Vietnam National Petroleum Group
Ticker: PLX
Bloomberg: PLX VN
Oil and Gas Industry
Q2/2019 Update Report
June 18, 2019
NEUTRAL
Recommendation
In Q1 2019, though revenue decreased by 8%, PLX's profit increased by
20%YoY, mainly thanks to the reversal of provision for devaluation of over
VND500 billion inventories. Excluding this reversal, PLX's gross profit margin is
Target price (VND)
68,500
Market price (6/18/2019)
61,000
In Q2 2019, BVSC forecasts gross profit margin will increase to 8.2%, as in April
Expected Return
12.3%
2019, PLX's retail price has increased in line with Brent oil price. This could
ensure that PLX's gross margin in April will remain as low as in Q1 2019 (7.8%).
In addition, in the remaining 2 months of Q2, Brent oil price fell sharply (15.7%)
while retail gasoline price has not been adjusted down with the corresponding
STOCK INFORMATION
HOSE
Exchange
52-week price range
50,740-70,250
72,825
Capitalization
Outstanding shares
7.8%, much higher than 7.1%YoY.
1,293,878,081
10-day average volume
867,807
% foreign ownership
11.57%
Beta
margin. PLX's strongest price adjustment (5.1% reduction) was applied at the
end of Q2 (June 17, 2019), while the previous price adjustments were less than
the decrease in Brent oil prices.
In the second half of 2019, we believe that Brent oil price will be favorable for
PLX, OPEC's output back to equilibrium supports our forecast that oil prices in
the remaining 2 quarters of 2019 will more stable. The profit in the second half
of 2019 is forecast to be better than the same period last year and the gross
profit margin for 2019 is estimated at 7.6%. For 2019, we forecast that PLX will
achieve VND202,502 billion in revenue and VND4,676 billion in net profit, up
5.5% and 15.4%YoY, respectively.
We rate NEUTRAL on PLX based on the valuation results of P/E, P/S, FCFE
and FCFF methods at VND68,500/share.
Valuation
Analyst
Nguyen Nguyen
(84 4) 3928 8080 ext. 213
nguyenbinhnguyen@baoviet.com.vn
Target price
Ratio
Average
P/S
74,200
25%
18,550
P/E
59,900
25%
14,975
FCFE
73,700
25%
18,425
FCFF
66,200
25%
16,550
Reasonable price
68,500
June 18, 2019
PLX Q2/2019 Update Report
Q1 2019 PLX spent about VND2,500 billion from
price stabilization fund
In Q1 2019, PLX spent almost VND2,500 billion from price stabilization fund as
the global petrol price has increased following crude oil price’s increase but
domestic petrol price did not increase with the corresponding margin due to
government’s policy of keeping gasoline prices from a "shock" increase during
Tet holiday together with electricity prices. In Q1 2019, Brent oil price increased
by almost 20% compared to the beginning of the year but PLX's retail price of
gasoline only increased by 5%.
PRICE STABILIZATION FUND – FIRST 5 MONTHS OF 2019
VND/liter
01/01
16/01
31/01
15/02
02/03
18/03
02/04 17/04 02/05 17/05 01/06
500
300
300
300
300
300
300
300
300
300
300
0
0
0
0
0
0
0
0
0
100
100
Kerosene
700
300
300
300
300
300
300
300
300
300
300
Diesel
800
300
300
300
300
300
300
300
300
300
300
Mazut of different types
500
300
300
300
300
300
300
300
300
300
300
0
645
825
1,171
1,250
2,061
1,304
743
283
0
0
550
1,462
1,673
1,932
2,000
2,801
2,042 1,456
925
457
398
Kerosene
0
295
652
1,078
1,078
1,065
0
0
0
0
0
Diesel
0
430
1,003
1,354
1,354
1,343
0
0
0
0
0
Mazut of different types
0
583
1,196
1,699
1,400
1,640
362
0
0
0
0
1,950 -2,215 -4,149 -6,034 -5,882 -7,710 -2,508
-999
-8
843
902
-240
-400
-405
-316
Reserves
Petrol of different types
E5
Usage
Petrol of different types
E5
Difference (VND/liter)
Price stabilization fund
1,930
outstanding balance (billion VND)
89
Sources: Petrolimex, BVSC Research
Thanks to the price stabilization fund, although the retail price of petroleum has
not kept up with the input price, PLX's gross margin in Q1 2019 still reached 7.8%.
