Raising Target Prices On Higher Forecast Urea Prices: Fertilizer Producers Sector Update

Fertilizer producers Sector Update
Duong Dinh Raising target prices on higher forecast urea prices

Senior Manager
18 March 2011 Urea prices in Q4 2021 have been significantly higher than expected. Global urea prices nearly
duong.dinh@vcsc.com.vn
+84 28 3914 3588 ext. 140 doubled in October and November 2021 vs average prices in Q3 2021 to ~USD800-900/ton. We
raise our average 2021F urea price forecasts for DPM and DCM by ~12% to ~USD440/ton.
Tram Ngo
Manager Urea price cycles. Over the past 15 years, urea prices have completed three cycles and are
tram.ngo@vcsc.com.vn currently in a fourth upswing (Fig 7). We see similarities and differences between the most
+84 28 3914 3588 ext. 135
pronounced of the previous cycles (2007-2008-2009) and the current upswing (2020-2021-2022).
The similarities are strong correlations between oil/gas prices (inputs), agricultural product prices
(outputs) and urea prices. The differences are supply disruptions caused by Covid-19, elevated
transportation costs, record high gas prices (which could run into 2022) and stricter environmental
regulations in China and the EU. We expect these factors to support high urea prices in 2022 and
subsequent years. We forecast an average Brent oil price of USD70/bbl in 2022, flat YoY, in
contrast to the collapse in oil prices in 2009 that followed the 2008 cyclical peak in urea prices.
We forecast an average global urea price in 2022 of USD625/tonne, 25% higher than
USD500/tonne in 2021, as we believe there is a global fertilizer shortage driven by: 1)
potentially lower utilization rates of urea plants globally as high gas prices and rising labour costs
lead some urea producers to shut down plants; 2) a resilient 2022 demand outlook, especially for
industrial use; 3) continued supply disruptions caused by COVID-19; 4) sustained high gas prices
in Europe for most of 2022 (the International Energy Agency forecasts an average LNG spot price
~5% higher than in 2021, while gas prices in Europe are currently 2-3x higher than in the previous
cycle); 5) China’s current export ban and limits on Russian exports announced in early November
continuing until mid-2022. We thus forecast an average global urea price in 2021-2022 of
USD563/ton, ~30% higher than in the strong upcycle in 2007-2008 (Fig 16).
We expect domestic urea prices to follow global prices with a significant discount. We raise
our average 2022F urea selling price for DPM and DCM by ~30% to USD493/ton (+12% YoY). This
implies ~ 20% discount compared to global prices vs ~ 10% discount in 2021 as we assume that
domestic urea producers will support farmers. We increase our 2023-2026F selling price forecasts
by 2.0% on average. We forecast production costs for DPM and DCM in 2022 of USD250-300/ton
which is competitive vs international producers (due to cheaper gas costs and lower depreciation,
labour and maintenance expenses). We therefore expect DPM and DCM to enjoy substantial gross
profits of USD200-250 per ton of urea in 2022.
We raise our target price (TP) for DPM by 18.6% to VND64,400/share and upgrade from
OUTPERFORM to BUY. We increase our 2021/2022F and aggregate 2021-2026F NPAT forecasts
by 30%/96% and 15%, respectively, due to higher forecast urea selling prices despite factoring in
20% hike in transportation tariff to USD2.5/MMBTU into DPM’s input gas cost over the forecast
period. We also double our 2021/2022/2023F DPS forecasts to VND3,000/VND4,000/VND5,000,
respectively, which imply dividend yields of 6-10%. DPM is trading at a projected 2022F P/E of 6.9x
and EV/EBITDA of 2.5x, based on our forecast (details on page 13).
We raise our TP for DCM by 19.2% to VND49,600/share and maintain a BUY rating. We
increase our 2021/2022F and aggregate 2021-2026F NPAT forecasts by 37%/102% and 24%,
respectively, due to higher forecast urea selling prices. DCM is trading at a projected 2022F P/E of
9.2x, EV/EBITDA of 3.6x and dividend yield of 3%, based on our forecast (details on page 15).
Risks to our positive view. Larger discounts on domestic urea prices vs international prices;
global urea prices cooling off faster than expected; lower-than-expected gas prices and/or
international transportation costs.
See important disclosure at the end of this document www.vcsc.com.vn | VCSC<GO> December 15, 2021 | 1
Figure 1: Fertilizer companies – Key data
Share Target
Market Foreign ADTV Target Div
State Foreign price price Upside 12M
Code Rating Cap Avail 30D price yield
O’ship % Limit % VND VND % TSR %
USDmn USDmn USDmn updated %
ps ps
DPM BUY 868 59.6% 100.0% 786 12.2 51,000 64,400 15/12/21 26.3% 5.9% 32.2%
DCM BUY 881 75.6% 49.0% 386 12.3 38,250 49,600 15/12/21 29.7% 3.1% 32.8%
Source: Bloomberg, VCSC
Figure 2: Fertilizer companies – Summary valuations (based on reported earnings)

Share EPS g EPS g EPS g P/E P/E P/E EV/ ROE
P/E P/B LQ Net D/E
Code price, 2020 2021F 2022F 2020 2021F 2022F EBITDA 2022F
TTM (x) (x) LQ %
VND ps % % % (x) (x) (x) 2022F (x) %
DPM 51,000 84.4% 325.6% 18.2% 15.3 34.7 8.2 6.9 2.5 29.1% 2.2 -49.1%
DCM 38,250 55.4% 161.3% 37.7% 21.6 33.2 12.7 9.2 3.6 28.0% 3.1 -55.7%
Source: Bloomberg, VCSC. Earnings growth and P/E are based on reported earnings.
Forecast changes summary

Figure 3: DPM’s selling prices and net profit forecast changes
2021F 2022F 2023F 2024F 2025F 2026F 2021-2026F
Urea selling price
Average
(USD/ton)
- New forecast 448 502 381 343 343 343 393
- Old forecast 396 374 351 351 351 351 362
- Forecast changes 13.2% 34.1% 8.5% -2.4% -2.4% -2.4% 8.6%
NPAT-MI (VND bn) Aggregate

- New forecast 2,950 3,487 1,999 1,398 1,359 1,349 12,543
- Old forecast 2,276 1,776 1,672 1,692 1,713 1,736 10,865
Source: DPM, VCSC estimates
Figure 4: DCM’s selling prices and net profit forecast changes

2021F 2022F 2023F 2024F 2025F 2026F 2021-2026F
Urea selling price
Average
(USD/ton)
- New forecast 431 483 410 349 349 349 395
- Old forecast 395 374 351 351 351 351 362
NPAT-MI (VND bn) Aggregate

