project, (2) VND900bn from other projects, and (3) a GPM
90%
assumption of 23.2% over 2025-2027F vs an average of 20.1% over 2013-2015, due to a minimal
75%
depreciation expense as the production plant is fully depreciated.
60%
• In our view, PVB’s valuation looks attractive with respective 2025F/26 P/Es of 5.2x and 3.3x.
45%
• Downside risks: Slower-than-expected progress of Block B’s pipeline construction; higher-
30%
than-expected input costs.
15%
0% PVB holds a monopoly in Vietnam’s pipeline coating market, demonstrated by its strong
-15% track record. Leveraging on PV Gas (its parent company) in the local midstream and
YTD 1Y 3Y ann.
downstream segments, PVB secured contracts for all oil and gas projects from 2010 to 2023,
PVB VNI totaling VND5.6tn in revenue. We expect Vietnam’s E&P activities to increase from 2024 and
several pipe-coating contracts that PVB won in 2023 signal recovery. We believe its strong track
record and strategic relationships ensure continued dominance and significant earnings
Phuoc Duong recovery in the new growth cycle of Vietnam’s E&P activities.
Analyst
phuoc.duong@Vietcap.com.vn
PVB is poised for significant earnings growth in 2025-27F, driven by a USD100mn gas
+8428 3914 3588 ext.135 pipeline coating contract for Block B. With our expectation for the Block B gas field to get an
FID in H1 2024, PVB's workload is expected to surge, supported by a pipeline development plan of
Duong Dinh
433km (offshore 330km, onshore 103km). We expect PVB to secure other pipeline coating
Associate Director
duong.dinh@Vietcap.com.vn contracts for more projects (including Yellow Camel & White Lion phase 2B) with a combined
+8428 3914 3588 ext.140 value of VND900bn in 2025-2028.
Update Report
Company Overview
PVB is a pure monopoly in the pipeline coating market. Prior to the inception of PVB, PVGAS
outsourced the pipeline coating contracts in its domestic project to foreign companies, such as
Bredero Shaw (USA-Malaysia) and Kabil (Indonesia), among others, which resulted in expensive
coated pipelines because of the transportation costs. PVGAS then established PVB and awarded
all pipe-coating contracts to its subsidiary since 2010. As PVGAS monopolizes in the local
midstream and downstream segments, PVB is the dominant pipeline coating provider to its
parent company, especially with Nam Con Son 2 – Phase 1 and Phase 2. Also, PVB has leveraged
PVGAS’s relationship to fully secure pipeline coating contracts for other related parties,
including Vietsovpetro, a joint venture between PetroVietnam (PVGAS’s parent), Zarubezhneft
(Russian O&G company), and PVS (PetroVietnam’s subsidiary). As such, PVB has become the
monopoly in supplying pipe-coating services for O&G operators in Vietnam. Additionally, PVB
purchases raw pipelines from another PVGAS subsidiary, PVPipe, at a competitive cost rather
than import from international suppliers.
Figure 8: PVB’s relationship with related parties
51%
PetroVietnam
(PVN)
96% 51% Vietsovpetro

(VSP)
PetroVietnam Gas JSC PetroVietnam Technical

(GAS) Services (PVS)
99% 53%
Customer Customer
PetroVietnam Steel PetroViet Nam Coating

Pipe JSC (PVPipe) JSC (PVB)
Customer
Source: PVN, GAS, PVS, PVB, Vietcap compilation
PVB’s well-designed pipeline coating capacity is backed by cutting-edge technology that

meets the demand for most of O&G projects. Through its first-and-only pipe-coating factory
in Ba Ria – Vung Tau, PVB’s total capacity ranges from 100.000 meters to 480.000 meters p.a.,
which relies on the types of services and products ordered by the O&G operators. PVB’s pipe-
coating services consist of: 1) anti-corrosion coating (3 layers polyethylene coating -3LPE, 3
layers polypropylene coating -3LPP, and fusion-bounded epoxy -FBE); 2) concrete weight
coating with impingement and steel wire; 3) insulation coating, and 4) bends and fitting coating.
Such pipeline coating technologies are considered more economical, more sustainable, with
lower maintenance costs, and have less impact on the environment compared to other
traditional methods. In addition, most machinery and equipment used are imported from
European countries, which ensures the quality of pipelines coated by PVB compared to foreign
counterparts.
Figure 9: PVB’s pipeline coating services capacity

Service Type Diameter Length Maximum Capacity
Anti-corossion coating FBE, 3LPE, 3LPP 2 – 48 inches 9.5 – 12.7 meters 480km p.a
Cocrete weight coating CWC 6 – 48 inches 9.5 – 12.7 meters 300km p.a
Insulation coating PUF, MLPP 4 – 24 inches 9.5 – 12.7 meters 150km p.a
Bends and fitting coating 2/3LPE, 2/3LPP 2 – 48 inches 9.5 – 12.7 meters 100km p.a
Source: PVB, Vietcap
Update Report
PVB’s track record has been proved with its historical huge backlog. Since its inception, PVB
has serviced pipeline coating for all domestic O&G projects with a total contract value of
VND5.6tn in 2010-2023 (some typical projects listed below with total value of VND2.9tn) and a
combined pipeline length of nearly 400km. PVB has contracted pipelines with a variety of
services and sizes. PVB has consistently completed its pipe-coating contracts within 12-24
months, establishing its reputation for meeting the deadlines set by its clients. As such, PVB has
become the top-notch pipeline coating contractor for upcoming projects. In 2022, PVB won a
pipeline coating contract of VND14.5bn for PTTEP (Thailand) in Zawtika 1D (Myanmar), paving the
way for its penetration into foreign markets.
Figure 10: PVB’s select oil and gas project details in 2010-2023
Project Investor Coating Service Diameter(inch) Length(km) Value(VNDbn) Timeline

Bien Dong 1 PTSC 3LPP,5LPP, CWC 12-20 46 150 2010
Te Giac Trang Hoang Long JOC 3LPE, PUF, CWC 6-16 37 300 2011
Su Tu Trang Cuu Long JOC 3LPP,5LPP, CWC 12 20 n/a 2011-2012
Hai Su Trang Den Thang Long JOC 3LPE, PUF, CWC 6-16 38 n/a 2012
Thang Long - Dong Do Lam Son JOC 3LPE, PUF, CWC 6-12 20 100 2013
Su Tu Nau Cuu Long JOC 3LPE, PUF, CWC 6-18 63 320 2013-2014
Nam Con Son 2 – Phase 1 PVGAS 3LPE, CWC 26 153 535 2014-2015
Ham Rong – Thai Binh PVGAS 3LPE, CWC 12 25 40 2014-2015
Ca Tam Vietsovpetrvo 3LPE, PUF, CWC 8-16 46 157 2018
Nam Con Son 2 – Phase 1 PVGAS 3LPE, CWC 26-30 140 983 2019-2020
Sao Vang - Dai Nguyet Idemitsu 3LPE, CWC 18-26 45 47 2019-2020
Zawtika 1D (Myanmar) PTTEP (Thailand) 3LPE, CWC 14 9.5 14.5 2022-2023
Kinh Ngu Trang Vietsovpetro 3LPE, CWC 12 44 292 2023-2024
Total 2,938
PVB’s operating cost are primarily from materials (43%), and outsourcing (24%) while the
production plant has been depreciated by 96% as of end 2023. In years of having pipeline
coating contracts, materials cost was the largest cost component, representing 43% of total
operating costs on average. Labor costs accounted for 12% of PVB’s total operating expenses.
Since its human resource policy is to employ domestic staff, PVB can recruit workforce with low
compensation compared to foreign players. From 2012 to 2015, PVB’s depreciation expense
averaged at VND107bn p.a. under the unit-production method. Switching to the straight-line
method in 2018 partly helped to reduce depreciation expense to VND7bn by 2023.
Figure 11: PVB’s total operating costs in 2010-2023 (VNDbn) Figure 12: Operating cost's proportion (%)
Materials Labour Outside Others Derpreciation Materials Labour Outside Others Derpreciation
1000 100%
800
600
50%
400
200
0 0%
2014
2015
2018
2015
2018
2017
2011
2012
2013
2016
2019
2013
2014
2016
2017
2019
2023
2020
2011
2012
2023
2020
2021
2022
2021
2022
Source: PVB, Vietcap forecast Source: PVB, Vietcap forecast
Update Report
Shareholder structure
PVB was founded after a business restructuring. In mid-2007, PVB was founded as
PetroVietnam Gas Investment And Construction Joint Stock Company (PVID). At the time, there
were originally 13 members contributing capital, of whom PetroVietnam (PVN), PetroVietnam
Technical (HOSE: PVS), and IDICO Corporation (HNX: IDC) were the founding shareholders. In
late 2007, PVN transferred its 10% of PVID shares to PetroVietnam Construction Joint Stock
Corporation (UpCOM: PVX). Afterwards, PVX continued to raise its ownership to 34% followed by
IDC’s divestment. Because of the failure in project development (including two projects in Nam
Dinh and Ninh Binh provinces) and the unfulfillment of charter capital (only 25% of VN100bn),
PVID’s shareholders planned to dissolve the company. However, PVN recommended that the
company would restructure its ownership and redirect its operations. In 2009, the company was
renamed PV Coating Joint Stock Company under the parent company, PVGAS (HSX: GAS).
PVB acts as a subsidiary of GAS. On December 24, 2013, PVB was approved to be listed on the
Hanoi Stock Exchange. In the following six months, given the five-fold increase in PVB’s share
price, GAS, the parent company, decided to partially divest its 24% ownership in PVB. Since then,
GAS has still been PVB’s controlling shareholder, with approximately 53% share, as of April 26
2024. Also, GAS played a critical role in PVB’s strategy and operation, with the chairman of the
board of directors and the chief executive officers as representatives, respectively.
Figure 13: PVB’s ownership structure at the end of Q1 2024 (%)
PV GAS
41.0% Samarang Ucits
52.9% MB Capital
Others
1.1%
4.9%
Management
PVB’s management team is mainly composed of PVGAS’s in-house staff. PVB’s current
chairman on the board of directors is Mr. Bui Tuong Dinh, who is an engineer in automotive
engineering and used to work at PVGAS with 20 years of experience. Similarly, PVB’s current CEO,
Mr. Nguyen Phuong Cao, is a seasoned officer at PVGAS with a chemistry–food technology
background. Four out of five of the BOD’s executive members, including the chairman, Mr. Dinh,
are representatives from the parent company, PVGAS. They represent PVB’s ownership of 53%
collectively.
Figure 14: PVB’s Board of Directors
Name Position Stake Note

