DPM 02032015 VPBS (Ta)

PETROVIETNAM FERTILIZER AND
CHEMICALS CORPORATION (DPM)

March 2, 2015
INITIATING COVERAGE: HOLD

Current price (2/27/2015) VND 31,700 dpm vn
DPM Peer Index VNINDEX
Intrinsic Value: VND 30,600 60
% 1Y change
Short Term Trading Recommendation HOLD
Resistance Level VND 34,000 40
Support Level VND 29,000
Bloomberg ticker: DPM VN Exchange: HSX 20
Industry: Fertilizer, chemicals
0
Beta (3Y) 0.94
52w high / low (VND) 45,400/ 28,600
-20
Outstanding shares (mn) 379,934,300
Market Cap (VNDbn) 12,044 -40
Free Float (mn shares) 126,858,300 02/14 04/14 06/14 08/14 10/14 12/14 01/15
LTM Avg Trading Vol 41,697
Foreign-owned Ratio (%) 24.74% We initiate coverage of Petrovietnam Fertilizer and Chemicals
Div.Yield EPS (VND) Corporation (DPM) with a long term HOLD recommendation.
2015 VPBS forecast 7.9% 2,958  Leading urea producer in Vietnam but facing increasing
2014 7.9% 2,888
threats from competitors: DPM has 40 percent share of the
2013 15.8% 5,837
2012 14.2% 7,989
local urea market with a strong distribution network and high
2010-14 2015F 2014-19 brand reputation that brings pricing power. However its market
CAGR VNDbn CAGR share is threatened by the expansion of other urea producers.
Revenues 9.6% 8,382 -3.3%  Profitability higher than peers but declining: DPM has
EBITDA -16.3% 1,413 -8.2% higher profit margins and return ratios than its local and regional
Net income -10.4% 1,124 -9.7%
peers. Revenue and profitability, however, have been shrinking
Ratio DPM Peer* VNI
since 2012. Although the company has some big projects
PE 11.0 9.65 13.38
P/B 1.37 1.50 1.93 planned, their feasibility and profitability are still in doubt.
EBIT/I 298.61 16.62 na  Global urea price will continue its downward trend: Urea
EV/EBITDA 4.21 6.65 9.50 prices will continue to decline due to surplus supply – especially
Debt/ Equity 0.01 0.39 1.13 from China, hurting growth and margins.
Profit margin 11.5% 4.8% 9.7%
 Loss of subsidies already built into valuation: DPM’s stock
ROA 10.9% 8.8% 2.8%
price fell about 30 percent last year when the company officially
ROE 12.1% 17.2% 14.7%
(*) Selected peer includes the Vietnamese listed companies in the applied market-based gas input prices after previously receiving
chemical and fertilizer industry subsidies from its sister-company, PVGas.
Company Description:
 Low oil prices will help profitability: Natural gas prices closely
DPM is a state-owned enterprise under Petrovietnam Oil
and Gas Group, established in 2003. In 2007, the company
follow petroleum prices which were down around 50 percent last
was equitized and listed on the HSX. year. This will provide a significant boost to profit margins.
Business activities: Producing and trading fertilizers (90% of  High dividend yield is still attractive: DPM provided
revenues), liquid ammoniac, industrial gas, other attractive dividend payments with a dividend of 35 percent
chemicals, and electricity. (2011), 45 percent (2012), and 50 percent (2013) on par. DPM
2014 unaudited results: Total assets of VND10,110 billion plans to reduce 2014 dividends to 25 percent leading to a
(USD475 million), total equity of VND8,789 billion (USD410
dividend yield of 7.9 percent, which is still more attractive than
million)
current bank deposit rates.
Please see important disclosure information at the end of this report
www.VPBS.com.vn Page | 1
CONTENTS
FERTILIZER INDUSTRY OVERVIEW .......................................................................................................... 3
GLOBAL FERTILIZER INDUSTRY ............................................................................................................................................ 3
VIETNAM FERTILIZER INDUSTRY ........................................................................................................................................... 7
COMPANY OVERVIEW ........................................................................................................................... 10
HISTORY .................................................................................................................................................................................. 10
SHARESHOLDERS AND OWNERSHIP .................................................................................................................................. 10
ORGANIZATIONAL STRUCTURE .......................................................................................................................................... 11
MANANGEMENT .................................................................................................................................................................... 12
LEADING MARKET SHARE OF UREA ................................................................................................................................... 13
BUSINESS ACTIVITIES .......................................................................................................................... 14
PHU MY PRILLED UREA IS THE MAIN PRODUCT ............................................................................................................... 14
GAS MAKES UP ABOUT 70% UREA PRODUCTION COST ................................................................................................. 16
HIGHEST SELLING PRICE BUT LOWEST PRODUCTION COST .......................................................................................... 17
BIGGEST THREAT FROM CHINA UREA ................................................................................................................................ 18
FUTURE PROJECTS: DRIVING FUTURE GROWTH .............................................................................................................. 19
FINANCIAL PERFORMANCE .................................................................................................................. 20
GROWTH AND PROFITABILITY ............................................................................................................................................. 20
LIQUIDITY AND SOLVENCY................................................................................................................................................... 23
FORECAST ASSUMPTIONS ................................................................................................................... 23
VALUATION ........................................................................................................................................... 26
DISCOUNTED CASH FLOW .................................................................................................................................................... 26
COMPARABLE MULTIPLES.................................................................................................................................................... 26
SENSITIVITY ANALYSIS ........................................................................................................................ 28
TECHNICAL ANALYSIS .......................................................................................................................... 29
CONCLUSION ........................................................................................................................................ 30
Appendix 1: VPBS projection ................................................................................................................................................. 31

Appendix 2: Introduction of fertilizer products .................................................................................................................... 34
FERTILIZER INDUSTRY OVERVIEW
GLOBAL FERTILIZER INDUSTRY (1)
China is the biggest urea producer and exporter in the world
Urea market is highly According to the International Fertilizer Industry Association (IFA), in 2013 global total
concentrated, with China urea production volume was about 170 million tons and China was the largest urea
and India making up over
half of the total global urea producer accounting for 40 percent. Most urea production in China is consumed
production and demand. domestically (accounting for 35 percent of total world urea demand), but this country
still maintains the largest urea export position with a share of 19 percent in the world.
India is the second largest urea producer, accounting for 14 percent of total global
volume, but is also the greatest urea importer, consuming about 18 percent global
urea demand.
World urea production 10 largest urea producers (2013)

240 80
Million tons
68.1
Million tons
180 60
120 40
23.2
60 20
6.7 6.5 6.4 5.4 4.8 4.0 4.0 3.6
0 0
10 largest urea exporters (2013) 10 largest urea importers (2013)

10 10
Million tons
8.3
Million tons
7.7
8 8
6.1
6 5.4 5.2 6
3.5 3.9
4 3.1 4
2.5 2.3 2.4
2.0 1.9 1.7
2 1.3 1.3 2 1.4 1.1 1.0 0.9
0 0
Source: IFA, Yara Fertilizer Industry Handbook (December 2014)
Black Sea and Arab Gulf determine almost urea price in the world
The urea industry is highly global due to its transportability while urea prices have
Urea from the Black Sea and
Arab Gulf is widely traded and minimal difference among markets adjusting for transportation cost and
determines the global urea import/export tax. Gas-based urea production is the most popular technology in the
price.
world and the main urea exporters are gas-rich countries or regions. The Black sea
and Arab Gulf are the two main urea producer regions along with China. However,
the domestic urea demand in these two areas is very small; almost all of its urea
production is used for export. Accordingly, these urea products are widely traded
around the world and affect the global urea price.
1 Please refer to the appendix at the end of this report for more information about fertilizer products.
Main urea trade flows in 2013
Note: Green arrows: urea exported from China; Red arrows: urea exported from Arab Gulf; Blue arrows: urea exported from Black Sea; Black
arrows: urea exported from other areas. Unit: million tons. Source: IFA, Yara Fertilizer Industry Handbook (December 2014)
And China sets the urea price floor