- New forecast 1,735 2,389 1,471 1,465 1,583 1,669 10,312
- Old forecast 1,264 1,182 996 1,583 1,637 1,662 8,324
- Forecast changes 37.3% 102.1% 47.7% -7.5% -3.3% 0.5% 23.9%
Source: DCM, VCSC estimates
Contents
Forecast changes summary ......................................................................................................... 2
Industry update .............................................................................................................................. 4
Global urea prices surged in 2021 ............................................................................................... 4
Global urea price cycles ............................................................................................................... 5
Global urea demand outlook ........................................................................................................ 7
We forecast average international urea prices in 2022 to be ~25% higher than in 2021 ............ 9
Vietnamese urea prices are following global urea prices .......................................................... 10
Share prices of urea producers and global urea prices ............................................................. 12
PetroVietnam Fertilizer & Chemicals (DPM) [BUY +32.2%] ..................................................... 13
PetroVietnam Ca Mau Fertilizer (DCM) [BUY +32.8%] ............................................................. 15
Appendices .................................................................................................................................. 17
Industry update
Global urea prices surged in 2021
Global urea prices started to rally from the beginning of 2021, following an increase in the Brent oil
price in Q4 2020. Urea prices continued to show strong positive momentum through H1 2021 and
were particularly strong in Q2 2021, driven by a combination of (1) higher oil prices, (2) supply
disruption and (3) stronger demand for agricultural products. In July and August 2021, urea prices
dropped ~5-10%, before picking up again from late September 2021 when China guided local
producers to limit urea exports to ensure sufficient supply for domestic consumption.
Urea is a common fertilizer for agricultural crops. Urea is also used for industrial purposes (for
example, urea is injected into the exhaust systems of diesel-run vehicles to reduce emissions,
which is a requirement for trucks, private vehicles and tractors in some countries, e.g., in Korea and
Australia). Global urea prices nearly doubled in October and November 2021 vs the average price
in Q3, which was driven by resilient demand across the world. In addition, electricity shortages in
China and gas shortages in the EU, as well as record gas prices in EU and Asia contributed to
higher urea prices, along with continued supply disruptions caused by Covid 19.
Figure 5: Global urea price movements
1,200 Energy crisis: electricity 140
shortage in China; gas
shortage in EU;
Grain price rally; 120
1,000 Continued supply
Continued supply
disruption
disruption;
Reduced Chinese 100
800 supply
COVID-19 Oil price
outbreak increase 80
600
60
400
40
200
20
0 -
Brent oil price (USD/bbl) - RHS

Black Sea urea price (USD/tonne) - LHS
Middle East urea price (USD/tonne) - LHS
Chinese urea price (USD/tonne) - LHS
Source: Bloomberg, VCSC compilation
Global urea price cycles
Over the past 15 years, urea prices have completed three cycles and are currently in a fourth
upswing. We see similarities and difference between the cycle in 2007-2008-2009 and the current
upswing (2020-2021-2022), as illustrated below. The similarities are mainly strong correlations
between oil and gas prices (inputs), agricultural product prices (outputs) and urea prices. The
differences are supply disruptions caused by Covid-19, record high gas prices (which could
potentially run into 2022), and stricter environmental regulations in China and the EU. China — a
major fertilizer exporter that accounted for 31% of global urea supply in 2020 — has been reducing
its coal-fired urea production since 2018 to protect the environment. We believe these factors
should support high urea prices in 2022 and subsequent years.
Figure 6: Comparison between two urea price cycles
Factors Cycle 2007-2008-2009 Cycle 2020-2021-2022
Peak at USD1,000/ton, 25% higher than
the 2007/09 cycle peak
Peak at USD800/ton
Average urea price in 2021 increased
Urea prices Average urea price in 2008 increased 65% vs 2020.
65% vs 2007, then collapsed 51% with
oil price collapse in 2009 We expect average urea price in 2022 to
increase vs 2021 before plunging in
following years.
USD70-90/bbl
USD120-140/bbl
Oil price range We forecast oil price in 2022 at
Oil price in 2009 plunged 70%
USD70/bbl, flat YoY
Gas price in EU ranged from EUR90-

Gas prices Gas price in EU was ~EUR35/Mwh
120/Mwh
380 USD, ~20% higher than the 2007/09

Agricultural product prices 320 USD
cycle peak
Source: VCSC compilation
Figure 7: Historical urea prices in 2007-2021

1,200 160
140
1,000
120
800
100
600 80
60
400
40
200
20
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Black Sea urea price (USD/tonne) - LHS

Middle East urea price (USD/tonne) - LHS
Chinese urea price (USD/tonne) - LHS
Brent oil price (USD/bbl) - RHS
Figure 8: Urea prices vs EU gas prices, 2007-2021
EUR/Mwh
1,200 USD/tonne 140
1,000 120
100
800
80
600
60
400
40
200 20
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Middle East urea price - LHS TTF natural gas future (EU) - RHS
Figure 9: Urea prices vs Japan import LNG prices and US gas prices, 2007-2021
1,200 20
18
1,000
16
14
800
12
600 10
8
400
6
4
200
2
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Middle East urea price - LHS
LNG Japan Corp JCC LNG (JLC) Import Price - RHS
Henry Hub natural gas spot price - RHS
Figure 10: Urea prices (USD/tonne) and Agriculture price index (USD), 2007-2021
1,200
1,000
800
600
400
200
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Middle East urea prices BBG Agriculture Spot Index BBG Soybean Meal Index
Global urea demand outlook
According to the Food and Agriculture Organization of the United Nations (FAO), total global urea
demand grew at 1.1% CAGR in 2016-2020. Global demand for urea has increased further in 2021,
driven by fertilizer demand. Per FAO, fertilizer demand from the agriculture sector accounts for
more than 70% of total global urea demand in 2021, while the remaining 30% is for industrial and
other uses.
Urea is widely used as a fertilizer in most markets, including North America, Brazil and India. In
2021, global crop acreage expansion has eaten up excess fertilizer supplies and production has
not been able to keep up. Per the International Fertilizer Association (IFA), urea demand for fertilizer
is expected to grow at 4.1% YoY in 2021 and 0.7% YoY in 2022. The IFA also forecasts urea
demand for fertilizer to grow at a 2022-2025 CAGR of 1.2%.
Meanwhile for industrial purposes, urea acts as a critical feedstock in the production of adhesives,
resins and plastics. Thus, growth in the markets for these products is a significant driver of growth
in demand for urea. Urea is also being increasingly used in automobiles due to changing regulations
regarding the use of nitrogen oxide in diesel engines. Urea is also used abundantly to produce
urea-formaldehyde resins, melamine, diesel exhaust fluids, and livestock feed. Urea demand for
industrial and other uses grew at 1.7% CAGR in 2016-2020, double that of fertilizer demand. Based
on historical data from the FAO and forecast total urea demand growth of 2.0% p.a. in 2021-2026F
from Expert Market Research (a US market research company), we estimate urea demand for
industrial uses has been negatively impacted by COVID-19 in 2021 but will recover strongly by
4.0% in 2022, before growing by 2.0% p.a. in 2022-2025. This segment will be a growth driver for
the total global urea demand in the long-term.
Figure 11: Urea demand in 2016-2020 (million tonnes)
2016-
(tonnes mn) 2016 2017 2018 2019 2020 2020
CAGR
Supply
Designed capacity 180 185 187 190 187 0.9%
Actual supply 154 155 158 162 160 1.1%
Demand
Urea – total demand (industrial &
142 143 144 146 148 1.1%
fertilizer)
- industrial & other uses 37 38 38 39 40 1.7%
- fertilizer demand 105 105 106 107 109 0.8%
Urea – excess supply 12 13 14 15 12 1.3%
Source: FAO, VCSC
Figure 12: Global urea demand forecast (*)
Million tonnes
200
160
120
80
40
-
2020 2021F 2022F 2023F 2024F 2025F 2026F
Urea - industrials demand & other uses Urea - fertilizer demand
Source: FAO, IFA, VCSC estimates. Note: (*) VCSC estimated global total urea demand based on: (1) a 2022-
2026F urea fertilizer demand CAGR of 1.2% p.a. per IFA’s forecasts and (2) VCSC assumption that urea
demand for industrials and other uses will grow at 2.0% p.a.
Regionally, Asia & Oceania is the largest urea importer, according to the IFA.
• China is the largest urea producer and consumer within the Asia Pacific region, per World
Fertilizer Magazine. China is also a net exporter of urea, exporting primarily to India and North
America. Although most urea exporters are gas-rich countries, China is a significant exporter
due to its rich coal supply, which is a feedstock of the product.
• India follows China as the second largest urea consumer in the Asia Pacific region, however, it
is the largest importer in the region. Unlike China, India imports urea to meet domestic demand.
India’s urea imports account for over 15% of global urea imports. In 2021, global import demand
remained strong and was led by India’s urea imports increasing 8% YoY in the financial year
2020-2021, according to India’s Chemicals and Fertilizers Minister.
• Other major importing countries include Brazil, South Korea and Thailand.
Figure 13: Major urea importers by region in 2020
Million tonnes EECA, West Asia,