1 Bui Tuong Dinh Chairman 21.6% (GAS’s representative) Joined in October 2021
2 Le Hong Hai Executive member 15.0% (GAS’s representative) Joined in March 2018
3 Nguyen Phuong Cao Executive member 0% Joined in June 2022
4 Vu Tuan Ngoc Executive member 8.0% (GAS’s representative) Joined in March 2018
5 Tran Dang Thuyet Executive member 8.0% (GAS’s representative) Joined in June 2022
Update Report
Figure 15: PVB’s Board of Management
Name Position Education Note

1 Nguyen Phuong Cao CEO Engineer in Chemistry – Food Technology Joined in June 2022
Master of Business Administration
2 Nguyen Thi Huyen Deputy CEO Bachelor in Economics Joined in April 2013
Bachelor in Language
3 Nguyen Van Quang Head of Account Master of Business Administration Joined in June 2019
Bachelor of Finance - Credit
Update Report
Historical performance
PVB’s performance fluctuates with pipeline coating contracts for mega O&G projects, driven by
the EPC phase, the project’s progress, and the FID.
From 2010 to 2015, PVB experienced a peak in revenue and earnings given the supportive
industry landscape. The high global oil price levels, coupled with the large capital expenditures
from local and foreign investors, supported PVB’s pipe-coating segment. PVB’s pipeline coating
backlog was stacked with contracts for major O&G projects such as Bien Dong, Te Giac Trang, Su
Tu Trang & Nau, Hai Su Trang & Den, and Nam Con Son – Phase 1, among others, with the
aggregate value of nearly VND4tn. PVB witnessed a revenue CAGR of 22% with the peak of
VND1tn revenue in 2014. Although PVB’s depreciation expense increased given the changes in
its depreciation methods from straight-line to unit-production, PVB’s gross profit margin and
NPAT-MI margin averaged 18.2% and 8.9%, respectively. Also, PVB provided EPC services for O&G
operators, but the minor revenue contribution (11% of total revenue) and the low profit margin
(2% gross profit margin) led to its divestment at the end of the period.
From 2016 to 2022, PVB underwent a spiral period with a few pipeline coating contracts. PVB
completed pipeline coating contracts for two mega projects, Ca Tam (VND157bn in value) and
Nam Con Son – Phase 2 (VND983bn in value) in 2018-2020. Nevertheless, in 2016-2017 and 2021-
2022, given the downtime of the domestic and international O&G landscape, there were no major
pipe-coating contracts for PVB to secure. As the depreciation expense and operating
expenditures are mainly fixed costs, PVB faced operating losses in these four years. Additionally,
PVB diversified into new segments such as anti-corrosion painting, and other pipeline-related
services. Still, there was no operating profit in PVB’s new segments during the period.
In 2023, PVB won several pipe-coating contracts, signaling recovery. In 2023, PVB won
multiple pipe-coating contracts with a total value of VND363bn. Such projects included RC8,
R8.RC9, Dai Hung – Phase 3, and especially Kinh Ngu Trang (VND292bn in value). PVB completed
VND192bn of its contracts in 2023 and is finishing the remainder of its backlog in 2024. PVB’s 2023
gross profit margin for pipeline coating was 7.4% (vs an average of 20.0% in 2010-2014 and 2018-
2020), which we attribute to the higher transportation costs given the higher number of small
projects. On the other hand, as for other segments, PVB reported VND67bn (of VND70bn signed
contracts) and a 7.6% gross profit margin.
Figure 16: PVB’s select oil and gas project pipeline in 2010-2023
Value
Project (VND ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 ‘20 ‘21 ‘22 ‘23
bn)
Bien Dong 1 150
Te Giac Trang 300
Su Tu Trang N/A
Hai Su Trang Den N/A
Thang Long - Dong Do 100
Su Tu Nau 320
Nam Con Son 2 – Phase 1 535
Ham Rong – Thai Binh 40
Ca Tam 157
Nam Con Son 2 – Phase 2 983
Sao Vang - Dai Nguyet 47
Zawtika 1D (Myanmar) 14.5
Kinh Ngu Trang 292
Total revenue 330 749 888 533 1,001 900 6 83 203 383 695 39 34 244
Total gross profit 49 119 165 114 259 116 -72 -34 49 82 110 -19 -27 18
Total reported NPAT-MI 21 26 81 59 148 75 -54 56 23 37 61 1 -13 3
Update Report
2024 Outlook: Earnings on track for recovery since 2023, due

to the backlog of Kinh Ngu Trang
Figure 17: 2024 outlook
VND bn 2023 2024 YoY % Vietcap’s comments on YoY growth

Revenue 244.5 240.6 -2% Q1 2024 revenue was VND123bn (207x YoY), equivalent to 51%
of our full-year forecast. This revenue mainly came from the
execution of the Kinh Ngu Trang project backlog.
Pipeline coating 194.7 188.3 -3% Revenue slightly decreased YoY due to a lack of workload this
year. We expect the remaining backlog from the Kinh Ngu Trang
Project to be completed in 2024. For other oil and gas projects,
such as Block B, Yellow Camel, and White Lion – Phase 2B, pipe-
coating contracts are expected to start from 2025 onwards.
Other services 49.8 52.3 5%
Gross profit 18.2 35.8 97% Q1 2024 gross profit was VND34bn (vs loss of VND6bn in Q1
2023), equivalent to 94% of our full-year forecast, as we
project most of PVB’s backlog to occur in H1 2024.
Pipeline coating 14.4 31.9 122% Mainly due to an increase in pipeline coating’s GPM to 16.9% from
7.4% in 2023, driven by lower pipeline transportation costs due to
a lower number of projects (one in 2024 vs five in 2023).
Other services 3.8 3.9 4%
SG&A -24.4 -23.9 -2%
Operating profit -6.3 11.9 N.M
Financial income 10.8 6.3 -42%
Financial expenses -1.5 -5.1 236%
in which: interest -1.4 -5.1 276%
expenses
Profit before tax 4.2 13.1 215%
NPAT-MI reported 3.4 10.5 211% As we expect (1) the remaining backlog of the Kinh Ngu Trang
project to be completed in 2024, and (2) an increase in pipe-
coating GPM driven by lower transportation costs.
Q1 2024 reported NPAT-MI was VND21bn (vs loss of VND7bn in
Q1 2023). Despite this being 2.1x our full-year forecast, we
estimate that PVB may record a net loss in H2 2024 when
there are no major pipe-coating projects.
PVB guided for VND3bn NPAT-MI in 2024. Historically, it beat

its guidance by ~50%.
NPAT-MI recurring 3.1 10.5 238%
Δ ppts
GPM % 7.4% 14.9% 7.5
Pipeline coating 7.4% 16.9% 9.6
Other services 7.6% 7.5% -0.1
SG&A %sales
EBIT Margin 10.0% 9.9% -0.1
Reported NPAT-MI -2.6% 4.9% 7.5
Margin
Source: PVB, Vietcap estimates
Update Report
Long-term outlook: Workload from Block B project to drive

earnings jump, surpassing previous peak in 2014
Figure 18: Vietcap’s forecast summary
2021 2022 2023 2024F 2025F 2026F 2027F 2028F