Urea from China feeds the Chinese urea products set the floor for global urea price as China is the least
last gap between global
demand and supply.
expensive urea producer to supply the last gap between global urea demand and
supply. Urea from China cannot flow outside the country without a higher price than
domestic, so this price with added import/export tax and transportation cost is
considered the floor price of urea around the world.
Compare urea price in major markets
Black Sea urea prill price Middle East urea prill price China average urea price
600
USD/ton
500
400
300
200
Source: Bloomberg
Crop and anthracite price are the two key drivers for fertilizer and urea prices
Urea price is highly correlated Crop prices are driven by food demand. The increase in crop prices will lead to
with crop and anthracite prices.
demand of expanding crop areas or increasing crop’s yield and quality. Eventually,
demand for fertilizer will go up and fertilizer as well as urea prices must increase.
In our research, we see that the correlation between the Black Sea urea price and
wheat prices in the United States is 0.47, based on monthly data from 2008 through
January 2015, but the correlation reaches its highest value at 0.60 when using the
same data but three-months-lagging data (assumption that wheat price pushes urea
price). Applying the same method and period for corn price in the United States and
urea price in the Black Sea, the correlation between them is 0.56 but reaches its
highest level at 0.58 when using one-month-lagging data. These correlations are
significant but not strong linear.
We believe that the correlations are really effective when crop prices go up and
support urea prices. Conversely, however, when crop prices decline, urea prices
cannot experience a parallel fall because of production cost issues.
Anthracite prices in China – not Although gas-based urea production is the most popular technology in the world,
oil –affects global urea prices.
majority of urea producers in China apply coal-based technology (anthracite in
particular) thanks to the availability of coal (China is the biggest coal producer,
accounting for 46 percent of global coal production in 2013 – source: World Coal
Association). Urea prices in China bring a global impact as mentioned above and
anthracite prices in China are the key driver for movement of urea prices in China.
According to monthly historical data of urea prices in China including WTI crude oil
price and anthracite price in China from 2011 to January 2015, we identify a
correlation between China urea price and WTI crude oil price of just 0.11 while the
correlation between the China urea price with anthracite price is high at 0.75, and the
number reaches the highest value at 0.80 when using two-months-lagging data.
Applying the same method and time period for urea price in Black Sea and anthracite
price in China, the correlation is 0.73 and the highest is 0.82 when using three-
months-lagging data. The correlation between urea price in the Black Sea and crude
oil, the WTI price, is insignificant at 0.03 and highest at 0.1 when using three-months-
lagging data.
From the above analysis and the fact that China urea sets the floor price for global
urea, we believe that anthracite price in China (not crude oil price) affects global urea
price, and we assume that gas-based urea producers will benefit greatly when oil
prices decrease.
Urea price vs. crop prices Urea price vs. crude oil price and anthracite price
Wheat in US China average urea price (USD/ton)
Corn in US Black Sea prill urea (USD/ton)
Crude oil, WTI (USD/barrel)
Black Sea prill urea price
China anthracite price (USD/ton)
12 1200 600 280
10 1000 500 240
8 800 400 200
6 600 300 160
4 400 200 120
2 200 100 80
0 0 0 40
Left axis: crop (USD/bushel); Right axis: urea (USD/ton) Left axis: urea price; Right axis: crude oil, anthracite price
Source: Bloomberg Source: Bloomberg
Urea price is still on a downward trend due to oversupply situation
The urea industry will The price of urea is expected to continue its downtrend due to global oversupply of
continue to experience an urea. In 2014, According to the International Fertilizer Industry Association (IFA) and
oversupply situation leading
to a downward trend of International Fertilizer Development Center (IFDC), total world urea capacity was
global urea prices. estimated at 227 million tons per year while demand was 178 million tons per year.
According to IFA, the situation will be unchanged over the next four years. And until
2018 the capacity is forecasted to increase to 245 million tons while the demand will
be 202 million tons.
In the world, prices of prilled and granular urea have very little difference. In the last
two years, the price of granular urea was 2.8% higher than prilled urea.
Global urea price trend, demand and capacity

Demand, Global (million tons) Capacity, Global (million tons)
Urea Middle East Granular (USD/ton) Urea Middle East Prill (USD/ton)
250 450
Million tons
USD/ton
200 400
150 350
100 300
50 250
0 200
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E
Source: IFA, IFDC, Green Markets, Bloomberg
VIETNAM FERTILIZER INDUSTRY
Vietnam must import fertilizer every year
Domestic production meets In the period from 2008 to 2014, total domestic fertilizer demand and supply was
all demand of urea, NPK, estimated to grow at a compound annual growth rate (CAGRs) of 6.4 percent and
phosphate, and 30 percent of
DAP demand. All demand of 11.6 percent, respectively. In 2014, the Vietnam Ministry of Agriculture and Rural
SA and potassium must be Development (MARD) estimated that total demand could be 10.76 million tons,
imported.
including 2.2 million tons of urea, 900 thousand tons of SA, 960 thousand tons of
potassium, 900 thousand tons of DAP, 4 million tons of NPK, and 1.8 million tons of
phosphate.
At present, domestic production can meet all demand of urea (production capacity
significantly exceeds demand), NPK and phosphate. All demand of SA and potassium
must be imported while production of DAP meets 30 percent of demand.
Vietnam fertilizer demand and supply Fertilizer demand by products
Total demand Total production

12
Million tons
10 Phosphate
16.7% Urea
8 20.4%
SA 8.4%
6 DAP 8.4%
Potassium
4 8.9%
2 NPK
37.2%
0
2008 2009 2010 2011 2012 2013 2014E
Source: MARD, VPBS Source: MARD, VPBS
Demand of fertilizer increased slowly over the last five years

The growth rate of fertilizer demand has slowed down in recent years as its CAGR
was 3.8 percent from 2000 to 2013 but estimated to be 2.5 percent over the period
from 2009 to 2014. According to the Fertilizer Association of Vietnam (FAV), total
demand of fertilizer in Vietnam is estimated at 11 million tons in 2014, up 4.0 percent
y-o-y with different growth rates among fertilizer types. Demand of urea, potassium
and phosphate were nearly unchanged or slightly decreased but demand of NPK and
DAP climbed slightly.
Demand of fertilizer over years

Phosphate SA Potassium NPK DAP Urea
12,000
Thousand tons
10,000 2,200
2,191 2,260 2,000
8,000 2,372 900
1,955 900
1,663 921 933
2,064 1,720 1,643 1,046 948
6,000 2091 1,874 651
755 434 3,171 3,800 4,000
593 560 3,490
741 2,760 2,900 3,035
4,000 2,206 2,171 2,512 2,620
1869 1,260 920 950 960
612
806 552 753 1,157 1,001 900 850 900
2,000 737 1,166 889 950
665 732 734 984 650
489 722
1157 1,320 1,322 1,198 1,438 1,436 1,676 1,665 1,825 1,800
940 1,017
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E
Source: MARD, DPM
Capacity of urea exceeds demand
Total domestic demand of urea is expected to be 2.20 million tons in 2014 while
domestic supply capacity is 2.66 million tons at present. Urea products are produced
by four factories including Petrovietnam Fertilizer and Chemicals Corporation (DPM)
(800,000 tons/year), Petrovietnam Camau Fertilizer JSC (DCM) (800,000 tons/year),
Ninh Binh Nitrogenous Fertilizer Company Limited (560,000 tons/year) and Ha Bac
Nitrogenous Fertilizer & Chemicals Company Limited (500,000 tons/year).
Urea supply capacity Urea producers in Vietnam
Phu My Ha Bac Ninh Binh Ca Mau Capacity