1.3% 5.2%
Asia & Africa,
20.4 6.0%
Oceania
Latin
13.0 North
America
Asia & America,
W. & C. 10.6%
6.6 Oceania,
Europe
39.2%
North
5.5
America
Africa 3.1 W. & C.
Europe,
West Asia 2.7 12.7%
EECA 0.7
0 5 10 15 20 25 Latin
America,
25.0%
Source: IFA
Figure 14: Key changes in urea imports in 2018 and 2020

25 Million tonnes
20
15
10
0
Asia & Latin W. & C. North Africa West Asia EECA
Oceania America Europe America
2018 2020
Source: IFA
Figure 15: Major urea importers by country in 2020
30 Million tonnes Urea importers by country

25.1
25
20
15
10.5
10 7.1
4.6
5 2.4 2.4
0
Turkey Australia USA Brazil India Others
Source: IFA
We forecast average international urea prices in 2022 to be ~25% higher

than in 2021
We forecast an average global urea price in 2022 of USD625/tonne vs USD500/tonne in 2021
due to: 1) potentially lower utilization rates of urea plants globally; 2) a robust 2022 demand outlook;
3) supply disruptions caused by COVID-19; 4) sustained high gas prices in Europe (even when
Russia brings the Nord Stream 2 gas pipeline into commercial operation, gas prices could remain
high due to Russia’s monopoly position); 5) China’s drive to reduce greenhouse gas emissions.
This implies an average 2021-2022 urea price of USD563/ton, ~30% higher than the 2007-
2008 upswing. This is due to: 1) projected gas prices ~2-3x higher than in the 2007-2008 upcycle,
2) supply disruptions caused by Covid-19 with elevated transportation costs, 3) governments’ strict
environment regulations to comply with COP26 and China’s policy to reduce coal usage, 4) a robust
demand outlook, especially for industrial use post Covid-19. We forecast an average price over
2023-2026F of USD382, representing a decline of ~35% vs our projected 2021-2022F average and
similar to the average price over 2011-2015 (which was ~13% lower than the 2007-2008 average).
Figure 16: Global urea price forecasts
2007-2008 2011-2015 2016-2020 2021-2022 2023-2026F
Average urea price
(USD/tonne, FOB price,
435 378 247 563 382
Black Sea, Middle East,
China)
Source: VCSC forecasts, IHS, IFA, Fertercon and industry players
We have seen several new developments that could keep urea prices high through 2022 and higher
than 2021 compared to our previous expectation for urea prices to remain high only in H1 2022, as
follows.
1. We expect utilization rates of urea plants globally to decline in 2022 vs 2021. In particular,
based on discussions with industry players, we expect utilization rates of urea plants in the EU to
decrease from ~80% in 2021 to ~70% in 2022 because of sustained high gas prices, high labor
costs and increasing costs to comply with COP26 commitments. We also expect Russian urea
plants’ utilization rate to decrease. The IEA forecasts an average 2022F LNG price of
USD16.8/MMBTU, 5% higher than an average 2021F price of USD15.9/MMBTU and much higher
than the average 2020 LNG price of USD4.2/MMBTU (Fig 23). In addition, we expect utilization
rates of urea plants in the Middle East to decline, partly due to labor shortages and high
maintenance costs. We also believe that utilization rates of Chinese urea plants will not increase.
2. Robust demand outlook in the Asia & Oceania region (which accounted for ~40% of global
imports over 2018-2020). The demand outlook in Latin America is also bright and the EU could
increase imports due to domestic rising production costs. In particularly, according to US-based
Gro Intelligence Research, China, the world’s largest agricultural producer, plans to increase
production of corn, wheat, and soybeans in 2022, while Brazil is expected to plant a record amount
of corn.
3. China limits urea exports. On October 19, 2021, Chinese authorities imposed new hurdles for
fertilizer exporters. The new measures implemented by Chinese authorities follow
customs regulations that became effective on October 15 requiring additional inspections of
fertilizer exports. Despite this, urea prices in China remain at high levels.
4. Russia – the largest urea exporter - imposed quotas on urea exports until mid-2022. On
November 5, 2021, Russia announced a six-month quota on various fertilizer exports. Nitrogen
fertilizer exports (including urea) will be limited to 5.9 million tonnes. The measures will begin on
December 1, 2022 and last until June 2022.
5. Supply constraints. The current difficulties and shipping disruptions from COVID-19 further add
to supply tightness and support high urea prices.
Risk of global urea prices cooling off faster than expected
While we expect an uptrend in global urea prices in the remainder of 2021 and the first three
quarters of 2022, there are several uncertainties that could cause global urea prices to decline
sooner than we expect.
• First, Europe and Russia could come to an agreement so that Russia can export more natural
gas to Europe. Historically, Russia has supplied ~175-200 billion cubic meters (bcm) of natural
gas to Europe — equivalent to 35%-40% of Europe’s imported gas by volume. The Nord Stream
2 gas pipeline project — a huge project of Gazprom that will help to provide an additional 55
bcm of Russian natural gas to Europe every year — finished construction on October 4, 2021.
This gas pipeline is waiting for German regulatory approval for commercial sales to Europe.
Gazprom previously expected to deliver 5.6 bcm of gas to Europe in 2021, after obtaining
approval. However, on December 12, 2021, the German Government said this pipeline could
not be approved in its current form because it did not meet the requirements of European
energy law,
• Second, European countries could subsidize gas prices, which could help urea producers to
increase their production. Recently, many European countries have tried to help consumers by
driving down costs (e.g., In September 2021, Spain’s Government said that it would cut energy
taxes to drive down costs. Italy and France are also cutting energy taxes, which bodes well for
the passing of policies to cool down urea prices and support farmers in 2022).
• Supply disruptions caused by Covid-19 and variants may be less-than-expected
Vietnamese urea prices are following global urea prices