Revenue 39 34 244 241 841 1,202 1,185 390
Pipeline coating 25 23 195 188 786 1,144 1,124 326
Other services 14 11 50 52 55 58 61 64
Gross profit -19 -27 18 36 191 282 276 70
NPAT-MI 1 -13 3 10 126 198 194 50
Revenue YoY% -94% -11% 611% -2% 249% 43% -1% -67%
NPAT-MI YoY% -99% -2335% N.M. 211% 1108% 56% -2% -74%
GPM -48% -78% 7% 15% 23% 23% 23% 18%
NPAT-MI margin 1% -38% 1% 4% 15% 16% 16% 13%
ROE 0% -3% 1% 3% 29% 33% 25% 6%
Net D/E -57% -51% -8% -16% -40% -38% -51% -64%
Source: PVB, Vietcap forecast
We forecast an aggregate revenue of VND2.5tn for PVB from Block B in 2025-2027. Block B, a
mega project with a capex of approximately USD14bn, encompasses three segments: upstream
(gas field development), midstream (gas transportation), and downstream (power generation).
Gas from Block B is transported via the Block B – O Mon gas pipeline to four gas-fired power plants
in Can Tho. The midstream workload involves EPCI for 330 km of offshore gas pipeline
(USD450mn), EPCI for 103 km of onshore gas pipeline (USD350mn), and gas pipeline coating
(USD130mn), and land clearance fees & others (USD370mn) (Figure 5). Given PVB's expertise in
gas pipeline coating, and PV GAS (PVB's parent company) holding a 51% stake in the midstream
projects, we expect PVB to secure the USD100mn contract for Block B's pipeline coating.
We expect PVB to secure other pipeline coating contracts for more projects with a
combined value of VND0.9tn in 2025-2028. As the sole domestic pipeline coating provider, PVB
is poised to win contracts for all oil and gas projects during this period. With PetroVietnam’s
capex recovery post-COVID-19 and increasing gas demand for electricity, we anticipate
Vietnam’s E&P activities to recover from 2024. The several pipe-coating contracts PVB won in
2023 signal recovery. Notably, PVB has expanded into foreign markets since 2022, as seen with
pipe-coating contracts for Zawtika. We believe its strong track record, and leveraging PV GAS,
ensure continued dominance and significant earnings recovery in the new growth cycle of
Vietnam’s E&P activities.
We expect the reported NPAT-MI to reach a record high in the 2025-2027F period. Projecting
an aggregate NPAT-MI of VND519bn in 2025-27F, driven by revenue from mega projects,
particularly Block B, we estimate PVB’s NPAT-MI to be VND173bn p.a., significantly exceeding its
historical peak of VND148bn in 2014.
Figure 19: PVB’s assumed project pipeline in 2024-2028

Project Required Diameter Combined Length Contract Value 2024F 2025F 2026F 2027F 2028F
Kinh Ngu Trang 12 inches 44 kilometers *VND292bn
28 inches 330 kilometers
Block B - Offshore
18 inches 38.5 kilometers VND2,500bn
Block B - Onshore 28-30 inches 103 kilometers
4 inches 1.8 kilometers
Yellow Camel 8 inches 24.2 kilometers VND40bn
10 inches 3.8 kilometers
White Lion – Phase 2B 16 inches 60 kilometers VND250bn
Blue Whale 36 inches 88 kilometers VND510bn
Other projects 4-20 inches 5-10 kilometers VND20bn p.a
Source: PVB, PVN, Vietcap forecast (*VND122bn of Kinh Ngu Trang contract was fulfilled in 2023)
Update Report
Figure 20: PVB’s net revenue by segments (VNDbn) Figure 21: PVB’s NPAT, NPAT margin (VNDbn, %)
58 61
200 20.0%
55 144 16.5% 16.4%

36 15.0%
374
15.0%
12.9%
150
10.0 %
100
1000
4.3%
5.0%
750 750 64 50
1.4%
50 52
0.0%
326 10
195 188 3 126 198 194 50
0 -5.0 %
2023 2024F 2025F 2026F 2027F 2028F 2023 2024F 2025F 2026F 2027F 2028F
Block B Other projects Other services NPAT (VNDbn) NPAT margin (%)
Source: PVB, Vietcap forecast Source: PVB, Vietcap forecast
Update Report
Risks
FID postponement for Block B – O Mon mega-project: After the prime period in O&G industries
from 2010 to 2014, the last decade experienced downtime given fewer O&G projects and
activities, which weighed on PVB’s pipeline coating services. As a consequence, the FID for Block
B – O Mon, which demands 433 km of coated pipelines, and translated to VND2.5tn revenue for
PVB in 2025-2026, is the primary catalyst for PVB. After a decade of delay, PVN and other foreign
partners have made progress towards the Block B – O Mon mega project. Having said that,
slower-than-expected FID/pipeline construction progress for Block B – O Mon will detrimentally
affect PVB’s revenue and earnings, as well as our valuation.
Slow progress in other O&G projects: Apart from the Block B – O Mon mega project, there are
other important O&G projects whose pipeline contracts are incorporated into our valuation.
Such projects include White Lion – Phase 2B (VND250bn), Yellow Camel (VND40bn), and Blue
Whale (VND510bn). Although the information, as well as the progress, are not fully disclosed to
the public, we still assume that PVB will secure the pipeline coating contract with the aggregated
revenue of nearly VND0.9tn from such projects in 2025-2028 given (1) the favorable global oil
price in late-2023 and early-2024, (2) the upcoming O&G investment from the Government, and
(3) the necessity for energy autonomy in Vietnam. That said, any postponetment or termination
of such projects will adversely impact our valuation.
Raw material cost: As a part of pipeline coating production, PVB sources about 40% of its raw
materials from suppliers in the foreign market. Specifically, for several materials such as plastic
granules, anti-corrosion coatings, iron ores, wire cloths, and others, overseas suppliers include
China, Thailand, South Korea, the US, among others. Therefore, the volatility in the global price
of raw materials poses a threat to the company’s earnings. In addition, raw pipeline prices which
purchase from PV Pipe might also fluctuate. However, we expect that PVB’s relationship with
PVGAS helps the company to connect with numerous local and international suppliers (which
might help to secure the raw materials and pipeline) at reasonable prices.
Exchange rate loss: Approximately 40% of its raw materials come from foreign providers, so PVB
must conduct several transactions in foreign currency, which is in contrast with PVB’s revenue
in VND. Because USD/VND has increased nearly 5% YTD, PVB is exposed to FX risks, which
increases its financial expense.
Update Report
Valuation
We use a 100%-discounted cash flow (DCF) valuation model. We use a terminal growth rate of
0%. Consequently, we arrive at PVB’s one-year fair value of VND39,700/share, which translates
to PVB’s TSR of 34.6%.
Figure 22: Cash flow projection
VND bn 2023 2024F 2025F 2026F 2027F 2028F

EBIT -6 12 155 237 230 40
+ Tax 1 -2 -31 -47 -46 -8
+ Depreciation 7 7 7 7 7 7
- Capex -1 -2 -2 -2 -2 -2
- Working cap increase -166 15 9 -126 6 106
Free Cash Flow -164 30 138 69 195 144
Present value of FCF 28 110 47 115 73
Total PV of FCF 28 138 185 301 374
Source: Vietcap forecast
Figure 23: Discounted cash flow valuation and assumptions
Cost of Capital DCF VND bn

Beta 1.4 PV of FCF (2024-2028) 374
Market Risk Premium % 8.0 Terminal value (0% g) 455
Risk Free Rate % 6.0 PV of FCF and TV 829
Cost of Equity % 17.2 Less: Net debt -30
Cost of Debt % 8.0 Less: Minority interest 0
Corporate Tax Rate % 20.0 Value of Equity 858
Debt-to-capital ratio % 10.0 Number of shares (million) 21.6
WACC % 16.1 Derived value per share (VND) 39,700
Figure 24: Valuation summary
Method DCF valuation

