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PGD - REDUCE - Profits Going Down - Results

PGD posted revenue of VND4,058bn, a 71% increase yoy but posted net profit of VND157bn, a 39% drop yoy. As expected a retroactive gas feedstock increase hurt 9MFY12 earnings. Gross margins were cut in half to 9.7%. PVGas (GAS), PGD’s parent company, plans to raise gas feedstock prices another 20% in 2013 which would further erode gross margins to 6.9%. We forecast a 21% drop in earnings for 2013 and reiterate our REDUCE rating on a lower target price of VND25,800/share (downside 16%).