In October and November 2021, average global urea prices were almost double those in Q3 2021.
Vietnam’s urea prices also followed the global price rally with average prices in October and
November up 1.7x vs the average level in Q3 2021.
Nevertheless, Vietnam’s retail urea prices were still ~USD70-100 or 10-15% lower than global
prices. We believe the discrepancy between international and domestic urea prices is largely due
to rising transportation costs due to COVID-19. Imported urea prices (inclusive of transportation
costs) were still much higher than domestic prices.
We estimate that DPM/DCM’s current selling price of USD700/ton is ~15% lower than the Middle
East urea price (excluding transportation costs), or ~20% lower including transportation costs.
Figure 17: Urea prices in the international market and in Vietnam (USD/tonne)
Urea prices in the Middle East, Vietnam’s wholesale urea Vietnam’s retail urea prices
FOB prices (DCM/DPM prices) (*) (DCM/DPM prices) (*)
Q3 2021 Oct-Nov Q3 2021 Oct-Nov Q3 2021 Oct-Nov
491 836 330-380 700 400-500 760
Source: Bloomberg, Agromonitor. Note: (*) VCSC estimates; transportation fee of USD50/tonne.
Looking back to the 2011-2020 period, Vietnam’s domestic urea prices (DPM/DCM selling prices)
were usually 10%-15% higher than global prices. However, in 2021, we estimate domestic prices
were ~10% lower than global prices. For 2022F, we expect the gap to widen to ~20% as we expect
Vietnamese urea producers to sell urea at significantly lower prices than global prices to support
farmers.
We note that, despite this wider assumed discount, our forecasts still imply a 12% YoY increase in
domestic urea prices in 2022F, following our expected 25% increase in global urea prices in 2022F.
Figure 18: Price gap between domestic and global urea prices (USD/tonne)
800
600
400
200
- (5) 44 6 39 61 48 28 35 12
(35) (55) (126) (33) (30) (30) (30)
(200)
Gap Middle East urea prices DPM selling prices
Source: Bloomberg, Agromonitor, VCSC
In 2020, we estimate that Vietnam’s urea consumption fell 21% due to a severe drought over the
first nine months of the year, salinization issues and COVID-19. Due to favorable weather
conditions and strong demand for rice in 9M 2021, we estimate urea demand recovered by 12.4%
YoY and urea imports increased significantly. In 2022, we expect domestic urea demand to bounce
back to 2019 (pre-COVID) levels.
Figure 19: VCSC’s estimates for domestic urea demand (quarterly data)
1,000 Thousand tons
9M 2021:
2019 domestic urea demand: 1.8 million tons
800 2020: 2.1 million tons, -20.7% YoY +12.4% YoY
2.7 million tons
600
400
200
(200)
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21
Exports Imports
DCM's production volume DPM's production volume
Ha Bac and Ninh Binh's production volume Total domestic demand
Source: MoIT, DPM, DCM, VCSC. Note: Urea export volume is based on DCM’s export numbers.
Share prices of urea producers and global urea prices
Over 2019-2021, DPM’s and DCM’s share prices showed quite high correlations with global urea
prices. However, the correlation has not always been positive – for example, DPMs share price
declined over 2011-2012 while global urea prices rose. We believe this was because PetroVietnam
raised input gas prices by 40% during that time. In addition, DCM’s previous input price mechanism
was based on a guaranteed ROE of 12% before 2019.
Going forward, we expect DPM’s and DCM’s share prices to show positive correlations with Brent
crude and global urea prices as we expect no more changes to the input gas price mechanism,
which was already linked to Brent crude and international fuel oil prices from 2014. We have also
incorporated a ~20% increase in the gas transportation tariff for DPM over the forecast period. We
believe the high urea prices in October/November 2021 are partly priced in but that investors still
have some concerns regarding the discount between actual domestic selling prices and global
prices. In particular, we believe that a longer-than-expected period of high urea prices that
continues for most of 2022 is currently not discounted by the market.
In theory, the share prices of DPM and DCM should correlate positively with the spread between
urea prices and gas prices and hence quarterly earnings. In the past, when oil prices and input
prices have increased, it was not unusual to see urea prices following at a slower pace, hence the
spread narrowed. We assume a similar situation for the 2023-2026 period.
We emphasize that we believe 2020-2022 is a somewhat abnormal period. Supply disruptions
caused by COVID-19, temporary gas shortages in the EU and the temporary electricity shortage in
China are increasing international gas/coal prices and in turn global urea prices, resulting in a larger
increase in DCM/DPM’s domestic urea prices vs their input cost that is linked to oil prices. As such,
higher oil prices have led to higher earnings and share prices for DPM/DCM. If the average Q4
2021 fuel oil price is lower than expected, spreads may be even wider, implying further upside risk
to our 2021F NPAT forecasts for DPM and DCM.
We expect global urea prices to decline from late 2022. However, we believe there will be a
somewhat lagged impact on domestic urea prices and/or a smaller discount on domestic urea
prices vs global prices. We also believe governments’ commitments to COP26 around the world
will also tend to support urea prices in 2023-2026.
Figure 20: DPM and DCM’s share prices vs urea prices
1,200 60,000
1,000 50,000
800 40,000
600 30,000
400 20,000
200 10,000
0 0
Middle East urea prices (USD/tonne) - LHS