3,000 Company
(tons/year)
thousand tons
2,500 Average demand of Urea 2.2 million tons/year Phu My fertilizer 800,000
800 Ca Mau fertilizer 800,000
2,000 800
745 Ha Bac fertilizer (*) 500,000
1,500 560
635 Ninh Binh fertilizer 560,000
460 560
1,000 130 500 Total capacity 2,660,000
147 194 195 195 195
(*) Before 2015, capacity is 195,000 tons/year
500
800 800 800 800 800 800
0
2010 2011 2012 2013 2014 2015
Source: MARD, DPM, VBPS Source: MARD, DPM, VPBS
Vietnam fertilizer demand should grow slowly due to sluggish expansion of

planted areas and current high levels of fertilizer usage
From 2000 to 2013, planted areas in Vietnam expanded slowly with a CAGR of 1.25
percent. Vietnam has a higher fertilizer consumption rate (297 kilograms of fertilizer
per hectare of arable land in 2012) than other countries in the region except Malaysia
(1,570 kilograms per hectares), and a higher-than-world average rate (141 kilograms
per hectare) thus the potential of increasing fertilizer consumption should be low in
the future.
Planted area over years Fertilizer consumption

Planted area % Planted area/total land area
15,000 48% 2010 2011 2012
Thousand hectares
Vietnam 323.3 311.5 297.1

14,500 45%
Thailand 162.2 161.5 153.2
14,000 42% Malaysia 2,197.0 2,062.7 1,570.7
13,500 39% Indonesia 181.5 198.4 194.8

Cambodia 11.5 15.5 16.6
13,000 36%
China 579.9 558.3 647.6
12,500 33% India 179.1 177.9 163.7

Japan 259.8 268.3 259.1
12,000 30%
World 136.0 137.7 141.3
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E
Source: Vietnam GSO, World Bank, VPBS (kilograms per hectare of arable land)
Source: Vietnam GSO, World Bank
2015 outlook for urea market
The current situation of supply surplus in the urea market will continue maintaining
its downward trend of urea prices in the global market. In 2014, WTI crude oil price
decreased about 45% while China’s domestic selling urea price declined by only 15%.
These facts generally support the assumption that urea prices will drop steeply in
2015. When oil prices suffered a falling shock in the last quarter of 2014, however,
urea prices increased slightly and were nearly unchanged in the first two months of
2015. The reason is already stated above – the correlation between oil price and urea
price is minimal, rather anthracite prices in China will dictate the trajectory of urea
prices in 2015.
From 2011 to 2014, urea prices in China experienced a lagging movement compared
with anthracite prices but it has never declined more than a percentage decrease of
anthracite price in the previous year. From this observation, we believe that China
urea will not decreased more than 14% in 2015. Because China urea has a major
effect on urea prices in Vietnam, we also believe that urea in Vietnam will also
decrease less than 14% in 2015.
China urea, crude oil and anthracite price
% y-o-y change 2011 2012 2013 2014
Anthracite price in China 8.86% -22.09% -4.48% -14.06%
WTI Crude oil price 7.20% -7.09% 7.19% -45.87%
Urea China price 13.51% 1.49% -17.89% -7.86%
Source: Bloomberg, VPBS
We also observe the same view in urea forecast price of the World Bank. According
to Commodity markets outlook report of World Bank in January 2015, urea prices in
the Black sea market are forecasted to decrease about 5.12% y-o-y in 2015. However,
we think that Vietnam’s urea price may decrease even more than that level in 2015 as
newly added urea capacity from Ha Bac Nitrogenous Fertilizer & Chemicals Company
Limited will create more burden on the domestic market.
COMPANY OVERVIEW
HISTORY
Petrovietnam Fertilizer and Chemicals Corporation - PVFCCo (DPM), a member of
A member of Vietnam Oil &
Gas Group and officially in
Vietnam Oil & Gas Group - PetroVietnam (PVN), was established on March 28, 2003
operation since 2004 and officially commenced operations on January 19, 2004. The company listed its
shares on the Ho Chi Minh Stock Exchange (HSX) on November 5, 2007.
DPM currently specializes in producing fertilizer – prilled urea. Its business activities
also include trading other kinds of fertilizer such as NPK, phosphate, potassium (kali);
trading chemicals; producing packaging products and electricity.
Milestones
2001 Ground-breaking for the Phu My Fertilizer Plant
2003 Establishment of Petrovietnam Fertilizer and Chemical Corporation (PVFCCo)
2004 Launched Phu My Urea on local market; Inauguration of Phu My Fertilizer Plant
2007 Transformation into a Joint Stock Company; Listed on HCMC Stock Exchange
2008 Transformation into Petrovietnam Fertilizer and Chemicals Corporation

Completion of the CO2 recovery system at Phu My Fertilizer Plant; increased urea
2010
production capacity to 800,000 tons/year.
2011 Inauguration of PVFCCo Tower Headquarters in HCMC
2014 Petrochemicals plant starts operation in Vung Tau

Source: DPM
SHARESHOLDERS AND OWNERSHIP

Ownership structure of DPM is highly concentrated with 95 percent ownership
belonging to institutional investors, of which PVN holds a controlling shareholder
position with 61.4% stake. Foreign investors account for 29.7% ownership, of which
two significant shareholders are two ETFs, Deutsche Bank AG London (5.0%) and Van
Eck Associates Corp. (4.6%), as of January 12, 2015.
Shareholders (>1%) Ownership structure as of January 12, 2015
Name Ownership
Amersham
Petrovietnam Oil & Gas Group 61.4% Industries Ltd. Others
Deutsche Bank AG London 5.0% 1.6% 23.9%
Van Eck Associates Corp. 4.6%
Norges Bank
Franklin Advisers Inc. 1.8% Petrovietnam
1.8%
Norges Bank 1.8% Oil & Gas
Amersham Industries Ltd. 1.6% Franklin Group
Advisers Inc. 61.4%
1.8%
Van Eck
Associates Deutsche Bank
Corp. AG London
4.6% 5.0%
Source: Bloomberg
ORGANIZATIONAL STRUCTURE
SHAREHOLDERS'
MEETING
BOARD OF DIRECTOR SUPERVISORY BOARD
INTERNAL AUDIT
DIVISION
BOARD OF
MANAGEMENT
BOARD OF DIRECTORS
OFFICE
SUBSIDIARIES FUNCTIONAL
DIVISIONS DEPENDENT UNITS
NORTH PETROVIETNAM CENTRAL PETROVIETNAM

FERTILIZER & CHEMICALS JSC FERTILIZER & CHEMICAL JSC FERTILIZER DIVISION CHEMICAL DIVISION PHU MY FERTILIZER
PLANT
SOUTH EAST PETROVIETNAM SOUTH WEST PETROVIETNAM

FERTILIZER & CHEMICAL JSC FERTILIZER & CHEMICAL JSC MARKETING & PVFCCO -
HSE DIVISION COMMUNICATIONS REPRESENTATIVE
DIVISION OFFICE IN MYANMAR
DAM PHU MY PACKAGING JSC PETROVIETNAM SOUTHERN

BUILDING AND DEVELOPMENT FINANCE-ACCOUNTING
JSC LEGAL DIVISION DIVISION
PVFCCO - BRANCH IN
HO CHI MINH CITY
HUMAN RESOURCES & RESEARCH & PLANNING DIVISION INFORMATION COMMERCE & BIDDING INVESTMENT &
ADMINISTRATION TRAINING DIVISION DEVELOPMENT TECHNICAL DIVISION TECHNOLOGY DIVISION CONSTRUCTION
DIVISION DIVISION
DPM has three dependent units including Phu My Fertilizer Plant, PVFCCo – Branch in
Ho Chi Minh City, and PVFCCO – Representative Office in Myanmar. In the past, DPM
also had a branch in Cambodia but it was closed in July 2014.
The company has six subsidiaries:
 North Petrovietnam Fertilizer & Chemicals JSC, 75.0 percent owned by DPM.
 Central Petrovietnam Fertilizer & Chemicals JSC, 75.0 percent owned by DPM.
 South East Petrovietnam Fertilizer & Chemicals JSC, 75.0 percent owned by DPM.
 South West Petrovietnam Fertilizer & Chemicals JSC, 75.0 percent owned by
DPM.
 Dam Phu My Packaging JSC, 51.0 percent owned by DPM.
 Petrovietnam Southern Building and Development JSC, 81.4 percent owned by
DPM.
Other investments: big DPM has two associates including Petrovietnam Urban Development JSC (PVC-
losses but optimistic about
earning growth. Mekong) and Petrovietnam Petrochemical and Textile Fiber JSC (PVTEX) who have
ownership interests of 35.6 percent and 26.0 percent, respectively. These investments
have brought big losses for DPM over the past three years.
 PVC-Mekong: was established in 2007 in Ca Mau province. Its main businesses