Current price (VND/share) 29,500
Fair value (VND/share) 39,700
Upside 34.6%
Dividend yield 2024F 0.0%
TSR 34.6%
Update Report
Financial Statements
P&L (VND bn) 2023 2024F 2025F 2026F B/S (VND bn) 2023 2024F 2025F 2026F
Revenue 244 241 841 1,202 Cash & Equivalents 35 56 195 282
COGS -226 -205 -649 -920 ST Investment 80 80 80 80
Gross Profit 18 36 191 282 Accounts Receivables 215 211 176 250
Sales & Marketing exp. 0 0 0 0 Inventories 117 105 180 261
General & Admin exp. -24 -24 -36 -46 Other Current assets 16 16 16 16
Operating Profit -6 12 155 237 Total Current Assets 463 468 647 889
Financial Income 11 6 7 15 Fixed Assets, Gross 608 610 611 613
Financial Expenses -2 -5 -5 -4 - Depreciation -579 -586 -593 -600
- o/w Interest Expense -1 -5 -5 -4 Fixed Assets, Net 29 24 18 13
Associates 0 0 0 0 LT investments 0 0 0 0
Net other Income/(Loss) 1 0 0 0 LT assets, other 6 6 6 6
Profit Before Tax 4 13 158 247 Total LT Assets 35 30 24 19
Income Tax -1 -3 -32 -49 Total Assets 498 498 671 908
NPAT Before MI 3 10 126 198
Minority Interest 0 0 0 0 Accounts Payable 28 27 75 105
NPAT Less MI, Reported 3 10 126 198 ST Debt 85 76 74 106
Other ST Liabilities 10 10 10 10
EBITDA 1 19 162 244 Total Current Liabilities 124 113 160 221
EPS Reported, VND 156 484 5,855 9,156 LT Debt 0 0 0 0
EPS Recurring (1), VND 143 484 5,855 9,156 Other LT liabilities 5 5 5 5
EPS Fully Diluted, VND 156 484 5,855 9,156 Total Liabilities 129 118 164 226
DPS, VND 0 0 1,000 1,500 Preferred Equity 0 0 0 0
DPS/EPS (%) 0% 0% 17% 16% Paid in capital 216 216 216 216
(1) EPS after FX loss and bonus & welfare Share premium 10 10 10 10
Treasury share 0 0 0 0
RATIOS 2023 2024F 2025F 2026F Retained earnings 127 137 264 440
Growth YoY Other equity 17 17 17 17
Revenue 611% -2% 249% 43% Minority interest 0 0 0 0
Op. Profit (EBIT) N.M. -290% 1203% 52% Total equity 369 380 506 683
PBT growth % N.M. 215% 1108% 56% Liabilities & equity 498 498 671 908
EPS growth % N.M. 238% 1108% 56%
Y/E shares out, mn 21.6 21.6 21.6 21.6
Profitability
Gross Profit Margin 7.4% 14.9% 22.8% 23.5% CASH FLOW (VND bn) 2023 2024F 2025F 2026F
Op. Profit, (EBIT) Margin -2.6% 4.9% 18.5% 19.7% Beginning Cash Balance 26 35 56 195
EBITDA Margin 0.4% 7.8% 19.3% 20.3% Net Income 3 10 126 198
NPAT-MI Margin 1.4% 4.3% 15.0% 16.5% Dep, & Amortization 7 7 7 7
ROE 0.9% 2.8% 28.5% 33.3% ∆ in Working Capital -166 15 9 -126
ROA 0.7% 2.1% 21.6% 25.1% Other Adjustments -12 0 0 0
Cash from Operations -167 32 142 79
Efficiency
Days Inventory on Hand 193 198 80 88 Capital Expenditures, Net -1 -2 -2 -2
Days Accts, Receivable 178 323 84 65 Investments, Net 90 0 0 0
Days Accts, Payable 23 42 26 34 Cash from Investments 89 -2 -2 -2
Cash Conversion Days 348 479 138 118
Dividends Paid 0 0 0 -22
Liquidity ∆ in Share Capital 0 0 0 0
Current Ratio 3.7 4.1 4.1 4.0 ∆ in ST Debt 85 -9 -2 31
Quick Ratio 2.8 3.2 2.9 2.8 ∆ in LT Debt 0 0 0 0
Cash Ratio 0.3 0.5 1.2 1.3 Other financing C/F 0 0 0 0
Debt / Assets % 17.2% 15.4% 11.1% 11.7% Cash from Financing 85 -9 -2 10
Debt / Capital % 18.8% 16.8% 12.8% 13.4%
Net Debt / Equity -7.9% -15.8% -39.6% -37.5% Net Change in Cash 8 22 138 87
Interest Coverage -4.6x 2.3x 33.8x 53.0x Ending Cash Balance 35 56 195 282
Source: PVB, Vietcap forecast
Non-rated
Update Report
Petrovietnam Chemical and Services (PVC)
Industry Oil & Gas 2023 2024F 2025F 2026F
Report Date May 20, 2024 Revenue 3,222 3,397 4,036 4,191
Current Price VND15,700 Revenue % YoY 10% 5% 19% 4%
Fair value VND18,000 NPAT-MI 20 27 49 55
Upside to FV 14.6% NPAT-MI % YoY 78% 33% 80% 13%
Dividend yield 1.1% Recurring NPAT-MI 7 22 44 50
TSR 15.7% GPM 6.9% 7.4% 8.8% 9.0%
NPM 0.6% 0.8% 1.2% 1.3%
Market Cap USD51mn ROE 2.2% 2.6% 4.6% 5.1%
Foreign Room USD0mn Net D/E 0.5% -9.3% -9.6% -7.4%
30D ADTV USD1.3mn EV/EBITDA 32.1x 27.1x 14.6x 13.8x
State Ownership 36% P/E 62.2x 46.8x 26.0x 23.0x
Outstanding Shares P/B 1.4x 1.3x 1.3x 1.3x
81.2 mn
Dividend yield 1.5% 1.1% 1.9% 3.5%
Fully Diluted O/S 81.2 mn
PVC VNI
Well-positioned to fully capture huge workload from Block B
P/E (ttm) 103.7 15.9x
• We issue a Non-Rated report for PVC with a fair value of VND18,000/share. Our investment
P/B (cur.) 1.2x 1.8x
thesis consists of (1) near-monopoly drilling fluid supplier benefiting from Block B project, with
ROE 2.7% 12.1%
ROA 0.9% 1.9%
potential revenue of VND16tn (USD640mn) during 2024-2049; (2) 30% revenue CAGR of
technical services (including well-related services & industrial-related services) during 2023-
2028F, and (3) a stable & increasing dividend payout due to its net cash position.
Company overview • We forecast PVC’s 2024/25F NPAT-MI to jump 33%/80% YoY due to: (1) the recovery in the
PVC is a near-monopoly player in number of drilling wells from 15 to 17 due to PVN’s guidance of 54% YoY in 2024’s Exploration &
Vietnam drilling fluids market with Production (E&P) capex, (2) estimated VND130bn contract for Dung Quat Refinery’s 5th
100% and 80% market share for
Maintenance Plan Package, and (3) expected VND658bn revenue from Block B.
local and foreign O&G clients,
• We forecast PVC’s 2024-28F revenue and reported NPAT-MI CAGR to reach 12% and 38%,
respectively, via its subsidiary
DMC-WS (100% stake) and joint respectively, which is fueled by (1) total revenue of VND1.4tn (USD56mn) in drilling fluids
venture MI-Vietnam, partner with services for the Block B project, including 16/17 wells in 2025/26F and 34 wells p.a in 2027-28F,
US-based Schlumberger (51% and (2) the further contributions of technical services contracts for oil & gas clients ranging
stake). Drilling fluid contribute from upstream to midstream and downstream, (3) a GPM assumption of 28% for the drilling
~14% revenue, 45% gross profit fluid segment vs 30-35% in the peak period (2014-2015).
over 2014-2023. PVC also provides • In our view, PVC looks attractive with a projected 2025 P/E of 26.0x, which implies a PEG of 0.7
technical services and
based on a projected EPS CAGR of 39% for 2023-2026F.
petrochemical trading.
• Upside potential: Faster-than-expected progress of oil and gas projects, especially Block B
Share price performance
• Downside risks: Partnership termination in M-I Vietnam (page 31); competition with foreign
45%
players in drilling fluids; higher-than-expected FX loss/ input material cost.
30%
A near-monopoly drilling fluids player to secure the total contract of VND16tn (USD600mn)
15% from the Block B project. PVC’s competitive edge includes (1) exclusive formulations of drilling
fluids derived from its US partner and (2) a strong relationship with oil & gas operators with
0% market share for domestic and foreign clients of 100% and 80%, respectively. As such, we expect
PVC to provide drilling fluids services for 90% of drilled wells from the Block B project, equivalent
-15%
to respective 16/17 wells in 2025/26F and 34 wells p.a. from 2027 to 2049.
YTD 1Y 3Y ann.
PVC VNI Robust expansion of technical services from upstream to midstream and downstream to
drive a 30% revenue CAGR. (1) Regarding upstream technical services, we expect the
contribution of the Block B project together with the recovery in E&P capital expenditure will fuel
the well-related services revenue. (2) Concerning downstream and midstream, we foresee the
Phuoc Duong
Analyst establishment of PVC’s two subsidiaries in 2023 (via capital raising by 60%) to pave the way for
phuoc.duong@Vietcap.com.vn PVC to further penetrate and develop technical services for O&G operators.
+8428 3914 3588 ext.135
Increasing cash dividend payout. We expect PVC to pay cash dividends of VND300-1,200/share
Duong Dinh in 2024-28F, equivalent to a dividend yield of 1-8%, due to its (1) net cash position, (2) positive
Associate Director free cash flow, and (3) minimal capital expenditures across the forecast period.
duong.dinh@Vietcap.com.vn
+8428 3914 3588 ext.140
Update Report
Company Overview
PVC is an industry leading oil & gas services provider with a well-diversified portfolio. PVC’s
business segments are composed of three categories: (1) supplying drilling fluids, (2) providing
technical services, and (3) petrochemical trading. PVC’s business model is involved in all stages
in the life cycle of oil and gas products and services, including upstream (exploration and
exploitation), midstream (transportation and storage), and downstream (processing and
distributing). As a result, PVC’s revenue and earnings performance are largely subject to the oil
and gas industry landscape in Vietnam.
Figure 25: PVC’s net revenue by segments in 2023 Figure 26: PVC’s gross profit by segments in 2023
6%
Drilling fluids Drilling fluids