In Q1 2019, PLX also reversed the provision for devaluation of over VND500
billion inventories. Gross profit margin of 7.8% also eliminated the effect of this
reversal.
Gross profit margin in Q2 is expected to improve from Q1
due to a faster increase in retail price than in input price
Since early Q2 2019, PLX's retail price has started to increase sharply. According
to our estimates, the retail price increase is equal to the increase in Brent oil price
June 18, 2019
PLX Q2/2019 Update Report
at the end of April 2019. In April 2019, PLX's retail price increased by 20% while
new Brent oil price increased by about 6%. The price stabilization fund has also
improved since early May 2019, the difference in revenue and expenditure has
returned to the equilibrium level in early May 2019 and then increased sharply in
May & June 2019.
After that, observably Brent oil prices fell by 15.7% while the new retail price of
A95 gasoline dropped by 9.3% from the peak of VND22,190/liter until the end of
Q2 2019. Thus, there are two reasons for us to be confident that PLX's gross
profit margin in Q2 will be better than Q1 2019:
❑ First, in April 2019, PLX's retail price increased in line with Brent oil price. This
will ensure that PLX's gross margin in April could remain low as in Q1 2019
(7.8%).
❑ In the remaining 2 months of Q2, Brent oil price fell sharply (15.7%) and PLX's
strongest price adjustment (5.1% reduction) was applied at the end of Q2
(June 17, 2019), while the previous price adjustments were less than the
decrease in Brent oil prices.
We estimate that gross profit margin in Q2 2019 is about 8.2%.
Brent price and PLX's retail price
23000
Since 1/1/2019, PLX's retail price
includes VND1,000/liter of
envrironmental taxation (up from
VND3,000 to VND4,000/liter
Domestic gasoline prices as of
the end of April 2019 have
caught up with the increase in
Brent oil prices
22000
90
80
21000
20000
70
19000
60
18000
In the remainder of Q2
(May and June 2019),
PLX's retail price is
adjusted at a lower pace
than Brent oil price.
17000
16000
50
Petrol 95 PLX's actual price (VND/liter) - Right column
Jun-19
May-19
Apr-19
Mar-19
Feb-19
Jan-19
Dec-18
Nov-18
Oct-18
Sep-18
Aug-18
Jul-18
Jun-18
May-18
Apr-18
Mar-18
Feb-18
Jan-18
Dec-17
Nov-17
Oct-17
Sep-17
Aug-17
Jul-17
Jun-17
May-17
Apr-17
Mar-17
Feb-17
40
Jan-17
15000
Petrol 95 PLX's price with 2018 environmental taxation
Brent oil price (USD/barrel) - Left column
Notably, VND is losing about 0.9% against USD. Meanwhile, due to business
characteristics, PLX trades largely in USD, according to our calculations,
exchange rate losses can increase to VND160 billion.
The second half of 2019 forecasted that Brent oil price
would be more favorable for PLX
June 18, 2019
PLX Q2/2019 Update Report
Oil prices are forecast to be more stable in he second half of 2019. In
1H2019, oil price increased strongly as OPEC and Russia agreed to cut 1.2
million barrels a day within 6 months from 01/01/2019. OPEC is also considering
to extend the agreement until year end but we doubt that it would happen:
1. Russia is not really interested in continuing to cut output.
2. OPEC can hardly cut production again as the output of some member
countries has reached the minimum level. Specifically:
Saudi Arabia's production
Iran's production
Venezuela's production
(million barrels/day)
(million barrels/day)
(million barrels/day)
11,1
3,9
2,5
3,5
3,1
2,7
0,5
5 year average domestic demand
5 year average domestic demand
Oct-18
Mar-19
Dec-17
May-18
Jul-17
Feb-17
May-19
Dec-18
Jul-18
Feb-18
Sep-17
Apr-17
0,0
Nov-16
Mar-19
Oct-18
Dec-17
May-18
Jul-17
Feb-17
Apr-16
Sep-16
Jun-15
Nov-15
Jan-15
1,5
Sep-16
8,7
1,0
1,9
Jun-16
9,0
2,3
Jan-16
9,3
Saudi Arabia's oil production has
fallen by 1.2 million barrels/day to 9.9
million barrels/day, the lowest level in
four years.
The difference between
production and domestic
demand is narrowed to
only ~250,000 barrels/day
Apr-16
9,6
1,5
Nov-15
9,9
Jun-15
10,2
2,0
US sanctions caused Iran's
output to drop ~ 1.5 million
barrels to 2.3 million
barrels/day, of which
domestic demand was ~ 2
million barrels and export oil
output was close to ~ 0.2.
million barrels/day.
10,5
Jan-15
10,8
OPEC output’s return to equilibrium supports our anticipation that oil prices in
2H2019 will be more stable. PLX's petroleum business are quite stable disregard
for input price thanks to the profit from selling gasoline based on the profit margin.
However, the business environment in which input prices are stable or increasing
will be more beneficial for PLX than if they fall too sharply. Retail prices of
petroleum products are determined based on the base price without exceeding
2% of the announced price. Thus, the retail price will fluctuate following the input
price. Profit of petroleum businesses will be in the norm profit of VND300/liter and
the capability of saving costs as the norm cost in the state base price is fixed.
However, as PLX's average inventory days are 20-24 days, the sharp decline in
oil prices in a long time will drop gross profit margin of not only PLX but other
peers due to the provision for devaluation of inventories. Adversely, stable oil
prices will be a favorable condition for PLX to maximize the advantage of leading
enterprises with over 50% market share and efficient distribution system (60% of
production is distributed via COCO channel with the highest gross profit margin.)
We forecast that the profit in 2H2019 will be better than the same period last year
and the gross profit margin of 2019 is estimated at 7.6%.
Environmental taxes raise gasoline prices by about
2.5% but PLX does not benefit from this increase
June 18, 2019
PLX Q2/2019 Update Report
Since January 1, 2019, the environmental protection taxation on petroleum
products in Vietnam has increased in accordance with Resolution
579/2018/UBTVQH14. According to our calculations, retail prices of gasoline
products will only be marginally higher, about 2.5% compared to the same period
last year and PLX will not benefit from this tax increase.
VND/liter
Previous tax
New tax*
Petroleum (excluding Ethanol)
3,000
4,000
DO
1,500
2,000
FO
300
1.000
Mazut
900
2.000
(*) applied from 01/01/2019
The output of exported petrol and oil is forecast to
grow slower than 2018
In 2018, domestic petroleum export volume reached about 9.1 million m 3/ton, an
increase of almost 4% from the same period in 2017. With the forecast of
Vietnam's economic growth in 2019 of 6.6% - 6.7%, we believe that Petrolimex's
domestic petroleum production growth this year will be lower than 2018, at about
3%. The biggest contribution is still RON 95, Ron 92 and E5 have not achieved
growth as expected as consumers remain skeptical about the quality of bio-petrol.
Forecast of petroleum production for domestic sale
Sources: Petrolimex, BVSC Research
10.000.000
9%
9.000.000
8%
8.000.000
7%
7.000.000
6%
6.000.000
5%
5.000.000
4%
4.000.000
3%
3.000.000
2.000.000
2%
1.000.000
1%
0
0%
2014
2015
2016
2017
2018
2019F
KO
Mazut
DO
Ron 92 E5
Ron 95
Production growth
June 18, 2019
PLX Q2/2019 Update Report
2019 business forecast
We forecast that PLX will achieve VND202,502 billion in revenue and VND4,676
billion in net profit in 2019, up 6% and 15%YoY respectively. This result has not
included benefits from the merger of PG Bank and HD Bank.
