GAS - Strong LPG segment outweighs weak natural gas volume in Q3, in line with our forecast

* GAS announced its Q3 2024 results with revenue of VND25.3tn (USD1,010mn, +14% YoY) and reported NPAT-MI of VND2.5tn (USD101mn, +6% YoY). We attribute strong revenue growth YoY to potentially strong sales from the LPG segment (LPG prices +25% YoY), which outweighed our estimated 15% YoY lower natural gas sales volume (mainly driven by lower gas-fired electricity production) as well as a 10% YoY decline of the FO price. This strong top-line growth contributed to the bottom-line growth despite a 32% surge in SG&A expenses.

* For 9M 2024, GAS’s revenue was VND78.6tn (USD3,145mn, +17% YoY) and reported NPAT-MI reached VND8.3tn (USD332mn, -7% YoY), completing 80%/76% of our respective full-year forecasts. The strong topline growth was driven by (1) potentially strong LPG revenue, (2) a 4% YoY increase in the average FO price, and (3) LNG sales contributions vs none in 9M 2023; these together outweighed an 11% YoY decline in natural gas sales volume. However, earnings contracted 7% YoY mainly due to (1) the 32% YoY surge in SG&A expenses (provision expenses related to disputed receivables at POW’s power plants and Phu My BOT’s plants), and (2) lower interest income; these factors outweighed arevenue expansion.

* The average FO price – the benchmark for Vietnam’s gas price — rose 4% YoY to USD468/tonne in 9M 2024, which is in line with our current forecast of USD465/tonne while the average 9M Brent oil price was USD82/bbl, aligning with our full-year projection of USD80/bbl as we expect the prices to be lower in Q4. 9M average LPG prices also outperformed Brent, growing at 7% YoY to USD602/tonne.

* We see insignificant changes to our 2024F NPAT-MI forecast, pending a fuller review. We currently have an OUTPERFORM rating for GAS with a target price of VND81,500/share.

GAS’s 9M 2024 results

VND bn	Q3 2023	Q3 2024	YoY	9M 2023	9M 2024	YoY	% of Vietcap’s 2024F
Average Brent oil price (USD/bbl)	86	79	-9%	82	82	0%	102%
Average fuel oil price (USD/tonne)	510	458	-10%	448	468	4%	101%
Gas sales volume* (million cbm)	1,537	1,303	-15%	5,527	4,892	-11%	71%
Revenue	22,126	25,252	14%	67,383	78,619	17%	80%
COGS	-18,445	-21,069	14%	-54,517	-65,009	19%	81%
Gross profit	3,682	4,183	14%	12,867	13,610	6%	77%
SG&A expenses	-998	-1,317	32%	-2,913	-3,846	32%	72%
Operating profit (EBIT)	2,684	2,866	7%	9,954	9,764	-2%	79%
Financial income	594	409	-31%	1,729	1,317	-24%	68%
Financial expense	-278	-109	-61%	-449	-519	16%	73%
Profit before tax (PBT)	3,009	3,204	6%	11,275	10,614	-6%	78%
Income tax expense	-605	-626	3%	-2,258	-2,051	-9%	75%
NPAT before MI	2,404	2,578	7%	9,017	8,563	-5%	78%
Minority interest (MI)	-27	56	N.M.	-134	-127	-5%	N.M.
Reported NPAT-MI	2,377	2,522	6%	8,883	8,298	-7%	76%

Source: GAS, Vietcap (*Vietcap estimates).