18% 28%
Technical 45% Technical
services services
76% Petrochemical Petrochemical

trading 27% trading
Source: PVC, Vietcap Source: PVC, Vietcap
Figure 27: PVC’s business model
Oil and Gas Value Chain
Upstream Midstream Downstream

Exploration & Exploitation Transportation & Storage Refinery & Distribution
- Drilling fluids products and - Industrial cleaning services - Environmental treatment

services. for FSO/FPSO, tanks, pipeline. services for O&G plants.
- Well services, E&P research, - Logistics services for O&G - Scaffolding installation
consulting and engineering. storage and trasnportation. services for O&G plants.
Drilling Fluids Technical Services Petrochemical Trading

% PVC’s Revenue: 5-10% % PVC’s Revenue: 15-20% % PVC’s Revenue: 75-80%
GPM: ~25-35% GPM: ~10-20% GPM: ~3-4%
Source: PVC, Vietcap
Update Report
Drilling fluids
The drilling fluid system plays a fundamental role in the entire O&G drillling process. Drilling
fluids are complex mixtures of chemical products added to the wellbore to faciliate the drilling
operation. They help O&G operators to treat and clean the wells, hold and remove the cuttings,
stablize wellbore, provide buoyancy, cool, and lubricate. The certain combination and specific
amount of fluids used in each drilling projects relies on the geographical conditions and the
clients’ requirements.
PVC is a near-monopoly in drilling fluids given its competitive edge in expertise and
reputation. Before 2016, through PVC’s two key subsidiaries M-I Vietnam (51% stake) and DMC-
WS (100%), and its relationship with PVN, the company had secured 100% of all drilling fluids
contracts in Vietnam. Since 2016, although PVC’s market share for foreign clients has averaged
70-80% (the remaining belongs to overseas players such as Hamilton, Baker Hughes
International, among others, because of PVN’s actions to reduce the industry concentration),
the company is still a monopoly drilling fluid provider for domestic clients. Given the partnership
with M-I Swaco (a company of Schulumberger LLC in the US) in the joint venture of M-I Vietnam,
PVC has leveraged its partners’ exclusive drilling fluids formulations. As a result, PVC can offer
drilling fluids system packages to oil and gas operators with lower cost and higher quality,
compared to other overseas competitors. We would like to note that, as for the drilling fluids
segment, the net revenue relies on the number of contracted wells and the revenue per serviced
well. Although drilling fluids account for the lowest of PVC’s net revenue, its gross profit margin
is by far the highest among PVC’s segments, ~25-35% in 2014-23.
Technical services
PVC’s technical services encompasses all phases of the oil and gas value chain from
upstream to downstream. The scope of PVC’s technical services is composed of upstream (well
service, E&P research, consulting and engineering, chemical supply), midstream (cleaning
solutions, and more), and downstream (environmental treatment, and more). PVC’s core
technical services are well-related services, which act as an additive offering together with the
fluid system in the drilling projects. Since the capital expenditure in oil and gas upstream
activities ramped down in Vietnam in 2014-2021, PVC’s technical services have been diversified
into the industries of midstream and downstream. As such, PVC has been building an ecosystem
of services to oil and gas customers in all stages, which reduces its dependence on the technical
well services in the upstream segment. Technical service’s net revenue contribution has
increased from 13% in 2014 to 18% in 2023, while the gross profit margin is the second largest,
~10-20% in 2014-23.
Petrochemicals trading
Petrochemical trading acts as a supporting sub-segment for PVC’s business model. PVC’s
petrochemical trading segment involves the products either produced or purchased by PVC.
Firstly, PVC purchases raw ores from its partners in the north of Vietnam or from its owned mine
in Savannakhet (Laos). Then, through the Cai Mep Petrochemicals Factory, PVC refines the
materials, processes the concentrates, and finally distributes the products, including Barite,
Bentonite, Cement-G, and others. Also, PVC participates in trading petroleum-related chemicals
and equipment for oil and gas operators in all phases of the oil and gas value chain. Although the
revenue contribution is the largest (76% of 2023 consolidated revenue), the gross profit margin
is by far the lowest (3-4% gross profit margin). The segment plays an important role in
manufacturing drilling fluids and establishing relationships with its clients to cross-sell other
high-margin products and services.
Update Report
Shareholder & Corporate structure

In March 1990, PVC was founded under the name of Drilling Mud and Petrochemical Company. In
2005, PVC was equitized into a joint stock company, and was listed on the Hanoi Stock Exchange.
In January 2020, the company was renamed as PetroVietnam Chemical and Service. As a State-
owned company, the largest shareholder of PVC is PetroVietnam, (PVN) which accounts for 36%
of the company’s stake. Foreign investors only hold 0.5% ownership. Other stockholders mainly
include domestic individual investors.
PVC’s business ecosystem is composed of three dependent units, four subsidiaries, and one
associate. In 2023, PVC raised VND212bn to establish two dependent units, PVChem-ITS and
PVChem-CS, with charter capitals of VND125bn and VND60bn, respectively. PVC’s wholly-owned
subsidiaries include PVChem-Tech and DMC. PVC owns a 51% stake in each of DMS and M-I
Vietnam. At the 2023 AGM, PVC approved the transfer of its ownership in DMC-VTS (Laos), which
has ceased operations, but the divestment is on hold.
Figure 28: PVC’s shareholder structure Figure 29: PVC’s corporate structure
PVC
Depedent Unit Subsidiary Associate
36% PVC-ITS (100%) PVC-Tech (100%)

DMC-VTS (30%)
PetroVietnam
DMC (100%)
Others PVC-CS (100%)
64%
DMS (51%)
PVC-RT (100%)
MI Vietnam (51%)
Source: PVC, Vietcap Source: PVC, Vietcap
Management
Most of PVC’s BOD and BOM members are experienced former PVN employees who held various
positions. As of end Q1 2024, the total ownership rate of PVC’s BOD and BOM is 0.84%,
considered the norm for Government-owned enterprises like PVC.
Figure 30: PVC’s Board of Directors
Name Position Note

1 Truong Dai Nghia Chairman Joined in April 2018
2 Tran Hong Kien Member/Head of Audit Committee Joined in December 2019
3 Nguyen Ngoc Quynh Executive member Joined in July 2010
4 Ha Duy Tan Executive member Joined in November 2009
Figure 31: PVC’s Board of Management
Name Position
1 Duong Tri Hoi CEO (former Deputy CEO of PVFCCo) Joined in January 2024
2 Bui Tuan Ngoc Deputy CEO Joined in November 2011
3 Pham Ngoc Khue Deputy CEO Joined in June 2019
4 Vu An Deputy CEO Joined in December 2023
Update Report
Historical performance
As PVC's core business is integral to the drilling value chain, its revenue and earnings are
affected by upstream investments and global oil prices. PVC’s historical performance is divided
into three stages, 2009-14 with high growth, 2014-20 with a large decline, and 2021-23 with a
slow recovery.
In 2009-2014, PVC enjoyed all-time high growth given the favorable industry landscape.
PVC’s net revenue and NPAT-MI CAGRs were 51% and 33%, respectively. The global Brent oil
price more than doubled, which prompted overseas and domestic investors to launch E&P
projects in Vietnam. As PVC was once a monopoly in supplying drilling fluids, the company had
secured well-drilling contracts for all E&P operators in Vietnam, including PVEP, VSP, and JVPC,
among others. The number of drilled wells serviced by PVC multiplied nearly ten-fold from 14 in
2009 to 120 in 2014. As such, given the gross profit margin of PVC has improved by 8.5 ppts by
the end of the period.
In 2015-2020, PVC’s performance was adversely affected by the downtime in the oil and gas
industry. PVC recorded a CAGR of net revenue of -45%, while that of NPAT-MI was, to a lesser
extent, -10%. The excessive supply of oil amid the constrained demand in 2015 and the economic
uncertainty of the COVID-19 lockdown in 2020 pressured Brent oil prices. The 2014 geopolitical
conflict with China in the Bien Dong Sea led to significant E&P divestment from Vietnam, resulting
in fewer drilled wells. Additionally, PVN's open bidding for drilling projects, including local and
foreign participants, weakened PVC’s dominant position. The number of PVC’s contracted drilled
wells averaged 30 p.a., which was nearly half compared to the previous period.
In 2021-2023, the company diversified into other segments amid the postponement of
drilling projects. PVC’s net revenue remained nearly flat, with a 2021-2023 CAGR of 3%, while
that of NPAT-MI was 63% during the phase, which we primarily attribute to the low base effect.
The company has expanded its business to other industries such as petrochemical trading and
technical solutions, which supported PVC’s performance. As for the drilling fluids segment, the
FID of the Block B – O Mon project was delayed until late 2023 and early 2024, which weighed on
the drilling activities in Vietnam. PVC has struggled to win drilling fluids contracts, reaching a
decades-low figure of only 15 supplied drilled wells in 2023.
Figure 32: PVC’s net revenue and NPAT-MI margin in 2009-2023
2009-14: global oil price hike and 2015-20: global oil price slump and 2021-now: global oil price and
domestic projects execution domestic projects shortage domestic investment recovery
5,000 10.0 %
9.1%
8.0%
7.0%
4,000
6.0%
3,000
4.9% 4.9%
3.8%
4.0%
2.9%
2,000
2.2% 2.0%
1.0% 0.6%
0.2% 0.2% 0.3% 0.4%
-0.3%
0.0%
1,0 00
-1.6%
3,604
2,465
2,265
2,934
2,760
3,709
3,222
3,061
3,615
2,518
4,312
2,179
3,317
-2.0%
1,741
552
0 -4. 0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Net Revenue (VND bn) NPAT-MI margin (%)
Update Report
Figure 33: PVC’s number of secured wells and GPM, EBITM in 2009-2023
120 19.5% 20.0%
18.0%
16. 0%
14.8% 15.0%
100
14.3%
11.1% 11.8% 12.0%
80
10.2% 10.9%
9.7%
7.9% 8.6%
7.1% 7.2% 7.5%
8.0%
60
6.2% 6.5% 6.6% 6.9%
4.0% 4.0%
2.4% 1.6%
1.3% 1.5% 1.3% 0.8%
0.5% 0.6%
40
0.1% 0.0%
-5.1%
20
-4. 0%
14 20 56 71 63 120 58 22 30 26 21 20 24 19 15
0 -8.0 %
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
No. of contracted wells GPM margin (%) EBIT margin (%)
Update Report
2024 Outlook: Earnings recovery due to technical services
Figure 34: 2024 Outlook
VND bn 2023 2024 YoY % Vietcap’s comments on YoY growth