are construction for road, building and water systems. In 2012 and 2013, the
company suffered big losses of VND139 billion (USD6.4 million) and VND124
billion (USD5.8 million), respectively, which impacted the investment value of
DPM at this company. In first half of 2014, DPM continued recording loss from
this investment. However, PVC-Mekong achieved better business result in the last
half of 2014 and the investment value of DPM at PVC-Mekong slightly increased
in 2014 compared with 2013.
 PVTEX: was established in March 2008 in Hai Phong city with total investment
capital of USD324 million in which the owner’s equity is USD100 million. PVTEX
engages in producing polyester fibers. Its factory was put into trial operation
from July 20, 2011 and commenced commercial operations from March 14, 2014.
Because 2014 is the first year PVTEX officially came into operation, the company
suffered high depreciation expenses and unstable output, leading to a big loss in
2014. We estimate that DPM recorded a loss of about VND281 billion (USD13.1
million) for this investment in 2014. However, we expect that the situation will
improve steadily as PVTEX may find a stable market for its products and its
financial expenses will be reduced over the years.
Associates investment
Unit: VND billion Ownership 2011 2012 2013 2014
Value of investment 459 491 463 209
PVC-Mekong 35.63% 26 58 11 12
PVTEX 26.00% 432 433 452 198
Profit (loss) from associates 6 (51) (36) (280)
Source: Company reports, VPBS
MANANGEMENT
With the controlling position in terms of ownership, PVN takes the leading role in
determining development strategies as well as allocating key personnel in DPM, in
line with the development plan of PVN. DPM’s Board of Directors and Management
include skillful people with extensive experience in the oil & gas and petrochemical
industries.
List of members of the board of director, board of management, and board of supervisory
Board of Directors Title Experience/Qualification Ownership
Marine Engineering Engineer, Business Administration Engineer, Master of Automation.
Le Cu Tan Chairman 0.01%
Appointed from December 2013
Nguyen Thi Hien Vice Chairwoman Bachelor of Foreign Trade Economics. Appointed from March 2009 0.00%
General Director,
Cao Hoai Duong As mentioned below 0.00%
BOD member
Nguyen Hong Vinh BOD member Agricultural Engineer. Joined DPM in December 2009 0.00%
Dinh Quang Hoan BOD member Master of Economics, ACCA. Representing share portion of Viet Capital Securities JSC at DPM 0.00%
Board of Management
CEO, BOD Master of Petrochemical Technology; has extensive experience in oil refinery and
Cao Hoai Duong 0.00%
member petrochemical industry. Appointed as CEO of DPM in November 2010
Duong Tri Hoi Vice president Industrial Electrical Engineer, Bachelor of Economics, Investment Planning. Joined DPM in 2007 0.00%
Hoang Viet Dung Vice president Petrochemical Technology Engineer. Appointed since March 2011 0.00%
Le Thi Thu Huong Vice president MBA. Appointed since March 2013 0.00%
Le Van Quoc Viet Vice president Bachelor Degree in Economic Planning. Appointed since February 2009 0.00%
Tu Cuong Vice president Organic Chemistry and Technology Engineer. Appointed since 2008 0.00%
Nguyen Van Tong Vice president Bachelor of Finance and Accounting, Reconstruction Banking. Appointed since April 2009 0.00%
Huynh Kim Nhan Chief Accountant Officer Bachelor degree in Economics – Finance and Accounting 0.00%
Board of Supervisory
Head of
Tran Thi Phuong Thao Bachelor of Foreign Trade Economics. Joined DPM since 2001 0.00%
Supervisory Board
Nguyen Van Hoa Member Bachelor of Economics majoring in Banking. Appointed since 2007 0.00%
Le Vinh Van Member Bachelor of Economics, majoring in Finance and Accounting. Appointed since November 2008 0.00%
Source: 2013 annual report; Ownership as of January 28, 2015 from Management report
LEADING MARKET SHARE OF UREA
DPM holds 40 percent market DPM plays a leading role in the Vietnam urea market and holds a market share of
share in Vietnam’s urea
industry. about 40 percent. The two main markets of DPM are Southeast and Central &
Highlands areas in which each market contributes about 30 percent to DPM’s urea
revenue.
Southwest area used to be the major market of DPM, however since Petrovietnam
Camau Fertilizer JSC (DCM) has begun its operation from 2012, DPM has been losing
its market not only due to location advantages of DCM but also this is part of the PVN
strategy – the major shareholder of both DPM and DCM.
Market share in 2014 Revenue contribution by market

Import
Market Revenue
3% Region
share contribution
Ninh Phu My Southeast 75% 31%
Binh 38%
14% Central and highlands 70% 29%
Ha Bac
Southwest 35% 25%
9%
Northern 25% 15%
Ca Mau
36%
Source: DPM, VPBS

Large distribution network DPM has a large distribution network with 10 branches, 101 wholesalers, 3,000 sale
and high reputation leading points and 29 warehouses spread across the country by the end of 2014. These units
to advantage in selling price
are managed by its four subsidiaries thus DPM can tightly control its network.
In the fertilizer industry, when product quality of companies is fairly similar and their
selling prices are just marginally different, marketing becomes a deciding factor for
the success of the company. However, wholesalers and retailers (not fertilizer
companies) are the parties who directly sell or advise the buyers who are typically
farmers, thus establishing relationship with wholesalers and retailers will be the main
strategy in marketing the fertilizer products business of fertilizers companies. We
note that the distribution network appears to be a big barrier for new fertilizer
entering the industry. Indeed, imported urea products from China usually have lower
prices but difficulty in expanding market share in Vietnam. At present, Phu My urea
products are sold with a higher price than others thanks not only to a strong
distribution network but also due to their good reputation. Phu My urea products
have been on the market for over 10 years while it is just about four years for both
DCM’s and Ninh Binh’s urea.
Export market is still small, Export revenue is very small, about VND180 billion in 2012 VND50 billion in 2013.
profitability is questionable. DPM has sold its products to Cambodia and other countries in Southeast Area. Due
to small opportunities in terms of demand and price competitiveness in the
Cambodian market, in July 2014 DPM dissolved its branch in this country. At present,
the company only has one offshore business unit – a representative office in
Myanmar. In 2014, DPM expanded its export market into two new countries including
Jordan and New Zealand; thus far the exported volume is very small.
In our view, we believe that export will serve only as a convenient solution for easing
the company’s excess urea supply as it does not bring significant profitability. In the
local market, imported urea must bear import taxes of six percent and other freight
costs. DPM currently sells its urea products with a little bit higher price than imported
urea (after adding import tax and freight cost). If DPM export its product, the
company will not able to take advantage of the different price proceeded from import
tax in Vietnam and freight cost. Thus we believe that their export business will not
generate a better profit margin than selling domestically.
BUSINESS ACTIVITIES
PHU MY PRILLED UREA IS THE MAIN PRODUCT
DPM’s main product is prilled urea, contributing to about 70% total revenue. The
volume of producing urea has been quite stable over the years as the company has
been producing at its maximum capacity. The volume of trading fertilizers has
fluctuated and has been dependent on the company’s strategy at any given time.
Volume of selling fertilizer Revenue breakdown in 2014

