PLX – Tailwinds already blowing – Initiation

• Petrolimex (PLX) is the market leader in Vietnam’s petroleum distribution, accounting for 50% of total market share.
• We expect PLX sales volume to be back to growth trajectory from FY22F onwards following the petroleum demand recovery of country.
• Initiate coverage on PLX with an Add rating and TP of VND64,900.

The market leader in Vietnam’s petroleum distribution sector
Owning 50% of total market share, PLX is the market leader in the Vietnamese petroleum distribution sector. Notably, PLX has owned many competitive advantages which help the company to dominate in the industry, including: (1) nationwide network of petroleum stations, (2) the largest technical infrastructure amongst the petroleum key traders in Vietnam, and (3) higher profitability thanks to the ability to optimizing CIF price.

Country petroleum consumption will bounce back in endemic
We see that Vietnam’s refined petroleum products consumption per capita remains at the low level compared to other countries in the Southeast Asia. As a developing country with high GDP growth rate and the increasing middle-class population, we believe Vietnamese petroleum distribution market has lots of room for growth. BMI Research forecasts Vietnam’s petroleum consumption to increase at a CAGR of ~4.7% in the next five years, much higher than global growth rate of 1.3%. Overall, we expect FY21F PLX’s domestic petroleum sales volume to remain at the same level of 2020, before growing with a CAGR of 5% in FY22-23F after the pandemic is under control.

Positive prospect in coming years
We forecast PLX’s net profit to significantly increase by 245.8% yoy in FY21F from 2020 low base, then reaching a net profit CAGR of 16.1% in FY22-23F on the back of: (1) total petroleum sales volume CAGR of 4.9% in FY21-23F, and (2) high and stable average selling price thanks to the expected average Brent oil price around US$70/bbl in the next two years.

Initiate coverage with an Add rating and target price (TP) of VND64,900
We initiate coverage on PLX with an Add rating and the DCF-based TP of VND64,900. Re-rating catalysts include higher-than-expect petroleum sales volume and the divestment from PG Bank deal. Downside risks come from: (1) the prolonged Covid-19 pandemic could hurt the demand for petroleum products, (2) the global oil price fluctuations risk, and (3) the threat of substitution by electric vehicles in long-term
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