Revenue 3,222 3,397 5% 2024Q1 net revenue was VND398bn (-40% YoY), equivalent of 12% of
our full-year forecast.
Drilling fluids 185 195 5% Fueled by the recovery of upstream activities from a low base, including
(1) the number of contracted drilling wells (17 in 2024 compared to 15 in
2023), and (2) the drilling fluids revenue per well (5% YoY from the all-
time low in 2023) given PVN’s guided capital expenditures in 2024.
Technical services 586 678 16% Stemmed from (1) the industrial services backlog of the Dung Quat 2
Refinery Plant's 5th maintenance plan package with a total value of
VND125bn, (2) technical services penetration and expansion followed
by the establishment of PVC's subsidiary, PVC-ITS (VND58bn charter
capital) in 2023, and (3) the pickup in the number and the revenue of
serviced wells from a low base.
Petrochemical trading 2,450 2,524 3% We attribute to (1) the inception of a subsidiary, PVS-CS (100% stake),
and (2) a two-year sulfur off-take agreement with ADNOC.
Gross profit 222 252 13% 2024Q1 gross profit was VND33bn (-28% YoY), equivalent of 13% of
our full-year forecast.
Drilling fluids 62 65 5%
Technical services 61 81 34%
Petrochemical trading 100 106 6%
Sales and marketing -34 -42 25% Primarily owing to the incurrence of additional outsourcing expenditure
exp for the technical and industrial services segments.
General and -163 -178 10% Mainly due to the increases in the higher employee headcount given the
administrative exp establishment of two wholly-owned subsidiaries.
Operating profit 26 32 22%
Financial income 29 37 29%
Financial expenses -19 -12 -36%
in which: interest -4 -4 -3%
expenses
Profit before tax 55 57 4%
NPAT-MI reported 20 27 33%
NPAT-MI recurring 7 22 219% Mostly propelled by PVC’s (a) higher number of contracted drilling
wells (17 wells in 2024 versus 15 wells in 2023) and higher revenue
per well (5% YoY), (b) larger contribution from high-margin
technical services given the establishment of two subsidiaries, (c)
the contract for Dung Quat refinery, and (d) a 36% decrease in
financial expense.
2024Q1 NPAT-MI was minimal at VND50mn, which we attribute to the
weak season of PVC’s operations in the first half.
Management guides for VND49bn NPAT before MI in 2024 vs our
forecast of VND45bn. PVC beat its guidance by ~26% on an
aggregate basis from 2013-2023.
Δ ppts
GPM % 6.9% 7.4% 0.5
Drilling fluids 33.3% 33.3% 0.1 We expect that the segment’s gross profit margin was supported by the
global Brent oil price recovery in 2024.
Technical services 10.4% 12.0% 1.6 We believe the further contribution from high-margin well-drilling
services drives the segment's gross profit margin.
Petrochemical trading 4.1% 4.2% 0.1
Reported NPAT-MI 6.9% 7.4% 0.5
margin
Source: PVC, Vietcap forecast
Update Report
Long-term outlook: Forecasting revenue and NPAT CAGR of

12% and 39% over the 2023-2028 period
Figure 35: Vietcap’s forecast summary
2021 2022 2023 2024F 2025F 2026F 2027F 2028F

Revenue 2,760 2,934 3,222 3,397 4,036 4,191 5,131 5,317
Drilling fluids 401 270 185 195 298 316 401 421
Technical services 264 445 586 678 1,164 1,250 2,052 2,164
Petrochemical trading 2,095 2,220 2,450 2,524 2,574 2,626 2,678 2,732
Gross Profit 181 221 222 252 357 376 514 538
NPAT-MI 8 12 20 27 49 55 90 100
Revenue YoY% 27% 6% 10% 5% 19% 4% 22% 4%
NPAT-MI YoY% 41% 52% 78% 33% 80% 13% 63% 11%
GPM 7% 8% 7% 7% 9% 9% 10% 10%
NPAT-MI margin 0% 0% 1% 1% 1% 1% 2% 2%
ROE 1% 1% 2% 3% 5% 5% 8% 9%
Net D/E 0% -9% -10% -7% -14% -11% -12% -10%
Revenue growth trajectory fueled by the contracted wells drilling in the

Block B project
We expect PVC’s revenue to experience a 12% CAGR given the aggregate revenue of
VND1.4tn from the Block B project in 2024-28F. In addition, we estimate total potential revenue
from Block B to be VND16tn (USD600mn) for the 2024-2049 period. Based on Block B project
updates from MOECO, there are 37 exploratory wells, used in the pre-production period between
2025 and 2026, and 861 development wells, used during the production life of the Block B project,
from 2027 to 2049. Despite the presence of foreign players such as Hamilton Energy, Baker
Hughes International, among others, we believe PVC will secure 90% of the total drilled wells at
Block B given its home-field advantage. Together with 20 wells from other projects, there will be
37/38 wells in 2025/26F, respectively, and 54 wells p.a. from 2027 onwards for PVC.
As for the drilling fluids segment, we anticipate a CAGR of 21% in revenue in 2024-28F. This is
because we estimate the drilling fluids revenue per well of Block B to be 30% of normal wells as
(1) the drilling time is faster (9-12 days vs 2-3 months) and (2) the well depth is shorter (1,000
meters vs 4,000 meters).
In terms of downstream and midstream technical services, we expect PVC to secure a

maintenance package for each of Nghi Son Refinery and Petrochemical Plant and Dung Quat Oil
Refinery Plant every four years. As such, we anticipate technical services revenue growing at a
CAGR of 34% in 2024-28F. We forecast petrochemical trading’s revenue CAGR at 2% in 2024-28.
Update Report
Figure 36: Revenue breakdown (VND bn) Figure 37: Number of serviced drilled well
20 20
2,678 2,732
2,574 2,626 20
20
2,450 2,524
2,164 34 34
2,052
1,164 1,250 15 17 16 17
586 678
185 195 298 316 401 421
2023 2024F 2025F 2026F 2027F 2028F 2023 2024F 2025F 2026F 2027F 2028F
Drilling fluids Technical services Petrochemical trading Block B Other projects
Source: PVC, Vietcap forecast Source: PVC, Vietcap forecast
Net profit margin widening backed by high-profit-margin segments to

drive NPAT-MI growth
We forecast PVC’s NPAT-MI to grow to a 38% CAGR in 2024-28F with drilling fluids and
technical services as the key contributors. We project PVC’s NPAT-MI margin to remain at
1.2%/1.3% in 2025-2026 before expanding to an average of 1.9% from 2027 onwards, in which
further contributions from drilling fluids and technical services outweigh the increase in
operating expenses. As the gross profit margin of drilling fluids is positively correlated to the
global oil price level, given the Brent oil price prediction of USD75/bbl over the 2025-2028 period
in our Oil & Gas Sector Report (dated October 9, 2023), we estimate the segment’s gross profit
margin remains at 27.9% in 2025-28F. Due to the gross profit margin of technical services
upstream being higher than that in the downstream and midstream, the recovery in the number
of serviced wells from the Block B project will drive the gross profit margin of the technical
segment to recover from 10% in 2023 to 14% from 2025 onwards (average GPM is 15% over 2019-
2023).
Conversely, we project operating expenditure as a percentage of net revenue to rise from 6.5%
in 2024 to 7.0% from 2025 onwards, which stems from the increase in both (1) general and admin
expense with higher employee headcount from PVC’s two wholly owned subsidiaries, PVC-CS
and PVC-ITS, and (2) selling expense with further penetration into technical services in
midstream and downstream.
Figure 38: NPAT-MI, NPAT-MI margin (VNDbn, %) Figure 39: Gross profit by segment and GPM (VNDbn, %)
120 2.0% 600
10.0% 10.1% 12.0%
1.9% 8.8% 9.0%