DCM share price (VND/share) - RHS
DPM share price (VND/share) - RHS
PetroVietnam Fertilizer & Chemicals (DPM) [BUY +32.2%] Update Report
Industry: Agrochemicals 2020 2021F 2022F 2023F 250%
DPM VNI
Report Date: December 15, 2021 Rev Growth 1.0% 51.6% 11.0% -15.8% 200%
Current Price: VND51,000 EPS Growth (1) 63.6% 342.0% 28.3% -42.7% 150%
Target Price (TP): VND64,400 EPS Growth (2) 84.4% 325.6% 18.2% -42.7% 100%
Previous Target Price: VND54,300 NPAT (VND bn) 693 2,950 3,487 1,999 50%
Upside to TP: +26.3% EV/EBITDA 13.9x 3.6x 2.5x 4.6x 0%
Dividend Yield: 5.9% P/Op CF 26.4x 5.8x 4.9x 9.3x -50%
P/E (2) Dec-20 Apr-21 Aug-21 Dec-21
TSR: +32.2% 34.7x 8.2x 6.9x 12.0x
(1) Recurring; (2) Reported
Market Cap: USD867.9mn DPM Peers (3) VNI
Company Overview
Foreign Room: USD786.3mn P/E (ttm) 15.3x 7.5x 17.4x DPM is the leading urea producer in Vietnam and
ADTV30D: USD12.2mn P/B (curr) 2.2x 3.1x 2.8x has a ~35% market share. DPM also trades other
State Ownership: 59.6% Net D/E -49.1% 50.5% N/A fertilizers, including NPK, SA and DAP. DPM owns
Outstanding Shares: 391.4 mn ROE 17.7% 29.4% 15.9% the Phu My urea plant (capacity of 800,000 tonnes),
Fully Diluted Shares: 391.4 mn ROA 12.9% 11.4% 2.5% an NPK-NH3 plant (capacity of 250,000 tonnes) and
a distribution network of 3,000 points of sale.
3-yr PEG 0.2 (3) Average value of foreign peers
Tram Ngo
Manager
Strong urea prices outweigh gas transportation tariff hike
tram.ngo@vcsc.com.vn
+84 28 3914 3588 ext. 135
• We upgrade our rating from OUTPERFORM to BUY as we expect DPM will benefit from strong
urea and ammonia (NH3) prices in 2021-2022F. Meanwhile, the company’s NPK segment is a
Duong Dinh potential medium-term earnings driver.
Senior Manager • We raise our TP from VND54,300/share to VND64,400/share primarily as we raise our
+84 28 3914 3588 ext. 140 2021/2022F and aggregate 2021-2026F NPAT forecasts by 30%/96% and 15%, respectively,
thanks to 13%/30% and 8% respective upward revisions in our urea price assumptions. A higher
debt/capital ratio due to our higher DPS assumptions also contributes via a lower WACC.
• We double our cash DPS forecasts by to VND3,000/4,000/5,000 for 2021/22/23F, respectively.
• We forecast recurring 2022F EPS to grow 28% YoY as we expect urea selling prices to increase
further despite a high base in 2021 and a 4% increase in sales volume. We expect reported
2022F EPS growth 18% YoY due to no more one-off profits.
• We forecast a 14% recurring EPS CAGR in 2020-2026F that will be driven by strong urea/NH3
prices in 2021-2022F and increasing utilization of the NPK plant to 100% in 2023.
• DPM has a strong financial profile with net cash of VND4.4tn (USD190mn) as of end-Q3 2021.
• DPM trades at a projected 2022F EV/EBITDA of 2.5x — a 70% discount vs the average TTM
EV/EBITDA of selected regional peers.
• Upside risks. Higher-than-expected dividends, 10% input VAT deduction eligibility from 2023.
• Key downside risks: Global urea prices cooling faster than expected.
We expect domestic urea prices to follow global urea prices with a significant discount. We
forecast an average global urea price in 2022 of USD625/tonne, 25% higher than USD500/tonne
in 2021, as we expect: 1) potentially lower utilization rates of urea plants globally; 2) a robust 2022
demand outlook, especially for industrial use; 3) continued supply disruptions caused by COVID-
19; 4) sustained high gas prices in Europe; 5) China to attempt to reduce greenhouse gas
emissions. We raise our average 2021/2022 urea selling prices for DPM by 13%/30% to
USD448/ton and USD502/ton (+12% YoY), respectively. This implies a 20% discount compared to
global prices in 2022 vs a 10% discount in 2021.
We assume a significant hike in gas transportation tariff. We now factor in a 20% hike in
transportation tariff to USD2.5/MMBTU into DPM’s gas price over 2022-2026F. Management
expects no change in the gas transportation tariff mechanism in 2021 vs 2020. We assume that
DPM will have to use more gas from expensive gas fields in the Cuu Long basin from 2022.
We double our cash dividend forecast, implying yields of 6-10%. Given our projection for NPAT
to triple YoY in 2021 and our bright 2022 outlook, we expect higher dividends in 2021-2023F.
Financial Statements
P&L (VND bn) 2020 2021F 2022F 2023F B/S (VND bn) 2020 2021F 2022F 2023F
Revenue 7,762 11,767 13,063 11,005 Cash & equivalents 2,279 5,075 7,827 7,992
COGS -6,032 -7,097 -7,520 -7,623 ST investment 1,935 1,935 1,935 1,935
Gross Profit 1,730 4,671 5,543 3,383 Accounts receivables 278 508 590 460
Sales & Marketing exp -655 -789 -885 -773 Inventories 1,468 1,555 1,545 1,566
General & Admin exp -409 -449 -599 -520 Other current assets 349 349 349 349
Operating Profit 666 3,433 4,058 2,090 Total Current assets 6,310 9,423 12,246 12,303
Financial income 180 147 315 439 Fixed assets, gross 13,117 13,317 13,617 13,917
Financial expenses -93 -81 -91 -79 - Depreciation -8,615 -9,166 -9,717 -10,116
- o/w interest expense -88 -81 -91 -79 Fixed assets, net 4,503 4,152 3,901 3,801
Associates 2 2 2 2 LT investment 19 19 19 19
Net other income/(loss) 95 133 10 10 LT assets other 467 467 467 467
Profit before Tax 850 3,635 4,296 2,463 Total LT assets 4,988 4,637 4,386 4,287
Income Tax -147 -618 -730 -419 Total Assets 11,298 14,060 16,632 16,590
NPAT before MI 703 3,017 3,565 2,044
Minority Interest -10 -66 -78 -45 Accounts payable 453 447 474 480
NPAT less MI, reported 693 2,950 3,487 1,999 Short-term debt 150 150 150 148
NPAT less MI, adjusted 615 2,718 3,487 1,999 Other ST liabilities 1,378 1,647 1,698 1,321
Total current liabilities 1,981 2,245 2,322 1,949
EBITDA 1,217 3,984 4,609 2,490 Long term debt 900 851 955 806
EPS reported, VND 1,470 6,257 7,395 4,239 Other LT liabilities 167 167 167 167
EPS adjusted, VND 1,304 5,764 7,395 4,239 Total Liabilities 3,048 3,263 3,444 2,923
EPS fully diluted, VND 1,304 5,764 7,395 4,239
DPS, VND 1,200 3,000 4,000 5,000 Preferred Equity 0 0 0 0
DPS/EPS (%) 82% 48% 54% 118% Paid in capital 3,914 3,914 3,914 3,914
Share premium 33 33 33 33
RATIOS 2020 2021F 2022F 2023F Retained earnings 4,140 6,620 8,933 9,366
Growth Other equity 0 0 0 0
Revenue growth 1.0% 51.6% 11.0% -15.8% Minority interest 163 229 308 353
Op profit (EBIT) growth 54.2% 415.4% 18.2% -48.5% Total equity 8,250 10,797 13,188 13,666
PBT growth 82.0% 327.5% 18.2% -42.7% Liabilities & equity 11,298 14,060 16,632 16,590
EPS growth, adjusted 63.6% 342.0% 28.3% -42.7%
Y/E shares out, mn 391 391 391 391
Profitability
Gross Profit Margin 22.3% 39.7% 42.4% 30.7% CASH FLOW (VND bn) 2020 2021F 2022F 2023F
Op Profit, (EBIT) Margin 8.6% 29.2% 31.1% 19.0% Beginning Cash Balance 2,978 2,280 5,075 7,827
EBITDA Margin 15.7% 33.9% 35.3% 22.6% Net Income 693 2,950 3,487 1,999
NPAT-MI Margin, adj, 8.9% 25.1% 26.7% 18.2% Dep. & amortization 551 551 551 400
ROE 8.4% 31.0% 29.1% 14.9% Change in Working Cap -374 -53 6 -262
ROA 6.1% 23.3% 22.7% 12.0% Other adjustments -116 0 0 0
Cash from Operations 755 3,448 4,044 2,136
Efficiency
Days Inventory On Hand 85.3 80.0 75.0 75.0 Capital Expenditures, net -60 -200 -300 -300
Days Accts, Receivable 23.5 23.0 23.0 23.0 Investments, net -732 0 0 0
Days Accts, Payable 28.2 23.0 23.0 23.0 Cash from Investments -792 -200 -300 -300
Cash Conversion Days 80.7 80.0 75.0 75.0
Dividends Paid -470 -470 -1,174 -1,566
Liquidity ∆ in Share Capital 0 0 0 0
Current Ratio x 3.2 4.2 5.3 6.3 ∆ in ST debt -27 0 0 -2
Quick Ratio x 2.4 3.5 4.6 5.5 ∆ in LT debt -164 -49 104 -148
Cash Ratio x 1.2 2.3 3.4 4.1 Other financing C/F 0 66 78 45
Debt / Assets 9.3% 7.1% 6.6% 5.8% Cash from Financing -661 -452 -992 -1,671
Debt / Capital 11.3% 8.5% 7.7% 6.5%
Net Debt / Equity -39.1% -56.9% -67.2% -67.4% Net Change in Cash -698 2,795 2,752 166
Interest Coverage x 7.5 42.2 44.7 26.4 Ending Cash Balance 2,280 5,075 7,827 7,992
Source: Company data, VCSC
PetroVietnam Ca Mau Fertilizer (DCM) [BUY +32.8%] Update Report
Industry: Agrochemicals 2020 2021F 2022F 2023F 250%
DCM VNI
Report Date: December 15, 2021 Rev Growth 7.4% 40.8% 17.7% -11.8% 200%
Current Price: VND38,250 EPS Growth 55.4% 161.3% 37.7% -38.4% 150%
Target Price (TP): VND49,600 NPAT (VND bn) 664 1,735 2,389 1,471 100%
Previous Target Price: VND41,600 DPS (VND/sh) 800 1,200 1,200 1,200 50%
EV/EBITDA 0%
Upside to TP: +29.7% 9.3x 5.1x 3.6x 4.3x
-50%
Dividend Yield: 3.1% P/E (2) 33.2x 12.7x 9.2x 15.0x
Dec-20 Apr-21 Aug-21 Dec-21
TSR: +32.8% P/E (3) 18.5x 9.6x 7.6x 11.2x
Market Cap: USD880.8mn DCM Peers (1) VNI Company Overview

