Company Initiation Report – BWE VN

Summary of the company initiation report for Binh Duong Water Environment JSC (BWE VN) 

Overview
  • Binh Duong Water Environment JSC. is a clean water supply, sewage, and waste treatment company in Binh Duong province. It was founded in 1975 as a State-owned company before going public in 2017. The company has a 100% market share for these three utility services for residential clients.
Outlook
  • Water demand is bound to grow steadily with fast urbanization and FDI inflow. Binh Duong expects a population growth from 2.5mn to 3.0mn in the 2020-2025 period, in line with the urbanization trend (urban population ratio from 77.0% to 80.2%, 2015-2020). FDI inflow is targeted to reach $9bn from 2020 to 2025, boosting industrial demand for water and attracting new labors. Furthermore, water volume has good expansion room, as BWE has only covered 78% of the total population in 2020 with 165mn m3/year consumption volume. We estimate that the clean water penetration rate will increase to 83% by 2024.
  • Waste and wastewater treatment urgently need a proper establishment, as Binh Duong province targets environmental issues with urbanization and industrial development. Waste per capita in Binh Duong is relatively high at 0.82kg/day, only lower than big cities such as Ho Chi Minh and Ha Noi, while wastewater business only covers 65.0% of the population, according to BWE.
Financial Performance
  • In 2020, BWE’s revenue grew by 18.8% y/y to VND3,025bn, mainly due to clean water sales and recycled products. The gross margin was similar to 2019 at 40.9%, as clean water margin improved because of a higher selling price (+5.1%) and economies of scale, but recycled products margin decreased due to a newly finished compost plant in July 2020. All in all, net profit reached VND539bn, +13.2%.
  • For 2021, we project revenue to be VND3,385bn (+11.9%), mostly due to clean water sales. This will be driven by (1) a 6.7% volume growth, thanks to high demand in new cities such as Di An, Thuan An, and (2) a 5.2% increase in water price, fixed by the government. Overall, net profit will reach VND653bn (+21.2% y/y).
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