• 212 shareholders (representing 92.33% of total voting rights) attended BSR’s AGM on May 23. 

• Overall, BSR's management expects crack spreads to bottom out in May and improve from June. They are confident in ramping up production as they expect the post-maintenance, efficiency rate potentially reach 114%.  

• Shareholders approved 2024 conservative guidance for revenue of VND95.3tn (USD3.8bn; -35% YoY) and NPAT of VND1.1tn (USD44mn; -86% YoY). Historically, BSR’s actual NPAT was often higher than its initial guidance. The actual 2021/2022/2023 NPAT were respective 7x/10x/5x vs their initial guidance.  

• Shareholders approved a 2023 cash dividend of VND700/share (in line our expectation). BSR guides for a 2024 cash dividend of at least VND300/share, with the specific rate to be approved next year (lower than our projection of VND700/share).  

• BSR has a disbursement budget of VND1.3tn in 2024 (6.8x vs actual 2023). The budget is primarily allocated for BSR’s upgrade and expansion project. The bidding for the overall construction package is set for June.  

• BSR is actively working on listing on HOSE with two solutions simultaneously, more info will be available in Q3: (1) monitoring the SSC's decision based on either the consolidated report or the parent company's financial statements, and (2) completing bankruptcy procedures for its subsidiary (BSR-BF at the Quang Ngai People's Court). 

• BSR plans to increase its share capital to VND50tn (+61% vs current via stock dividend) and is waiting for approval from the State Capital Management Committee. PetroVietnam underscores BSR's critical role in national energy security, maintaining its 92% stake even after BSR's share capital increase. 

• Our view: We foresee insignificant change to our 2024 earnings forecast, pending a fuller review. However, we see upside potential to our long-term earnings forecast, driven by BSR’s efficiency rate reaching 114% post its fifth maintenance period (higher than our current projection of 110% during 2024-2027, and 97% in 2028-2030), pending extensive review. We also note that BSR projects an IRR for the upgrade and expansion project of 12.9%, which is higher than our anticipation of 10%.

Shareholders approved the company’s conservative guidance for 2024. BSR guides for 2024 revenue of VND95.3tn (USD3.8bn; -35% vs actual 2023) and NPAT of VND1.1tn (USD44mn; -86% vs actual 2023) based on a Brent oil price assumption of USD70/bbl, which are equivalent to 90% and 17% of our respective forecasts. We attribute this to management cautious approach, as historically, BSR’s actual NPAT was often higher than its initial guidance. The actual 2021/2022/2023 NPAT were respective 7x/10x/5x vs their initial guidance.  

BSR expects decent Q2 results despite planned maintenance in April. Operations resumed in May, and BSR expects the crack margin to improve from June onward. BSR shares that the 3-2-1 crack margin currently averages USD14.8/bbl, well above the company's planned USD8/bbl.  

BSR's efficiency rate reached 114% after the fifth maintenance, surpassing our projections. The company believes it can further increase production capacity to capitalize on market trends. Even after completing the expansion project, with a new capacity of 7.6 million tonnes (16% higher than current), BSR plans to maintain or exceed its efficiency rate. This is higher than our projection. We currently project an efficiency rate of 110% during 2024-2027 and 97% in 2028-2030 (post-upgrade and expansion project), on average. 

The upgrade and expansion project has been approved by the Board of Directors, with bidding for the overall construction package set for June. BSR anticipates the upgrade and expansion project to commence in Q2 2024 and be operational by Q3 2028 (in line with our expectations). Disbursements for the project will peak in 2025 and continue through 2026-2027. For 2024, BSR has a conservative investment plan with a disbursement budget of VND1.3tn (6.8x vs actual 2023; but lower than our projection), primarily allocated to design and land grading. We currently project 2024 capex of VND11.5tn (financed by existing equity and bank loans). As a result, we foresee a downward adjustment to our 2024 capex projection, implying upside to our projection for BSR’s 2024 free cash flow. We also note that BSR currently projects an IRR for upgrade and expansion projects of 12.9% (up 1.5ppts vs previously). Due to difficulties in securing bank loans and a high interest rate environment, BSR proposed to increase the equity ratio from 40% to 60-80%, details as below:  

Figure 1: Capital structure for upgrade and expansion projects 

Source: BSR, Vietcap. (Note: BSR assumes USD/VND rate at 24,430) 

BSR’s move to list on HOSE has a slight positive development. BSR is actively pursuing two solutions for its stock exchange listing: (1) monitoring the SSC's decision based on either the consolidated report or the parent company's financial statements, and (2) completing bankruptcy procedures for BSR-BF at the Quang Ngai People's Court. 

BSR plans to increase its share capital to VND50tn (+61% vs current). BSR aims to implement in this plan in 2024-2025 to address the company's substantial capital requirements. We note that, PetroVietnam Group maintains its 92% ownership stake. 

PetroVietnam underscores BSR's critical role in national energy security, maintaining its 92% stake even after BSR's share capital increase. At the AGM, Mr. Le Xuan Huyen, PVN's Deputy General Director, highlighted BSR's significant contribution to PVN's revenue (more than USD5bn). Given BSR's pivotal role in energy security, State control remains essential for sustainable development. PVN commits to supporting BSR, providing a stable operational environment and financial backing.