1.8%
117
500 10.0 %
7.4% 115
100
6.9%
1.3%
400 8.0%
80
1.2% 111 113

303
300 6.0%
60 1.0%
287
0.8% 200
100 106 175

4.0%
163
0.6%
40
100
61 81 2.0%
62 65 83 88 112 117
100
90
49
20
55
20
27
0 0.0%
0 0.0%
2023 2024F 2025F 2026F 2027F 2028F

2023 2024F 2025F 2026F 2027F 2028F
Drilling fluids Technical services
NPAT-MI (VNDbn), LS NPAT-MI margin (%) Petrochemical trading GPM (%)
Update Report
Sustainable dividends to guarantee shareholders’ return given its

healthy financial position
We estimate PVC to pay an increasing dividend payment with a payout ratio consistently
over 70% each year. Since the inception of the company, PVC has consistently paid cash
dividends of VND180-1,400 per share to its shareholders, not only in the prime period from 2010
to 2014, but also in the downtime with the shortage of workloads in recent years. In 2024, PVC is
paying its cash dividend of VND246 per share in cash given the existing number of 81 million
shares outstanding – implying a dividend yield of 1.3%. In PVC’s 2024 AGM, the company is
approved to pay VND550 per share in cash and/or stock in 2024, which is equivalent to ~2.8%
dividend yield and ~74% payout ratio. Additionally, we expect to PVC raise its dividend to VND800
per share in 2026 given better company performance. Starting from 2027, given the meaningful
recovery in its revenue and earnings supported by the Block B project’s backlog, PVC expects
PVC to raise its dividend to VND1,200 per share, which translates to a dividend payout ratio of
~40-60%. We attribute PVC’s capability to keep its steady dividend policy to its robust financial
position, including (1) positive free cash flow generation ability, (2) negative net debt-to-equity
ratio, and (3) minimal capital expenditures from 2024 onwards.
Figure 40: Free cash flow and dividend payment (VND bn) Figure 41: Dividend per share and payout ratio
166 100 186%

105
1,200 200%
94 97
65
39 41 24 3445
1,0 00
31 127%
160%
23 15 800
120%
85%
70% 65%
600
54% 55% 80%
Free cash flow

400
42%
1,200
1,200
40%
800
300
450
550
230
200
180
-138 Dividend payment

0 0%
2021 2022 2023 2024F 2025F 2026F 2027F 2028F

-221
Dividend per share (VND) Dividend payout (%)
2021 2022 2023 2024F 2025F 2026F 2027F 2028F
Update Report
Risks
Partnership termination risk: As PVC’s drilling fluids technology and expertise mostly come
from its subsidiary, M-I Vietnam, the company is still dependent on its partnership with
Schlumberger. In 2021, PVC and Schlumberger agreed to extend the joint venture contract for
M-I Vietnam for another decade (to 2031). We would like to note that we estimate about ~40%
of PVC’s consolidated NPAT to come from its 51% stake in M-I Vietnam. However, as the drilling
fluids workload from the upcoming Block B Project is considered huge revenue and earnings
drivers for the joint venture, we expect both parties will continue to partner until the end of the
project.
Lower capital expenditure in the oil and gas industry: PVC’s core business is the provision of
services and products for the oil and gas value chain, including upstream (exploration and
exploitation), midstream (transportation and storage), and downstream (refinery and
distribution). Meanwhile, the investment value in the oil and gas industry largely depends on the
global oil price, the national power development plan (PDP), and the geopolitical conditions.
Given the recent rally of oil prices and the stacked pipeline of large projects, we anticipate drilling
fluids and technical services to grow at CAGRs of 21% and 34% in 2024-28F, respectively, and
the number of secured wells to recover to 17 in 2024 and 20 starting from 2025 (excluding the
Block B – O Mon project). Any changes in the above factors could affect our revenue and earnings
forecasts for PVC.
Block B project’s FID postponement: Over the last decade, given the unfavorable worldwide oil
price, there are only a few oil and gas mega projects, weighing on the number of serviced wells
to an all-time low of 15 wells in 2023. As a result, the FID for Block B – O Mon, which includes 898
drilled wells in total, brings about an aggregate VND1.4tn of revenue in 2025-28. Since late 2023
and early 2024, PVN and foreign partners have made good progress towards the Block B – O Mon
project, so we project that PVC will service 16/17 wells in 2025/2026 and 34 wells p.a. in 2027-
2049. That being said, any delays of the Block B – O Mon Project could affect PVC’s contracted
drilled wells.
Competitive market risk: PVC was once a monopoly (100% market share) in providing drilling
fluids for drilling activities through its key subsidiaries, DMC-WS and MI Vietnam. Nevertheless,
currently, PVC must compete with both domestic and international counterparts to secure its
contract, which might ramp down the number of contracted drilled wells and the revenue per
serviced well of the company.
Material supply risk: PVC’s business segments are involved in the production of drilling fluids
and other chemical products, in which the company has to ensure the price and the quality of
input materials. The establishment of strategic partnerships with reputable and experienced
input material suppliers, particularly in the northern regions like Tuyen Quang and Thai Nguyen,
helps mitigate the risk.
Exchange rate loss: PVC inputs a portion of its materials from overseas suppliers, where the
company has to conduct numerous transactions in foreign currency. Nevertheless, the
operation of PVC’s foreign exchange department lessens the risk as the net gain/loss from
foreign exchange has been relatively minimal since the inception of the company.
Account receivables loss: Approximately 47% of PVC’s total assets are account receivables, of
which 92% are from trade receivable accounts. PVC’s customers are mainly State-owned
enterprises operating in the oil and gas industry, including Nghi Son Refinery and Chemical LLC,
and PVEP POC, among others. However, PVC’s largest client is a chemical trading company,
Stavian Chemical JSC, which accounts for 69% of accounts receivable and 29% of total assets.
Although PVC has not recorded a large amount of provisions for accounts receivable, the
concentration asset structure and client portfolio might weigh on the company’s earnings.
Update Report
Valuation
We use a 100%-discounted cash flow (DCF) valuation model as we believe the DCF approach is
the most suitable method to reflect the intrinsic value of PVC. We use a terminal growth rate of
2%. As a consequence, we derive PVC’s one-year fair value of VND18,000/share.
Figure 42: Cash flow projection
VND bn 2023 2024F 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F
EBIT 26 32 74 82 155 166 160 166 184 191 187
+ Tax -5 -6 -15 -16 -31 -33 -32 -33 -37 -38 -37
+ Depreciation 17 16 14 13 11 10 9 8 7 6 5
- Capex -15 -2 -2 -2 -2 -2 -2 -1 -1 -1 -1
- Working cap 71 66 -31 -42 33 -40 5 -30 -65 -33 2
increase
Free Cash Flow 94 105 41 34 166 100 140 109 87 124 155
Present value of FCF 101 36 27 121 67 86 61 44 58 66
Cumulative PV of FCF 101 136 164 285 352 437 498 543 600 666
Figure 43: Discounted cash flow valuation and assumptions
Cost of Capital DCF VND bn

Beta 1.3 PV of FCF (2024-2033) 666
Market Risk Premium % 8.0 Terminal value (2% g) 911
Risk Free Rate % 6.0 PV of FCF and TV 1,578
Cost of Equity % 16.0 Less: Net debt 4
Cost of Debt % 8.0 Less: Minority interest 108
Corporate Tax Rate % 20.0 Value of Equity 1,465
Debt-to-capital ratio % 70.0 Number of shares (million) 81.2
WACC % 9.4 Derived value per share (VND) 18,000
Figure 44: Valuation summary
Method DCF valuation