Target
Revenue
2019
2018 Forecast Base
202,502 191,932 Revenue is forecast to increase 6% thanks to:
1. Production growth for domestic sales of 3%
2. Growth in petroleum products price of 2.5%
COGS
Gross profit
187,111 178,041
15,390
13,891 In Q1 2019, excluding the reversal of provision for devaluation of inventories
in cost of goods sold, PLX's gross profit margin will be 7.8%. In Q2 2019, as
analyzed above, gross profit margin is forecast at 8.2%. With the forecast that
Brent oil price will not fluctuate strongly around $60-70/barrel for the remainder
of 2019, BVSC believes that profit in 2H2019 will be better over the same period
last year. On a prudent basis, we believe that gross profit margin for the whole
year may reach 7.6%, higher than 7.2% in 2018.
Financial income
Financial expense
891
1,223
994
1,508 In 2018, PLX recorded an exchange rate difference loss of almost VND600
billion due to the strong fluctuation of USD/VND in 06-09/2018 (VND dropped
2.3% against USD). In 1H2019, VND devalued 0.8%, forecasting a yearly
depreciation of about 1.6% against the USD, therefore the exchange rate
difference loss in 2019 is forecast to decrease.
In which: Interest
807
865
670
635
expense
Lợi nhuận từ công
ty liên doanh liên kết
Selling expense
G&A expense
9,130
8,560 Selling expense is forecast at 4.6% of gross profit, the average of previous two
years.
926
575 G&A expense is forecast at 0.4% of gross profit, the average of previous two
years.
Net profit from
5,672
4,877
264
250
90
85
business activities
Other income
Other expenses
June 18, 2019
PLX Q2/2019 Update Report
Profit after tax
4,676
4,048
Profit of
shareholders parent company
4,272
3,650
EPS
3,302
2,766
Recommendation
Valuation by comparison method: We selected the leading enterprises in the
petroleum business in regional countries with economic conditions equivalent to
Vietnam, but not owning petrochemical refinery to compare with PLX. The
valuation result by P/E method is VND59,900/share, P/S is VND74,200/share.
Valuation
by
discounted
cash
flow
method:
FCFE
fair
price
is
VND73,700/share, FCFF of VND 66,200/share, assuming that Brent oil price will
maintain around $60-70/barrels in 2019 and USD/VND slippage rate 1.6%.
Growth in demand for diesel and fuel products is about 4.5%/year. The cost of
equity (Re) and the average cost of capital (WACC) are assumed at 11.4% and
9.5% respectively.
Valuation
Target price
Ratio
Average
P/S
74,200
25%
18,550
P/E
59,900
25%
14,975
FCFE
73,700
25%
18,425
FCFF
66,200
25%
16,550
Reasonable price
68,500
In summary, we estimate the fair value for PLX stock is VND68,500/share. We
rate NEUTRAL on PLX stocks.