Others
1,600 Producing urea Trading fertilizers
6%
Thousand tons
Trading
1,200
fertilizer
28%
800
DPM ure
400 66%
0
2009 2010 2011 2012 2013 2014
Source: DPM, VPBS
Urea
DPM’s prilled urea has the DPM’s main product is prilled urea; its quality is ranked as one of the best in the
highest quality in Vietnam so domestic market even ahead of imported urea products from China. Since the
far. Granular urea of DCM is
the most comparable
product was introduced in 2004, it has gradually replaced imported products in
product in terms of quality. Vietnam.
At present, the main competitor of DPM’s urea product is granular urea produced by
Petrovietnam Camau Fertilizer Company (DCM). Granular urea has a slower
resolution and less evaporative characteristics that make it better in terms of cost
saving, however, using prilled urea can bring more rapid results on trees. Further,
prilled urea is not preferred as granular to become an input of NPK producing
because prilled urea is delicate than granular.
DCM has an advantage in terms of geography. Granular urea produced by DCM is
almost used to feed demand in Southwest area of Vietnam, the biggest urea
consumption market with annual demand of about 700,000 tons. Urea consumption
in other areas of Vietnam is mostly distributed by DPM thanks to its wide distribution
network and long experience in these markets.
On the global market the price of granular urea is generally a little bit higher than
prilled urea but sometimes can be lower depending on the relation between demand
and supply (please refer to industry review for detailed information). In Vietnam, the
price of Phu My urea is marginally higher than Ca Mau urea currently thanks to the
high reputation of the DPM brand as well as Vietnamese traditional using style of
urea products. However, we believe this is just an early-stage selling policy of DCM
to introduce products to the market; in the future, farmers should become more
familiar with granular urea while DCM builds its reputation. Consequently Ca Mau
urea prices should be adjusted and come in line with the Phu My urea.
Urea is being produced at DPM’s urea plant was built with an original designed capacity of 740,000 tons/year
full capacity. and upgraded to 800,000 tons/year since October 2010. The factory is located in Phu
My I IP, Tan Thanh, Ba Ria – Vung Tau province with an area of about 63 hectares. Its
original investment capital was USD370 million and was increased by USD27 million
in 2009 when its capacity was upgraded. Over a period from 2010 to 2014, volume of
urea production has been higher than the designed capacity, the production volume
attained the highest level of 856,000 tons in 2012. However as this plant is in
operation over ten years, it must be perform more frequent periodic maintenance
which leads to less stable production volume through the year. In the past DPM
performed periodic maintenance for its plant in 2008, 2011 and 2013. The company
plans to conduct a similar maintenance project in 2015.
Production process Volume of produced and sold urea over years
Produced urea Sold urea Designed capacity
CO2
Thousand tons 1,000
Natural gas Ammonia
Urea plant
Plant Urea 800
NH3 (800,000
(450,000
tons/year)
tons/year) 600
400
Unused NH3
200
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: DPM
Trading fertilizers
Including: Ca Mau urea, potassium, NPK, DAP and S.A.
- Ca Mau urea: DPM used to be the sole distributor of Ca Mau urea in 2012 when
the urea plan of DCM was first put into operation. From 2013, DPM has no
longer been the sole distributor but still sells products of DCM.
- Other fertilizers: all these products are processed by other companies (mostly
from China) as orders from DPM. DPM uses its own brand name and selling
network to distribute such products. This business segment has very low gross
profit margin, just around two to five percent.
Chemical products
Including: ammonia and other chemicals such as acid, chemicals used in oil and gas
and the plastics industries.
Before 2014, DPM was only trading chemical products (except ammonia that the
company can produce). From May 2014, DPM put its new chemical plant into
operation. The plant has a capacity of 25,000 barrels/year and can annually generate
revenue of VND300 billion (USD1.4 million). In 2014, DPM produced a total of 15,000
barrels, valued at VND200 billion (USD9.3 million). Currently, DPM has plans to
deploy new chemical projects, thus capacity of this business segment is expected to
increase in the near future.
Ammonia produced directly from natural gas is an input material of urea production.
The capacity of its ammonia plant is about 450,000 tons/year, which is totally used to
produce 800,000 tons of urea annually. At present, Vietnam must import about
100,000 tons of ammoniac annually, thus demand of ammoniac is quite high and
DPM can flexibly transfer between urea and ammoniac products as long as it’s
generating a better profit.
The profit margin of ammonia is higher than urea, but a small amount is sold each
year. In the future, if the urea supply surplus in Vietnam continues put pressure on
decreasing urea prices in Vietnam, DPM may consider reducing the proportion of
urea production volume and increasing ammonia volume accordingly.
Other products
Including packaging products and electricity
Packaging products are produced by Dam Phu My Packaging JSC – a subsidiary of
DPM. Total designed capacity is 46 million units per year. DPM produced 49.5 million
units in 2014, and expects to produce up to 53.2 million units per year from 2015. At
present, DPM only uses half of its production volume and the rest is sold to other
companies which generate a marginal profit for DPM.
Electricity is a product created from production process of urea. DPM owns an
electricity plant with a capacity of 21 MW which can produce electricity for internal
use with a small amount designated for outside sales.
GAS MAKES UP ABOUT 70% UREA PRODUCTION COST

Urea production costs include gas input – natural gas, labor cost, depreciation and
Gas accounts for 70% of
urea production costs while other materials such as catalytic materials of which about 70% of the proceeds come
depreciation only makes up from the input of gas.
a small portion of 6%.
Depreciation only makes up a small portion of about 6% in total production costs.
DPM’s factory was built up in 2004 and its fixed assets have almost been fully
depreciated. Current depreciation expense proceeds from new fixed assets that the
company added over years to operate its business. As of December 31, 2014, about
85% of fixed assets have been fully depreciated.
Cost structure of urea production Cost structure in 2014

Input gas Depreciation
Labor cost Others
100%
Others 18%
80%
Labor cost
8%
60%
Depreciation Input gas ,
40% 6% 68%
20%
0%
2011 2012 2013 2014
Source: VBPS’s calculation
Input gas was provided by Petrovietnam Gas Joint Stock Corporation (PVGas) from
Bach Ho oil field (Cuu Long basin) and Nam Con Son Basin. Demand of input gas is
from about 500 million cubic meters for producing 800,000 tons of urea per year.
DPM had previously Since DPM is a subsidiary of PVN, the company has bought natural gas from PVGas
purchased natural gas from its
sister company PVGas at a
with favorable prices. DPM also receives special favors from Vietnam’s government
favorable price but subsidies as the company must perform its social responsibility to stabilize the supply and
are being removed. price of fertilizer in Vietnam.
The subsidy for input gas from PVN has being cut and the input gas price has
increased steadily regardless of market price over the years. From April 1, 2014, DPM
must apply a gas price linked to a market benchmark using a specific formula.
Compare input gas price and crude oil price Gas input price
WTI crude oil price Gas price From April 01, 2014 to December 31, 2014:
140 8
USD/MMBTU
P = Pn + Tp = 46% * MFO + 0.63 (USD/MMBTU)
USD/barrel
120 7
100 6
- P: Input natural gas price (USD/MMBTU) (not including VAT)
80 5
- MFO: monthly average FO oil price traded on Singapore
60 4 exchange according to Platt’s magazine.
40 3 - Tp: transportation cost equal to USD0.63 per MMBTU.
20 2
0 1
2008 2009 2010 2011 2012 2013 2014
WTI crude oil price Gas price From January 01, 2015 to December 31, 2015:
140 8
USD/MMBTU
USD/barrel
120 7 P = Pn + Tcl = 46% * MFO + 0.92(USD/MMBTU)

100 6
80 5 - P: Input natural gas price (USD/MMBTU) (not including VAT)
60 4 - MFO: monthly average FO oil price traded on Singapore
exchange according to Platt’s magazine.
40 3
- Tcl: transportation cost equal to USD0.92 per MMBTU (only
20 2 apply for gas bought from Cuu Long basin). This cost will
0 1 annually increase by USD0.02 per MMBTU from 2016 to 2019.
Source: DPM, Bloomberg, VPBS
HIGHEST SELLING PRICE BUT LOWEST PRODUCTION COST