Current price (VND/share) 15,700
Fair value (VND/share) 18,000
Upside 14.6%
Dividend yield 2024F 1.1%
TSR 15.7%
Update Report
Financial Statements
P&L (VND bn) 2023 2024F 2025F 2026F B/S (VND bn) 2023 2024F 2025F 2026F
Revenue 3,222 3,397 4,036 4,191 Cash & Equivalents 649 718 858 871
COGS -2,999 -3,144 -3,679 -3,815 ST Investment 156 156 156 156
Gross Profit 222 252 357 376 Accounts Receivables 1,158 1,168 1,148 1,189
Sales & Marketing exp. -34 -42 -61 -63 Inventories 318 360 483 504
General & Admin exp. -163 -178 -222 -231 Other Current assets 18 18 18 18
Operating Profit 26 32 74 82 Total Current Assets 2,300 2,421 2,664 2,738
Financial Income 29 37 40 46 Fixed Assets, Gross 431 433 435 437
Financial Expenses -19 -12 -12 -13 - Depreciation -301 -317 -331 -343
- o/w Interest Expense -4 -4 -4 -5 Fixed Assets, Net 130 116 104 94
Associates 0 0 0 0 LT investments 0 0 0 0
Net other Income/(Loss) 19 0 0 0 LT assets, other 38 38 38 38
Profit Before Tax 55 57 102 115 Total LT Assets 172 158 146 135
Income Tax -20 -11 -20 -23 Total Assets 2,472 2,578 2,810 2,874
NPAT Before MI 35 45 82 92
Minority Interest -15 -18 -33 -37 Accounts Payable 313 431 504 523
NPAT Less MI, Reported 20 27 49 55 ST Debt 810 786 920 954
Other ST Liabilities 280 280 280 280
EBITDA 43 48 88 95 Total Current Liabilities 1,403 1,497 1,704 1,757
EPS Reported, VND 252 335 605 683 LT Debt 0 0 0 0
EPS Recurring (1), VND 106 335 605 683 Other LT liabilities 19 19 19 19
EPS Fully Diluted, VND 312 335 605 683 Total Liabilities 1,422 1,516 1,723 1,776
DPS, VND 180 300 550 800 Preferred Equity - - - -
DPS/EPS (%) 85% 42% 54% 55% Share capital 812 812 812 812
(1) EPS after FX loss and bonus & welfare Share premium 40 40 40 40
Treasury shares 0 0 0 0
RATIOS 2023 2024F 2025F 2026F Retained earnings 34 46 71 82
Growth YoY Other equity 56 56 56 56
Revenue 9.8% 5.4% 18.8% 3.8% Minority interest 108 108 108 108
Op. Profit (EBIT) -45.0% 21.6% 135.4% 11.1% Total equity 1,050 1,062 1,087 1,098
PBT growth % 40.9% 3.9% 80.3% 12.9% Liabilities & equity 2,472 2,578 2,810 2,874
EPS growth % 173.9% 215.2% 80.3% 12.9%
Y/E shares out, mn 81.2 81.2 81.2 81.2
Profitability
Gross Profit Margin 6.9% 7.4% 8.8% 9.0% CASH FLOW (VND bn) 2023 2024F 2025F 2026F
Op. Profit, (EBIT) Margin 0.8% 0.9% 1.8% 2.0% Beginning Cash Balance 228 649 718 858
EBITDA Margin 1.3% 1.4% 2.2% 2.3% Net Income 20 27 49 55
NPAT-MI Margin 0.6% 0.8% 1.2% 1.3% Dep, & Amortization 17 16 14 13
ROE 2.2% 2.6% 4.6% 5.1% ∆ in Working Capital 71 66 -31 -42
ROA 0.9% 1.1% 1.8% 2.0% Other Adjustments -11 0 0 0
Cash from Operations 98 110 33 26
Efficiency
Days Inventory on Hand 42 39 42 47 Capital Expenditures, Net -15 -2 -2 -2
Days Accts, Receivable 141 125 105 102 Investments, Net -9 0 0 0
Days Accts, Payable 48 43 46 49 Cash from Investments -24 -2 -2 -2
Cash Conversion Days 135 121 100 100
Dividends Paid -23 -15 -24 -45
Liquidity ∆ in Share Capital 212 0 0 0
Current Ratio 1.6 1.6 1.6 1.6 ∆ in ST Debt 166 -24 134 34
Quick Ratio 1.4 1.4 1.3 1.3 ∆ in LT Debt 0 0 0 0
Cash Ratio 0.5 0.5 0.5 0.5 Other financing C/F -8 0 0 0
Debt / Assets % 32.8% 30.5% 32.7% 33.2% Cash from Financing 347 -38 109 -11
Debt / Capital % 43.6% 42.5% 45.8% 46.5%
Net Debt / Equity 0.5% -9.3% -9.6% -7.4% Net Change in Cash 421 69 140 13
Interest Coverage 6.2x 7.8x 18.9x 17.9x Ending Cash Balance 649 718 858 871
Update Report
Vietcap Rating System

Stock ratings are set based on projected total shareholder return (TSR), defined as (target price – current
price)/current price + dividend yield, and are not related to market performance.
Equity rating key Definition
BUY If the projected TSR is 20% or higher
OUTPERFORM If the projected TSR is between 10% and 20%
MARKET PERFORM If the projected TSR is between -10% and 10%
UNDERPERFORM If the projected TSR is between -10% and -20%
SELL If the projected TSR is -20% or lower
NOT RATED The company is or may be covered by the Research Department but no
rating or target price is assigned either voluntarily or to comply with
applicable regulation and/or firm policies in certain circumstances,
including when Vietcap is acting in an advisory capacity in a merger or
strategic transaction involving the company.
RATING SUSPENDED, A rating may be suspended, or coverage terminated, if fundamental

COVERAGE TERMINATED information is deemed insufficient to determine a target price or
investment rating or due to a reallocation of research resources. Any
previous investment rating and target price are no longer in effect.
Unless otherwise specified, these performance parameters are set with a 12-month horizon. Movement in
share prices may cause a temporary mismatch between the latest published rating and projected TSR for a
stock based on its market price and the latest published target price.
Target prices are generally based on the analyst's assessment of the stock’s fair value over a 12-month
horizon. However, the target price may differ from the analyst’s fair value if the analyst believes that the
market will not price the stock in line with assessed fair value over the specified time horizon.
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may adversely affect the value, price or income of any security or related instrument mentioned in this report.
For investment advice, trade execution or other enquiries, clients should contact their local sales
representative.
Update Report
Disclaimer
Analyst Certification of Independence
We, Phuoc Duong and Duong Dinh, hereby certify that the views expressed in this report accurately reflect our personal views about the subject
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Update Report
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Sector thought piece

Figure 2: Valuation summary (based on reported earnings)

Source: Fiinpro, Vietcap (data as of May 20, 2024)

Government approved Execution plan of Power Master Plan VIII on April 2,

Overview of Block B project

Figure 3: Block B project value chain

Central production Gas feedstock

Workload from Block B

- Phase 1: Construction (2024-2027)

- Phase 2: Production & expansion (2028-2050)

Figure 4: Estimated capex/workload of Block B project by involved company

(USD mn) Estimated capex

Source: Public media, Vietcap

Beneficiaries Potential revenue Potential NPAT Details

Figure 8: PVB’s relationship with related parties

96% 51% Vietsovpetro

PetroVietnam Gas JSC PetroVietnam Technical

PetroVietnam Steel PetroViet Nam Coating

Source: PVN, GAS, PVS, PVB, Vietcap compilation

PVB’s well-designed pipeline coating capacity is backed by cutting-edge technology that

Figure 9: PVB’s pipeline coating services capacity

Source: PVB, Vietcap

Project Investor Coating Service Diameter(inch) Length(km) Value(VNDbn) Timeline

Source: PVB, Vietcap

Source: PVB, Vietcap forecast Source: PVB, Vietcap forecast

Figure 13: PVB’s ownership structure at the end of Q1 2024 (%)

Source: PVB, Vietcap

Figure 14: PVB’s Board of Directors

Name Position Stake Note

Source: PVB, Vietcap

Name Position Education Note

Source: PVB, Vietcap

2024 Outlook: Earnings on track for recovery since 2023, due

Figure 17: 2024 outlook

VND bn 2023 2024 YoY % Vietcap’s comments on YoY growth

PVB guided for VND3bn NPAT-MI in 2024. Historically, it beat

Long-term outlook: Workload from Block B project to drive

Figure 18: Vietcap’s forecast summary

2021 2022 2023 2024F 2025F 2026F 2027F 2028F

Figure 19: PVB’s assumed project pipeline in 2024-2028

55 144 16.5% 16.4%

Source: PVB, Vietcap forecast Source: PVB, Vietcap forecast

Figure 22: Cash flow projection

VND bn 2023 2024F 2025F 2026F 2027F 2028F

Source: Vietcap forecast

Figure 23: Discounted cash flow valuation and assumptions

Cost of Capital DCF VND bn

Figure 24: Valuation summary

Method DCF valuation

Source: PVB, Vietcap forecast

Drilling fluids Drilling fluids

76% Petrochemical Petrochemical

Source: PVC, Vietcap Source: PVC, Vietcap

Figure 27: PVC’s business model

Oil and Gas Value Chain

Upstream Midstream Downstream

- Drilling fluids products and - Industrial cleaning services - Environmental treatment

Drilling Fluids Technical Services Petrochemical Trading

Source: PVC, Vietcap

Shareholder & Corporate structure

Depedent Unit Subsidiary Associate

36% PVC-ITS (100%) PVC-Tech (100%)

Source: PVC, Vietcap Source: PVC, Vietcap