BSR_BUY_TP 28,400_Upside 16.4_Outperform Profit_BSC_Vietnam company update

Valuation

BSC maintains Buying recommendations for BSR shares with a new target price of 28,400 VND/SHARE (equivalent 16.4% upside compared to the closing price on 18/08/2022 of 24,400 VND/SHARE) based on  the  P/E   method,   for  the  base  scenario.  Since   BSR's profitability is directly affected by crack spreads and oil prices, we make scenarios based on the 2023 oil price assumption from $80 to $100 per barrel.

Forecast of Business Results

• BSC forecasts that in 2022, BSR's DTT and LNST will reach VND 148,689 billion (+47% YoY) and VND 14,062 billion (+111% YoY), EPS FW = VND 4,490, assuming (1) The average oil price in 2022 reaches $100 per barrel (+37% YoY); (2) Consumption of products reached 6.9 million tons (+7% YoY); and (3) Crack spread of BSR's main petroleum products averaged $16 per barrel.
•  For base scenarios, BSC forecasts revenue and NPAT of BSR in 2023 to reach VND 120,994 billion (-19% YoY) and VND 9,373 billion (-33% YoY) respectively, EPS FW = 2,993 VND/SHARE assuming (1) The average oil price in 2023 reaches $90 per barrel (-10% YoY) and (2) Consumption of petroleum products is estimated at 6.23 million tons (-10% YoY) due to periodic maintenance.

Investment Thesis

• BSR's profitability is difficult to maintain at a high level the coming time after oil prices and Crack spreads peaked in Q2.
• Finished petroleum production in late 2022- early 2023 period.
• The potential to upgrade refinery and petrochemical expansion thanks to its strong financial position.

Risks

• The price of crude oil inputs fluctuated sharply.
• Competition increases when gasoline import tax is gradually reduced to 0% by 2024.

• In Q2/2022, BSR's revenue is VND 52,391 billion (+88% YoY), and NPAT is VND 9,910 billion (+484% YoY). In Q2, the business results is positive thanks to the sharp increase in crude oil prices (+62% YoY), meanwhile the crack spread