Among urea producers in Vietnam, DPM has the lowest production cost thanks to
Lowest production cost
thanks to low depreciation. lower depreciation costs. As mentioned above, DPM’s factory was built in 2004 and is
almost fully depreciated. Meanwhile, DCM built its plant in 2012 with higher
investment costs (nearly double the amount) for the same technology and capacity.
Other local urea plants are also quite new and suffer high depreciation expenses: The
Ninh Binh urea plant was built in 2012 and the Ha Bac expansion factory was
completed at the end of 2014.
DPM and DCM are two gas-based urea factories while Ha Bac and Ninh Binh are coal-
based factory. In general, gas-based factories require lower investment capital but
higher input material costs.
Production cost of urea plants in Vietnam
Dep. and
Investment Depreciation Demand of Feedstock % compared
Company Capacity Feedstock material
cost expense/ ton material cost/ ton to DPM
cost
(USD million) Tons/year (USD/ton) (USD/ton) (USD/ton)
DPM 397 800,000 50 Gas 500 million m3 127 127(*) 100.0%
DCM 779 800,000 97 Gas 500 million m3 127 225 177.0%
Ninh Binh 667 560,000 119 Coal 470,400 tons 84 203 160.1%
Ha Bac 568 320,000 178 Coal 268,800 tons 84 262 206.0%
Assumption:
- Depreciation period is 10 years.
- 1 ton Urea need 0.84 ton coal
(1 ton ammonia need 1.3 – 1.7 ton coal - source: China Coal Research Institute 9/2011; 1 ton ammonia need 1.45 ton coal – source:
1 ton urea need 1.45 tons coal – source: “New KPR process for coal to ammonia” – reported by KPR company in 11/2008; 1 ton
urea = 0.58 ton ammonia)
- Gas price : 5.63USD / MMBTU (estimated gas price of DPM in 4Q-2014)
- Coal price: VND2,150/kg ; coal price class 3c at nangluongvietnam.vn
- (*) excluding depreciation expense as DPM plant is fully depreciated. Value including depreciation expense is USD177 per ton urea
Source: Company report, VPBS
But highest selling price Thanks to a good marketing strategy and a solid distribution network, DPM has sold
urea at a higher price than other urea products over the years.
Local urea price comparison (price including VAT)
Urea DPM Urea DCM Urea China
12,000
VND/kg
11,000
10,000
9,000
8,000
7,000
1/2012 4/2012 7/2012 10/2012 1/2013 4/2013 7/2013 10/2013 1/2014 4/2014 7/2014 10/2014
Source: Binh Dien Fertilizer JSC, An Giang Ministry and Trade Department, VPBS
BIGGEST THREAT FROM CHINA UREA

Chinese urea is putting more Despite a strong competitive advantage in the local market, DPM hardly beats import
pressure on decreasing products in terms of selling price. Import taxes imposed on urea products has
prices of domestic urea.
increased from 3% to 6% since September 2014 to support local production; however
imported products are still cheaper than local products.
In comparison with other urea plants around the world DPM’s urea is very
competitive in terms of cost. In 2013, its cash production cost was even lower than
the production cost of Chinese coal-based urea producers (coal-based urea producers
set the global market’s floor price, as explained in the industry overview section).
This advantage is mostly thanks to subsidies from gas input prices but has been
removed since 2014. In 2014, coal prices in China decreased by over 20%, leading to
significant cash production costs of coal-based urea while such costs were nearly
unchanged for DPM. Another thing to consider is that almost all of China’s urea
producers have lower profitability than DPM (please refer to the evaluation section –
comparable multiples for more detail), thus even if there is no difference in urea
production costs between Vietnam and China, Chinese companies are still willing to
sell their products with a lower price than DPM, leading to downward pressure on
urea prices of DPM.
Global urea cash cost by countries (late 2013)
400
Gas/coal cost Other cash cost
350
300
DPM cash cost per ton urea
250
200
150
100
50
0
W. Canada U.S Gulf DPM DPM China Gas China Soft China W. Europe Ukraine Ukraine W.Europe
Est.2014 Coal Anthracite (USD10 (USD12 (USD13
(USD2.85 (USD3.6 (USD (USD6.78 (USD10
/MMBTU /MMBT 6.56 /MMBTU /MMBTU /MMBTU /MMBTU /MMBTU
U gas) /MMBTU gas) gas) gas) gas) gas)
gas) Source: Fertecon, Agrium Inc, CRU Group, VPBS
Decreasing VAT from 5% to 0% for fertilizer products from 2015 will
burden local companies. From 2015, the VAT for fertilizer products will decrease
from 5% to 0%; however this VAT amount is currently used to deduct the VAT of
input materials. When removing this VAT rate, DPM’s production cost will increase
by this amount. On another hand, this new regulation has no effect on imported urea,
thus reducing competitiveness of local urea producers including DPM.
FUTURE PROJECTS: DRIVING FUTURE GROWTH

Projects in pipeline
Construction
Project Capacity (per year) Investment cost Status Profitability
length
Expansion Expected to sign EPC contract in IRR: 15.2%
Ammonia: 90,000 tons USD191 million 28 months
ammonia plant Q1/15, put into operation in 2017 ROE: 26.6%
Expected to sign EPC contract in IRR: 15.2%
NPK plant NPK: 250,000 tons USD53 million
Q1/15, put into operation in 2018 ROE: 26.6%
Signed EPC contract. Begin to
construct from Oct. 2014. Expect
NPV: VND120 billion;
UFC85: 15,000 tons or to complete in Feb 2016.
UFC85/formalde IRR: 14.6%; payback
Formaldehyde: 25,000 USD22 million 16 months 2014: disbursed 30%; 2015: will
hyde plant period: 7 years.
tons disburse 70%.
Gross margin: 30%
Customer: Ninh Binh fertilizer
(UFC85); DCM: (formaldehyde)
H2O2 plant 30,000 tons USD20 million EPC tendering phase
Nitra ammonium 450,000 tons NH3 &
USD900 million Still study
/Ammonia plant 200,000 tons NH4NO3
Source: DPM
DPM is operating with a maximum capacity and urea prices are now on a downward
trend leading to negative potential growth of revenue. In order to overcome the
pessimistic situation of its main business, DPM has been setting plans for its new
business to create a new growth force for the future. Specifically, the company will
expand its chemical business and NPK production.
Chemical business will steadily improve profitability of the whole

company: At present, DPM has four chemical projects in the pipeline, of which only
UFC85/formaldehyde project has already been constructed since October 2014 and is
expected to be completed in February 2016. Another project that we believe will
soon be implemented is the expansion of the ammonia plant; this plant will produce
ammonia material for NPK’s plant. At present, except for the urea business, most
other revenues are derived from imported trading fertilizers and this business
segment has very low gross profit margins (from 2-5%) while the chemical business
must have higher margins (the company expected that the net profit margin before
tax for this business is 12.8% in 2015). Thus we believe that the chemical business
will improve DPM’s profitability albeit slowly because so far this segment only
contributes a marginal portion to total revenue.
NPK project focuses on high quality products: At present, NPK production

already outpaces its demand in Vietnam, however almost NPK products in Vietnam
are produced by small companies with simple-hand mixing methods and their
products are low quality. NPK projects of DPM will apply chemical technology that is
the most advanced NPK production technology in the world and currently there is no
NPK plant applying this technology in Vietnam. So far we cannot evaluate how much
this project can add to shareholders’ value but we believe that when the project is
finished it will improve profitability of the company by replacing imported fertilizer
products. DPM can save a lot of costs from developing its distribution channels and
marketing business as they can exploit current wide distribution channels and their
NPK brand name is already available on the market.
FINANCIAL PERFORMANCE
GROWTH AND PROFITABILITY
Revenues on fairly growth but net profits face a slight downwards
Over a period from 2009 to Over the period from 2009 to 2014, net revenues have experienced a modest growth
2014, revenues have grown
with a CAGR of 7.6% but are with a CAGR of 7.6% while growth of urea revenue – DPM’s main business – attained
currently facing a downward a marginally better growth of 10.3%. The capacity upgrade by the end of 2010
trend.
significantly added to revenue growth. In 2012, revenues achieved their highest level
as urea selling amount and price were recorded at their peaks while the company
traded urea products of Petrovietnam Camau Fertilizer Company (DCM). After 2012,
revenues have decreased gradually due to reductions in trading DCM urea and the
falling of urea selling prices.
We saw a similar trend in DPM’s net profits which obtained a dramatic growth over a
period from 2009 to 2011 but then underwent a sharp decline from 2012 to 2014 due
mostly to steady declines in urea prices and significant increases in input gas prices.
Revenue and net profit Urea selling volume and price