(3)
Foreign Room: USD386.0mn P/E (ttm) 21.6x 7.5x 17.4x DCM is one of the two largest urea producers in
ADTV30D: USD12.3mn P/B (curr) 3.1x 3.1x 2.8x Vietnam and has ~32% market share. DCM owns a
State Ownership: 75.6% Net D/E -55.7% 50.5% N/A urea plant with an annual capacity of 800,000
Outstanding Shares: 530 mn ROE 15.4% 29.4% 15.9% tonnes of granular urea. In addition, DCM has
Fully Diluted Shares: 530 mn ROA 10.6% 11.4% 2.5% invested in an NPK plant with a capacity of 300,000
(1) average of foreign peers; (2) reported; (3) adjusted P/E assuming a tonnes.
3-yr PEG (2): 0.4 normal 20-year depreciation policy
Tram Ngo
Manager
Higher urea prices drive robust 2022F earnings outlook
tram.ngo@vcsc.com.vn • We maintain our BUY rating and raise our target price (TP) by 19%. We reiterate our optimistic
+84 28 3914 3588 ext. 135
view that DCM will benefit from higher average urea prices in 2021 and 2022, along with long-
Duong Dinh term growth from rising export demand and the company’s NPK segment.
Senior Manager • The 19% increase in our TP is driven by a 24% increase in our projected 2021-2026F aggregate
+84 28 3914 3588 ext. 140
earnings following a 10% upward revision in our forecast urea selling prices.
• We expect urea prices to remain robust in the near-term and cool off at a slower pace than the
decline from their previous peak in 2008, which will be driven by supply disruption caused by
COVID-19, sustained high transportation and energy costs, and reduced supply from China and
the EU due to stricter environmental regulations.
• We forecast robust 2022F NPAT growth of 37.7% YoY, despite a high base in 2021, driven by
a 12% increase in urea selling price YoY combined with a flat gas input price and sales volume.
• We expect a 16.6% CAGR in recurring EPS in 2020-2026F that will be driven by strong urea
prices in 2021-2022F and a rising utilization rate at the NPK plant.
• DCM has strong financial capacity with net cash of USD161mn and a net cash/equity ratio of
55.7%, which should support our projected 2021-2023F cash dividends of VND1,200/share
(3.1% yield) and 2024-2025F cash dividends of VND2,000/share (5.2% yield).
• DCM trades at a projected 2022F EV/EBITDA of 3.6x — a ~60% discount vs the median TTM
EV/EBITDA of selected regional peers.
• Upside catalyst: State divestment progress resumes in 2022F; higher cash dividends; fertilizer
products become eligible for input VAT deductions from 2023.
• Downside risks: Global urea prices cooling off faster than expected.
VAT law amendment could lead to additional upside for DCM’s 2023-2026F earnings. Since
2015, VAT has not been levied on fertilizer products hence producers have not been eligible for an
input VAT deduction. Fertilizer producers and the MoIT have proposed an amendment to the VAT
law several times - specifically, they have proposed a 5% output VAT on fertilizer products so that
fertilizer producers could be eligible for an input VAT deduction. The latest development regarding
this matter is that the Ministry of Finance has proposed that VAT changes for fertilizers will be
combined in the draft VAT law. According to DCM, the new VAT law may be approved in 2022 and
benefit urea producers. We have not factored this potential VAT change into our 2023-2026F
forecasts. As DCM’s input gas cost includes VAT of 10%, we estimate that DCM could save
~VND240bn (USD11mn) of tax p.a. on this input. Hence, the VAT change could lift DCM’s NPAT-
MI by ~15% in 2023-2026F on average vs our forecasts which assume no change in VAT.
Financial Statements
P&L (VND bn) 2020 2021F 2022F 2023F B/S (VND bn) 2020 2021F 2022F 2023F
Revenue 7,563 10,649 12,530 11,046 Cash & equivalents 510 2,400 4,450 6,263
COGS -6,250 -7,993 -9,261 -8,948 ST investment 2,302 2,302 2,302 2,302
Gross Profit 1,312 2,656 3,269 2,097 Accounts receivable 45 292 343 303
Sales & Marketing exp -368 -477 -539 -487 Inventories 843 1,314 1,522 1,594
General & Admin exp -299 -416 -337 -294 Other current assets 288 288 288 288
Operating Profit 645 1,763 2,393 1,316 Total Current assets 3,987 6,595 8,905 10,749
Financial income 128 143 204 286 Fixed assets, gross 15,180 15,380 15,680 15,980
Financial expenses -63 -30 -23 -21 - Depreciation -10,463 -11,869 -13,275 -14,680
- o/w interest expense -43 -10 -4 -2 Fixed assets, net 4,717 3,511 2,406 1,300
Associates 0 0 0 0 LT investment 0 0 0 0
Net other income/(loss) 8 8 8 8 LT assets other 23 23 23 23
Profit before Tax 719 1,884 2,582 1,589 Total LT assets 4,740 3,534 2,428 1,323
Income Tax -54 -141 -181 -111 Total Assets 8,726 10,129 11,334 12,071
NPAT before MI 665 1,743 2,401 1,478
Minority Interest -1 -9 -12 -7 Accounts payable 713 985 1,015 981
NPAT less MI, reported 664 1,735 2,389 1,471 Short-term debt 685 624 108 38
NPAT less MI, adjusted 664 1,735 2,389 1,471 Other ST liabilities 664 598 598 598
Total current liabilities 2,063 2,207 1,721 1,616
EBITDA 1,963 3,169 3,799 2,722 Long term debt 137 75 0 0
EPS reported, VND 1,153 3,013 4,150 2,555 Other LT liabilities 197 197 197 197
EPS adjusted, VND 1,153 3,013 4,150 2,555 Total Liabilities 2,398 2,480 1,919 1,814
EPS fully diluted, VND 1,153 3,013 4,150 2,555
DPS, VND 800 1,200 1,200 1,200 Preferred Equity 0 0 0 0
DPS/EPS (%) 69% 40% 29% 47% Paid in capital 5,294 5,294 5,294 5,294
Share premium 0 0 0 0
RATIOS 2020 2021F 2022F 2023F Retained earnings 1,008 2,319 4,073 4,908
Growth Other equity 2 3 4 4
Revenue growth 7.4% 40.8% 17.7% -11.8% Minority interest 26 35 47 54
Op profit (EBIT) growth 64.0% 173.2% 35.7% -45.0% Total equity 6,328 7,648 9,414 10,257
PBT growth 54.8% 162.2% 37.0% -38.4% Liabilities & equity 8,726 10,129 11,334 12,071
EPS growth, adjusted 55.4% 161.3% 37.7% -38.4%
Y/E shares out, mn 530 530 530 530
Profitability
Gross Profit Margin 17.4% 24.9% 26.1% 19.0% CASH FLOW (VND bn) 2020 2021F 2022F 2023F
Op Profit, (EBIT) Margin 8.5% 16.6% 19.1% 11.9% Beginning Cash Balance 472 511 2,400 4,450
EBITDA Margin 26.0% 29.8% 30.3% 24.6% Net Income 664 1,735 2,389 1,471
NPAT-MI Margin, adj, 8.8% 16.3% 19.1% 13.3% Dep. & amortization 1,318 1,406 1,406 1,406
ROE 10.7% 24.8% 28.0% 15.0% Change in Working Cap -196 -513 -230 -65
ROA 7.0% 18.4% 22.3% 12.6% Other adjustments -108 0 0 0
Cash from Operations 1,678 2,628 3,564 2,811
Efficiency
Days Inventory On Hand 62.6 60.0 60.0 65.0 Capital Expenditures, net -172 -200 -300 -300
Days Accts, Receivable - 10.0 10.0 10.0 Investments, net -189 0 0 0
Days Accts, Payable 46.5 45.0 40.0 40.0 Cash from Investments -360 -200 -300 -300
Cash Conversion Days 16.1 25.0 30.0 35.0
Dividends Paid -318 -424 -636 -636
Liquidity ∆ in Share Capital 0 0 0 0
Current Ratio x 1.9 3.0 5.2 6.7 ∆ in ST debt -471 -61 -516 -71
Quick Ratio x 1.5 2.4 4.3 5.7 ∆ in LT debt -491 -62 -75 0
Cash Ratio x 0.2 1.1 2.6 3.9 Other financing C/F 2 9 12 7
Debt / Assets 9.4% 6.9% 1.0% 0.3% Cash from Financing -1,279 -538 -1,214 -699
Debt / Capital 11.5% 8.4% 1.1% 0.4%
Net Debt / Equity -31.6% -52.6% -70.9% -83.6% Net Change in Cash 39 1,889 2,050 1,813
Interest Coverage x 14.9 170.7 647.4 736.3 Ending Cash Balance 511 2,400 4,450 6,263
Source: Company data, VCSC forecasts
Appendices
The following summarizes our outlook for oil, gas, LNG and coal prices as published in our energy
sector update, “Demand recovery to pre-Covid 19 level supports oil prices”, October 21, 2021.
Figure 21: Brent oil price forecasts (USD/bbl)
Forecasts
Institutions 2021F 2022F 2023F 2024F 2025F
as of
Bloomberg consensus 69 68 66 70 69 Oct-21
EIA 69 66 Sep-21
World Bank 56 60 61 62 63 Apr-21
Goldman Sachs 71 Jul-21
Wood Mackenzie 70 68 Oct-21
Average of above forecasts 67 66 64 66 66
VCSC’s oil price base case 70 70 65 65 65 Oct-21
Source: Institutions in table, VCSC
Global LNG prices surged along with natural gas prices

