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Company Quarterly Earnings Update – BWE VN – H1/2024
Summary of the Q1/2024 results and outlook of Binh Duong Water Environment JSC (BWE VN)
- Net revenue increased by 17.2% y/y to VND1,826 billion, driven by a 20.5% y/y rise in the water supply segment (72% of total revenue). Specifically, water supply revenue in Binh Duong grew by 10.3% y/y, supported by a 9.4% y/y increase in water volume due to new residential customers and heightened industrial activities. Additionally, the consolidation of Biwase-Long An from Q2/2023 contributed 10% to the water supply revenue. In contrast, revenue from waste treatment and wastewater treatment (13% of total revenue) declined by 19% y/y to VND237 billion, primarily due to delays in revenue recognition.
- Gross profit margin decreased to 44.0% from 45.9% last year, influenced by reduced margins in waste treatment despite improvements in the water supply segment. Increased material and outsourcing costs in waste treatment have adversely impacted profitability. The company is currently seeking approval from Binh Duong province for a 3.0% annual increase in water prices and a 20% rise in waste treatment prices to cover these costs. Administrative expenses rose by 36.1% y/y to VND117 billion, attributable to the consolidation of Biwase-Long An, which has lower operating profit margins. Net financial expenses surged by 144.5% y/y to VND157 billion, largely due to an unrealized FX loss of VND71 billion resulting from a 4.3% increase in the USD/VND exchange rate. Overall, net profit fell by 10.6% y/y to VND313 billion. Leverage remained high, with D/E and D/A ratios at 1.03x and 0.44x, respectively.
- For H2/2024, we project the revenue to be primarily driven by the water supply segment due to higher consumption from both residential and industrial customers. Revenue from waste treatment and wastewater treatment is projected to be supported by VND213 billion unrecognized revenue from H1/2024 and a 20% increase in waste treatment prices effective from Q4/2024. Net profit is anticipated to be driven by improved gross margins from higher water supply utilization and increased waste treatment prices. Given the appreciation of the VND against the USD since July, we expect the unrealized FX loss from H1/2024 to partially revert.
- Looking ahead to 2025, we project revenue growth will be driven by increased water volumes and a 3.0% rise in water prices in Binh Duong, along with added capacity from Biwase-Long An starting in Q3/2025. Net profit is forecast to be supported by improved water supply margins, the full-year impact of increased waste treatment prices, and higher dividend income from associates
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Featured image credit: biwase.com.vn