Urea revenue Others Net profits Urea selling amount Urea selling price
15,000 1,000 10,000
VND/kg
Thousand ton
VNDbn
12,000 800 8,000
9,000 600 6,000
6,000 400 4,000
3,000 200 2,000
0 0 0
2009A 2010A 2011A 2012A 2013A 2014(*) 2009A 2010A 2011A 2012A 2013A 2014E
Source: DPM, VPBS Source: DPM, VPBS
Reduction in depreciation As previously mentioned, gas accounts for around 70% of urea production costs and
expense cannot fully compensate
for surges in gas expense.
is highly correlated to DPM’s net profits. Depreciation used to consume the biggest
portion in total production costs but it has been reduced dramatically since 2010.
However, the reduction in depreciation cost cannot compensate for the rising of gas
expenses. Gas expense has climbed significantly, which has led to a decrease in
DPM’s gross margin over the years.
Cost structure over years

Input gas expense Depreciation
Input gas expense/ revenues Depreciation/revenues
35% 3,000
VNDbn
28% 2,400
21% 1,800
14% 1,200
7% 600
0% 0
2009A 2010A 2011A 2012A 2013A 2014E
Source: DPM, VPBS’s estimates
And obviously profit margins Urea selling price has been on a downward trend since 2012 while gas price was
fell. inflated, consequently leading to a sharp decrease in DPM’s profit margins. In the
period from 2009 to 2014, EBIT margin always ran below the NPBT margin, due to
high annual income from deposit interests (about 25% to NPBT in 2014).
In 2014, net profit margin even decreased more severely not only due to drops in
selling urea prices and escalations in gas prices but also from changes in other
operating factors.
 The proportion of selling expenses in revenues climbed from 6.1% in 2013 to

about 7.4% in 2014 (unaudited data) due to tight transport regulations that came
into effect from April 1, 2014. This led to a drop in traffic flow and increasing
transportation costs.
 Other reasons were contractions in financial income due to falling deposit
interest in 2014 and big losses from associates – PVTEX when this company
officially came into operation (as explained above).
Profit margin DPM urea selling price and input gas price
Gross profit margin EBIT margin NPBT margin Urea selling price Gas price (USD/MMBTU)
50% 10,000 10
VND/kg
USD/MMBTU
9,000 9
45%
44% 8,000 8
40%
38% 7,000 7
35% 36% 6,000 6
33% 32% 32%
30% 30% 5,000 5
29%
27% 4,000 4
25% 25% 25% 25%
23% 3,000 3
20% 21% 23% 21%
2,000 2
15% 13% 1,000 1
12% 0 0
10%
2009A 2010A 2011A 2012A 2013A 2014(*) 2009A 2010A 2011A 2012A 2013A 2014E
(*): Unaudited; Source: DPM, VPBS
Moderate growth in total assets and equity
Total assets and equity From 2009 to 2014, total assets and owners’ equity attained a moderate growth with
attained a moderate growth a CAGR of about 9.7 percent and 9.9 percent, respectively, but almost all of the
but was nearly unchanged
over the last four years. increase came in 2011 and 2012 and even slightly decreased in 2014. In 2011, DPM
completed its head office buildings with a total investment value of VND912 billion
(USD42.5 million). Besides 2011 and 2012, DPM has achieved good business results
leading to high value of cash-on-hand and also contributing to the growth of assets
and owner’s equity.
In the assets structure, current assets make up about 70 percent, this proportion has
climbed slightly over the years as the value of fixed assets has decreased due to
depreciation. In terms of equity structure, the value of share capital and retained
earnings are highly stable over years and most of the increase in shareholders’
equity proceeded from other equity that is the value of investment & development
funds and financial reserve funds.
Total assets Shareholder’s equity
Current assets NonCurrent assets Share capital Retained earnings Other equity
12,500 10,000
VND billion
VND billion
10,000 8,000
7,500 6,000
5,000 4,000
2,500 2,000
0 0
2009A 2010A 2011A 2012A 2013A 2014(*) 2009A 2010A 2011A 2012A 2013A 2014(*)
2014 efficiency at the lowest ROA and ROE reached their highest level in 2011, then they suffered a gradual
level within the last six years downward trend. Such ratios even lessened more in 2014 with a ROA of 10.9 percent
and a ROE of 12.1 percent. While the financial structure of DPM is highly stable with a
very small amount of borrowings and total assets/equity ratio that has been nearly
unchanged at 115 percent over the period from 2009 to 2014, the main driving keys
for the reduction in profitability are falling in both assets turnover and net profit
margin. As mentioned above, DPM has undergone an escalation in gas price and a
decline in urea selling price after 2011 that has reduced revenue and net profits of
DPM over the period from 2012 to 2014.
ROA and ROE Dupont analysis
ROA ROE Asset turnover Asset/Equity Net profit margin

50% 150%
37.6%
40% 120%
30.9%
30% 23.4% 24.8% 90%
21.1%
20% 60%
10.9% 33.6%
20.3% 25.7% 22.6% 21.4%
10% 43.1% 35.1% 30% 11.5%
26.5% 29.2% 24.2%
12.1%
0% 0%
2009 2010 2011 2012 2013 2014(*) 2009A 2010A 2011A 2012A 2013A 2014(*)
LIQUIDITY AND SOLVENCY
Low financial leverage
Almost all of DPM’s assets are financed by the owners’ equity and liabilities
accounted for only 10.9 percent of total assets as of December 31, 2014. The ratio has
fluctuated through the years but has always hovered at a low level. In terms of
liabilities structure, borrowings only contributed a very small portion and as of
December 31, 2014 total borrowings came in at VND94.6 billion equal to about 0.9
percent of total assets and almost all of DPM’s loans are borrowed by its subsidiaries.
High liquidity ratios

DPM has very high liquidity ratios thanks to its low financial leverage, high value of
cash-on-hand and stable business.
Liquidity and solvency ratios

2009A 2010A 2011A 2012A 2013A 2014(*)
Current ratio 6.3 x 5.2 x 7.0 x 5.2 x 6.1 x 6.9 x
Quick ratio 5.2 x 4.4 x 5.5 x 4.2 x 4.9 x 5.3 x
Total liabilities/Total assets 13.3% 16.0% 9.5% 13.4% 11.6% 10.9%
Total borrowings/Equity 4.4% 5.3% 0.1% 0.4% 0.7% 1.1%
EBIT/Interest expense 90.2 x 196.5 x 109.0 x 1,945.5 x 662.3 x 394.2 x
EBITDA/ Total borrowings 10.0 x 7.0 x 350.9 x 89.1 x 35.3 x 15.0 x
FORECAST ASSUMPTIONS
Selling volumes
2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Urea product (thousand tons)
Selling amount 753 909 835 840 822 845 822 845 822
Production amount 802 856 822 845 822 845 822 845 822
Ammonia (thousand tons) 15 0 15 0 15 0
Other fertilizers 291 538 362 380 339 339 339 339 339
Urea product
DPM must frequently maintain its plant, its last maintenance was in 2013 and the
company plans to conduct its next maintenance in 2015, thus we assume that DPM
conducts scheduled maintenance on a two-year time frame. We expect that
production volume will be 845,000 tons of urea when DPM operates normally and
822,000 tons when it conducts maintenance.
DPM shoulders the partial responsibility of keeping the urea market in Vietnam stable
and it must supply sufficient volume of urea for the local market. We assume,
therefore, that when DPM conducts its maintenance on its urea plant, the company
will have no sales from residual ammonia.
Trading other fertilizers
In 2014, DPM traded about 380,000 tons of other fertilizers (excluding urea). In 2015,
the company plans to trade 339,000 tons, and we assume that this amount will be
kept unchanged during the forecast period.
Selling price
Per our analysis in the Outlook Section, we estimate that DPM’s urea price will
decrease 12 percent in 2015 and 6 percent in 2016, and then remain unchanged at
this level.
Input gas price
2014 2015F 2016F 2017F 2018F 2019F