Country
Market cap
P/E
P/S
Taiwan
419
17.47
0.58
ESSO THAILAND PCL
Thailand
1,038
14.08
0.16
PETD MK Equity
PETRONAS DAGANGAN BHD
Malaysia
6,108
27.76
0.85
SHLPH PM Equity
PILIPINAS SHELL PETROLEUM
Philippines
1,295
13.26
0.31
18.14
0.47
Ticker
Company name
9937 TT Equity
NATIONAL PETROLEUM CO LTD
ESSO TB Equity
Average
June 18, 2019
PLX Q2/2019 Update Report
Financial forecast
Business Results
Billion VND
2016
2017
2018
2019E
Revenue
123,098 153,697 191,932 202,501
Cost of goods sold
108,967 141,401 178,041 187,111
Gross profit
14,131
12,297
13,891
15,390
935
791
994
891
-875
-791
1,508
1,020
Profit after tax
5,166
3,912
4,048
4,676
Profit of shareholders - parent
company
4,665
3,468
3,650
4,272
2018
2019E
14,223 10,220
12,389
Financial Income
Financial expenses
Balance Sheet
Billion VND
Cash & Cash equivalent
2016
11,394
Short-term receivables
6,961
Inventories
2017
7,462
7,458
7,869
8,615
12,868 10,295
10,862
Fixed assets
13,753
13,326 13,088
12,950
Total assets
54,238
61,769 56,171
60,011
Short-term liability
27,699
35,758 31,576
34,531
Long-term liability
3,336
2,627
1,611
1,500
Shareholders’ Equity
23,204
23,384 22,984
23,981
Total liability and shareholders’ equity
54,238
61,769 56,171
60,011
Financial indicators
Target
2016
2017
2018
2019E
-16.2%
24.9%
24.9%
5.5%
69.0%
-24.3%
3.5%
15.4%
11.5%
8.0%
7.2%
7.7%
Net profit margin (%)
4.2%
2.5%
2.1%
2.4%
ROA (%)
9.5%
6.3%
7.2%
8.0%
ROE (%)
22.3%
16.7%
17.6%
20.0%
Total debt/Total assets (%)
57.2%
62.1%
59.1%
60.0%
Total debt/Total equity (%)
1.3
1.6
1.4
1.5
4,254
3,013
2,766
3,302
17,932
18,071
17,762
18,532
Annual Growth
Revenue growth (%)
After-tax profit growth (%)
Profitability
Gross profit margin (%)
Capital Structure
Earnings per share
EPS (VND/share)
BVPS (VND/share)
June 18, 2019
PLX Q2/2019 Update Report
DISCLAIMER
I, analyst Nguyen Nguyen, confirm that I am totally honest and have no personal motivation in making this report. All information in this
report has been verified carefully and is deemed to be the most reliable; however, I shall take no responsibilities with regard to the
accuracy and completeness of the information provided herein. Viewpoints, comments and assessments in this report are of our personal
opinions with no purpose of advising the readers to buy, sell or hold any securities. This report is only for the purpose of providing
information; readers should only use this analysis report as a source of reference. Bao Viet Securities Joint-stock Company (BVSC)
and I shall take no responsibilities to investors as well as subjects mentioned in this report for losses incurring during investments or
incorrect information about the enterprise.
This report is an asset of Bao Viet Securities Joint-stock Company. Therefore, no part of this report may be (i) copied or duplicated in any
form by any mean or (ii) redistributed without the prior consent of Bao Viet Securities Joint-stock Company.
CONTACT
Research and Investment Advisory Department - Bao Viet Securities Joint-stock Company
Equity Research
Macro & Market Research
Luong Luu
Phuong Le
Dung Pham
Deputy Head of Research
Deputy Head of Research
Deputy Head of Research
luuvanluong@baoviet.com.vn
ledangphuong@baoviet.com.vn
Pham.tiendung@baoviet.com.vn
Ha Nguyen
Ngoc Nguyen
Yen Tran
Banking. Insurance
Real Estate
Economist
nguyenthuha@baoviet.com.vn
nguyenchihongngoc@baoviet.com.vn
tranhaiyen@baoviet.com.vn
Nguyen Nguyen
Phu Truong
Bach Tran
Natural Rubber
Automobiles & Parts
Technical analyst
nguyenbinhnguyen@baoviet.com.vn
truongsyphu@baoviet.com.vn
tranxuanbach@baoviet.com.vn
Hang Ha
Clothing & Accessories
hathithuhang@baoviet.com.vn
Hao Thai
Water Infrastructure
ngokim.thanh@baoviet.com.vn
Hoa Le
Building materials
lethanhhoa@baoviet.com.vn
June 18, 2019
PLX Q2/2019 Update Report
BaoViet Securities Joint Stock Company
Hanoi Headquarter:
Ho Chi Minh Branch:
▪ No 72 Tran Hung Dao, Hoan Kiem, Hanoi
▪ 8 Floor, No 233 Dong Khoi, Dist, 1, HCM city
▪ Tel: (84 4) 3 928 8080
▪ Tel: (84 8) 3 914 6888