PLX Update Report – Outperform

Vietnam National Petroleum Group (PLX VN)

PLX’s business results continue to recover from the bottom in 2022 thanks to the strong improvement of net profit margin and stability of output. Therefore, PLX announced Q1/2024 business results with NPAT-MI reaching VND1,072 billion (+73.2% YoY), higher than our expectations. With this result, PLX completed 49.7% of its annual plan and 29% of our full year forecast.

PLX recorded Q1/2024 revenue reaching VND75,106 billion (+11.4% YoY) and NPAT-MI reaching VND1,072 billion (+73.2% YoY). This increase in revenue and profit is due to:

• Selling volume is stable, increasing slightly by 0.4% YoY to 2.6 million tons
• Gross profit margin increased to 6.2% from 5.3% over the same period, thanks to the increase in Regulated costs in the petrol price formula (applied from July 2023). In particular, the regulated cost for gasoline increased by 2.9% and diesel increased by 6.8% compared to the last adjustment from 2014.

However, the outlook for business results in the Q2/2024 may be less positive than Q1/2024. In May 2024, gasoline selling prices are decreasing compared to March and April 2024 due to falling oil prices. This decrease may put PLX at a disadvantage in terms of high-priced inventory. In addition, the petroleum import tax from 2024 will be reduced to 0% under FTA agreements, which can reduce PLX’s differential tax benefit.

Regarding the outlook for the whole year 2024, along with stable petroleum sources, PLX will benefit from applying new regulated costs for the whole year 2024 instead of from July 2023. Selling volume is estimated to increase by 4% YoY thanks to recovery in production activities. In addition, according to Decree 80/2023, transportation costs for bringing petroleum from abroad to Vietnamese ports, insurance costs, and premiums in the selling price formula are also adjusted more frequently, every 3 months (instead of 6 months as before) helps reduce the risk of closure of some small petroleum stations as in 2022. In addition, the draft amendment to Decree 80/2023 also has many support points for major petroleum wholesaler/distributor like PLX.

Quick comment: We forecast 2024 business results with expected revenue of VND289,614 billion (+5.6% YoY) and NPAT-MI of VND3,797 billion (+35% YoY). Our target price for PLX by the end of 2025 is 46,300 VND/share, equivalent to a total profit margin of 11.8%.