Henry Hub natural gas prices (US) doubled from USD2.5-3/MMBTU in H1 2021 to an average of
USD5/MMBTU in Q3 2021. Moreover, gas prices in October 2021 skyrocketed amid the coal and
gas shortage in China as well as a gas shortage in Europe due to lower-than-average inventory
levels for the upcoming winter season. The gas market has tightened in the past few months due
to a demand recovery from the severe impact of COVID-19, increased gas storing ahead of cold
winter weather in the US and Asia that has caused additional gas demand, a series of events (such
as Hurricane Ida in the US in late August) that hampered US gas production and export capacity,
and Russia’s slow delivery of gas to the EU. Accordingly, the IEA forecasts that Japan LNG spot
prices are set to triple from USD9/MMBTU in Q1 2021 to USD27/MMBTU in Q4 2021.
Meanwhile, Japanese LNG prices for term contracts rose to USD10/MMBTU in Q3 2021 from
USD8.5/MMBTU in H1 2021. According to the IEA, LNG contracting activities so far this year
demonstrate potential for recovery following the sharp fall in 2020 (-30% YoY of LNG contracting
activities in 2020). The LNG market has shown a higher proportion of fixed-destination, long-term
contracts than in previous years in order to limit risk in an exceptionally volatile price environment.
Figure 22: Global spot and term LNG prices
20 USD/MMBTU USD/bbl 140
18 LNG prices have historically correlated with Brent oil
prices; however, the correlations are not very strong due 120
16 to LNG’s supply and demand dynamics. In addition,
14 LNG has not been as widely traded as crude oil. 100
10.1
12 80
10
8 60
6 40
4
20
2
0 -
Mar-19
Mar-15
Jun-15
Mar-16
Jun-16
Mar-17
Jun-17
Mar-18
Jun-18
Jun-19
Mar-20
Jun-20
Mar-21
Jun-21
Dec-15
Sep-16
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Sep-21
Sep-15
Sep-17
Sep-18
Sep-19
Sep-20
Japan LNG import price (spot contracts) - LHS

