GAS – Bigger upside ahead – Update

• 2Q21 net profit grew 32% yoy to VND2,262bn following the average Singapore FO price hike (+111% yoy).
• Brent oil price is expected to resilient on a new base in FY21-23F, around the level of US$70/bbl, in our view.
• Reiterate Add with a higher target price of VND109,800.

2Q21 results recovery on the oil price surge
GAS reported a 45.3% yoy growth in 2Q21 revenue to VND22,702bn thanks to a double in Singapore FO price and a 12% yoy increase in LPG volume, which offset to c.11% yoy decline in dry gas sales volume in 2Q21. Despite a 1.3% pts improvement in GPM, 2Q21 net profit (NP) only rose 32% yoy due to: (1) 75% decrease in net financial income to VND91bn, and (2) 52.3% surge in SG&A expenses to VND929bn mainly as the company booked a Covid-19 prevention expense of VND154bn in 2Q21.
For 1H21, GAS’s revenue and NP increased to VND40,272bn (+23.2%) yoy and VND4,292bn (+4.5% yoy). 1H21 NP completed 38% of our full-year forecast, lower than our expectations due to the decreasing dry gas sales volume. However, we expect GAS to record stronger 2H21F results thanks to strong oil price and the dry gas sales volume recovery from Su Tu Trang phase 2A.

Brent oil price is expected to be resilient on a new base in FY21-23F
Due to OPEC+ conservative in raising production combined with the sluggish US supply response, we believe supplies would not rise fast enough to keep pace with the predicted demand recovery, creating the shortage gap that could support for the oil price in coming times. Hence, we expect Brent oil price to be resilient on the price band around US$70/bbl in FY21-23F, in our view.

We forecast GAS to achieve net profit CAGR of 18.3% in FY21-23F
Due to the unexpected decrease in dry gas sales volume in 1H21, we lower FY21F EPS forecast by 7.9% as we revise down our dry gas sales volume forecast by 4% to 8,972 mcm. On the other hand, we upgrade FY22-23F EPS forecast by 6.8-5.7% given the new Brent oil price assumption. Overall, we forecast GAS’s net profit CAGR of 18.3% in FY21-23F thanks to: (1) oil price is expected to resilient on a new base in FY21-23F and (2) dry gas volume would recover from 2022F onwards when the La Nina phenomenon is ended.

Reiterate Add with a higher target price of VND109,800
We raise our target price (TP) to VND109,800, following higher EPS FY22F- 23F, higher P/E valuation and the stock beta adjustment. Potential re-rating catalyst is higher oil price. Downside risks come from lower-than-expected oil price and the delay in major gas field development.

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