Henry Hub natural gas spot price - LHS
Japan LNG import price (term contracts) - LHS
Brent crude oil price - RHS
Source: GAS, industry players, VCSC
Asian spot LNG prices to cool in H2 2022 thanks to improving supply availability
In Q3 2021, a tighter-than-expected supply, continued demand recovery in Asia and strong storage
demand in Europe elevated LNG spot prices. According to the IEA, high gas prices are expected
to prolong into Q1 2022. Prices are expected to moderate after the end of the peak season for
heating (from October 2021 to March 2022) followed by an improved supply availability weighing
on H2 2022 prices.
Figure 23: The IEA forecasts LNG prices to cool in H2 2022 thanks to improving supply
availability
30 27.1
USD/MMBTU 26.1
25
20 17.6
13.9 13.2 14.0

15
9.1 9.8
10 7.5
3.7 3.6
5 2.1
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2020 2020 2020 2020 2021 2021 2021F 2021F 2022F 2022F 2022F 2022F
Henry Hub natural gas spot price Asian spot LNG prices
Source: IEA’s forecasts in Q4 2021 gas market report, VCSC
Figure 24: International coal benchmark prices - Australia and China (USD/ton)
250
200
150
100
50
Newcastle Thermal Coal 6000 kCAl/kg FOB (USD/mt)

China Qinhuangdao Port Thermal Coal 5500 kCAl/kg FOB (USD/mt)
VCSC Rating System
Stock ratings are set based on projected total shareholder return (TSR), defined as (target price – current price)/current
price + dividend yield, and are not related to market performance.
Equity rating key Definition
BUY If the projected TSR is 20% or higher
OUTPERFORM If the projected TSR is between 10% and 20%
MARKET PERFORM If the projected TSR is between -10% and 10%
UNDERPERFORM If the projected TSR is between -10% and -20%
SELL If the projected TSR is -20% or lower
The company is or may be covered by the Research Department but no rating or

target price is assigned either voluntarily or to comply with applicable regulation
NOT RATED
and/or firm policies in certain circumstances, including when VCSC is acting in an
advisory capacity in a merger or strategic transaction involving the company.
A rating may be suspended, or coverage terminated, if fundamental information is

RATING SUSPENDED; deemed insufficient to determine a target price or investment rating or due to a
COVERAGE TERMINATED reallocation of research resources. Any previous investment rating and target price
are no longer in effect.
Unless otherwise specified, these performance parameters are set with a 12-month horizon. Movement in share prices
may cause a temporary mismatch between the latest published rating and projected TSR for a stock based on its market
price and the latest published target price.
Target prices are generally based on the analyst's assessment of the stock’s fair value over a 12-month horizon.
However, the target price may differ from the analyst’s fair value if the analyst believes that the market will not price the
stock in line with assessed fair value over the specified time horizon.
Risks: Past performance is not necessarily indicative of future results. Foreign currency rates of exchange may adversely
affect the value, price or income of any security or related instrument mentioned in this report. For investment advice,
trade execution or other enquiries, clients should contact their local sales representative.
Disclaimer
Analyst Certification of Independence
We, Tram Ngo and Duong Dinh, hereby certify that the views expressed in this report accurately reflect our personal views about the subject
securities or issuers. We also certify that no part of our compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views expressed in this report. The equity research analysts responsible for the preparation of this report receive
compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall
firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking.
VCSC and its officers, directors and employees may have positions in any securities mentioned in this document (or in any related investment)
and may from time to time add to or dispose of any such securities (or investment).VCSC may have, within the last three years, served as
manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities
mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in
relation to the investment concerned or a related investment.
Copyright 2013 Viet Capital Securities Company “VCSC”. All rights reserved. This report has been prepared on the basis of information
believed to be reliable at the time of publication. VCSC makes no representation or warranty regarding the completeness and accuracy of
such information. Opinions, estimates and projection expressed in this report represent the current views of the author at the date of publication
only. They do not necessarily reflect the opinions of VCSC and are subject to change without notice. This report is provided, for information
purposes only, to institutional investors and retail clients of VCSC in Vietnam and overseas in accordance to relevant laws and regulations
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Raising Target Prices On Higher Forecast Urea Prices: Fertilizer Producers Sector Update

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Fertilizer producers Sector Update

Duong Dinh Raising target prices on higher forecast urea prices

Figure 2: Fertilizer companies – Summary valuations (based on reported earnings)

Forecast changes summary

NPAT-MI (VND bn) Aggregate

Figure 4: DCM’s selling prices and net profit forecast changes

NPAT-MI (VND bn) Aggregate

Brent oil price (USD/bbl) - RHS

Source: Bloomberg, VCSC compilation

Gas price in EU ranged from EUR90-

380 USD, ~20% higher than the 2007/09

Source: VCSC compilation

Figure 7: Historical urea prices in 2007-2021

Black Sea urea price (USD/tonne) - LHS

Source: Bloomberg, VCSC

Source: Bloomberg, VCSC

Source: Bloomberg, VCSC

Source: Bloomberg, VCSC

Figure 12: Global urea demand forecast (*)

Urea - industrials demand & other uses Urea - fertilizer demand

Million tonnes EECA, West Asia,

Figure 14: Key changes in urea imports in 2018 and 2020

30 Million tonnes Urea importers by country

We forecast average international urea prices in 2022 to be ~25% higher

• Supply disruptions caused by Covid-19 and variants may be less-than-expected

Vietnamese urea prices are following global urea prices

Gap Middle East urea prices DPM selling prices

Source: Bloomberg, Agromonitor, VCSC

Middle East urea prices (USD/tonne) - LHS

Source: Bloomberg, VCSC

Market Cap: USD880.8mn DCM Peers (1) VNI Company Overview

Global LNG prices surged along with natural gas prices

Japan LNG import price (spot contracts) - LHS

Source: GAS, industry players, VCSC

13.9 13.2 14.0

Source: IEA’s forecasts in Q4 2021 gas market report, VCSC

Newcastle Thermal Coal 6000 kCAl/kg FOB (USD/mt)

Source: Bloomberg, VCSC

Equity rating key Definition

BUY If the projected TSR is 20% or higher

OUTPERFORM If the projected TSR is between 10% and 20%

MARKET PERFORM If the projected TSR is between -10% and 10%

UNDERPERFORM If the projected TSR is between -10% and -20%

SELL If the projected TSR is -20% or lower

The company is or may be covered by the Research Department but no rating or

A rating may be suspended, or coverage terminated, if fundamental information is

Transaction Office Transaction Office

Banks, Securities and Insurance Macro

Consumer and Pharma Oil & Gas and Power

Real Estate, Construction and Materials Industrials and Transportation

Retail Client Research

Institutional Sales and Brokerage Retail & Corporate Brokerage

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