Average crude oil price, WTI
93.26 54.58 65.00 65.00 65.00 65.00
(USD/barrel)
Average FO oil price (USD/ton)
557.58 326.32 388.62 388.62 388.62 388.62
(Singapore market, according to Platts)
Transportation cost (USD/MMBTU) 0.63 0.92 0.94 0.96 0.98 1.00
Gas price (USD/MMBTU)
6.78 4.62 5.34 5.36 5.38 5.40
(excluding VAT)
% change y-o-y -31.94% 15.72% 0.37% 0.37% 0.37%
According to projections of the U.S. Energy Information Administration dated

January 13, 2015, the average price of WTI crude oil will be USD54.58/barrel in 2015,
down 41.48% from USD93.26/barrel in 2014. Based on this projection, we structure
our forecast with the assumption that the average WTI crude oil price will be at 54.58
USD/barrel in 2015. However, we believe that oil prices are currently very low and
will rebound, thus we apply a price assumption of 65 USD/barrel from 2016 to 2019.
Gross profit margin of other businesses

We estimate that gross profit margin of other products increased from 3.2% in 2013
to about 5.3% in 2014, thanks to an increasing proportion of chemical business which
has brought higher profit margins than trading fertilizer. We forecast that this trend
will continue as more revenue from the chemical business will be added in 2015. We
expect that gross margin of other businesses will climb to 5.5% in 2015 and remain
unchanged for the next four years.
Selling and general & administrative expenses (SG&A expenses)
(*): Unaudited 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F
Selling expenses/revenues 5.3% 4.8% 6.1% 7.3% 6.0% 6.5% 6.5% 6.5% 6.5%
GA expenses/revenues 5.4% 5.1% 5.3% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
As explained above, in 2014 due to tight transport regulations that came into effect
on April 1, 2014, traffic flow has stagnated and transportation costs have increased.
Thus the selling-expense-to-revenue ratio increased significantly in 2014. In 2015,
although these regulations will continue to burden DPM, thanks to current low oil
prices, we expect that DPM’s selling-expense-to-revenue ratio will decrease
considerably. However, we expect that oil price will rebound significantly from 2016
and will raise this ratio from 2016 onwards.
Conversely, GA expense-to-revenue ratio is forecasted to be at the same level of 6
percent as 2014’s ratio.
Working capital demand and borrowings
We expect DPM’s shortage period of about 68 days and DPM will maintain its low
financial structure during the forecast period.
2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Inventory DOH (days) 85 49 72 79 79 79 79 79 79
Receivable DOH (days) 12 4 6 10 10 10 10 10 10
Payable DOH (days) 24 25 39 22 22 22 22 22 22
Shortage period (days) 72 27 39 68 68 68 68 68 68
Working capital demand (VND billion) 1,029 672 768 1,327 1,144 1,252 1,196 1,247 1,210
Short-term bank loan (VND billion) 9 28 65 94 80 88 84 87 85
% short-term loan/ Working cap demand 0.9% 4.1% 8.5% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%
Financial income and expenses
Low borrowings and high cash Financial income consists mostly of interest income. Because DPM holds a high value
balances mean that the recent of cash and cash equivalents, the fluctuation of deposit interest rates will markedly
decline in interest rates has hurt
profitability. affect the company‘s financial income. Currently, the three month deposit interest
rate at PVcombank where DPM maintains a close working relationship is 5.1 percent,
thus we apply this rate as an average deposit rate from 2015 to 2018.
Gain/loss from associates

Value of DPM’s investment in PVTEX valued at VND198 billion as of December 31,
2014, in which it suffered a big loss in 2014. However, we believe that the loss will
diminish as we explained previously.
Investment in PVTEX 2013 2014 2015F 2016F 2017F 2018F 2019F
Investment value 452 198 99 69 62 62 62
Income from PVTEX (*) 11 -281 -99 -30 -7 0 0
ROI 2.5% -62.1% -50.0% -30.0% -10.0% 0.0% 0.0%
(*): estimated by VPBS
Project in pipeline
At present, DPM has a total of five projects in its pipeline, however, it is our view that
only the UFC85/formaldehyde plant is likely to come to fruition. Due to a lack of
information about the product market, price and input material we cannot precisely
estimate the added value to shareholders from this project. DPM estimates the NPV
of this project to be VND102 billion. If successful, this project will add about VND268
per share (about 0.9% to target stock price of VND30,600), we believe this amount is
not significant. We maintain our neutral view on this project and we have not
calculated this project in our evaluation.
For the NPK plant and expansion ammonia plant project, we note it has been delayed
since 2013 and so far DPM has not yet signed any EPC contracts. Further, the
investment capital requirements for these projects is huge (about USD244 million).
We anticipate collecting more detailed data when DPM updates new information
about these projects before adding them into our evaluation.
Tax rate
DPM applies two separate income tax schemes, consisting of 15% for its main
business of urea production and 22% for its other business. For the urea production
business, DPM has an exempted income tax rate within four years from the first year
that the company generates a positive profit (2004). Afterwards the company is
subject to a 50% tax reduction for the next seven years. 2014 is the last year that DPM
can apply such a tax reduction policy. From 2015, the tax rate will be 15% for its urea
production business.
VALUATION
Based on the discounted cash flow (DCF) and comparable multiples methods, we
derive a target price for DPM at VND30,600 per share.
Valuation method (VND/share) Weighting

DCF 25,894 50%
P/E 32,111 25%
EV/EBITDA 38,646 25%
Target price (VND/share) 30,600
We believe that DPM currently has a stable business and its cash flow is steady, thus
we apply our highest weighting of 50% utilizing the DCF method. The weighting is
equally applied with 25% for P/E and the EV/EBITDA method.
DISCOUNTED CASH FLOW

The fair price derived from our DCF model is VND25,894 per share and includes the
following assumptions:
Cost of Equity
5-year government bond yield 5.3%
Beta one year 0.94
Market risk premium 8.86%
Cost of equity 13.6%
Cost of Debt
Long-term interest rate 7.8%
Effective tax rate 17.0%
After tax cost of debt 6.5%
WACC
Current share price (VND/share) 31,700
Number of shares (million) 379.93
Market capitalization 12,043.92
Debts 94.65
WACC 13.58%
Terminal growth rate 0.0%
DPM’s sales and profits have decreased significantly in recent years. The company
is now operating at its maximum capacity. In addition, urea selling price is on a
downward trend, thus we believe that the potential growth for DPM’s profitability
after 2019 will be minimal unless other major projects are put into operation.
Accordingly, in our DCF model, we assume that terminal growth rate after 2019 will
be nil.
COMPARABLE MULTIPLES
The number of companies that have similar business lines with DPM is very limited
in Vietnam. Petrovietnam Camau Fertilizer Company Limited is a good comparable
peer, however, this company is not yet listed. Thus we designate other regional
companies as part of our comparison. We especially lean towards urea companies in
China as Vietnam’s urea market is highly affected by the Chinese market. We also
add relative ROA and ROE into our comparison because we believe that ROA and
ROE are highly varied among markets due not only to differences in companies’
internal business factors but also other macro factors such as interest and inflation
rates which affect return ratios of the entire market.
In 2013, DPM enjoyed the better profitability in comparison with local and regional
peers, however, in 2014 the business result of DPM became worse and its
profitability were no longer better than its local peers. We believe that Vietnam’s urea
market is highly affected by urea imported from China and Chinese urea
manufacturers with low-profit margins will inevitably usher in more competition in
terms of urea prices and put pressure on DPM’s profits in the future.
Peer comparison
EPS
Market ROA ROE P/E EV/EBITDA
Company BB code Main products growth P/B
cap
LTM LTM Rel. LTM Rel. LTM Rel. LTM Rel.
Regional peers USDmn % % x % x % x % x x
Ammonia, urea, nitramine,

Yunnan Yuntianhua Co.,
600096 CH pentaerythritol, sodium 2,291 68.80 N/M N/A N/M N/A N/A N/A N/A N/A 2.19
Ltd.
formate, and polyformaldehyde
China Blue Chemical Ltd. 3983 HK Ammonia and urea 1,855 -37.50 6.39 3.44 8.29 0.58 10.10 0.96 3.33 0.34 0.83
Luxi chemical Group Co Urea, synthetic ammonia, and
000830 CH 1,312 2.23 1.87 0.64 5.86 0.63 24.62 0.59 N/A N/A 1.39
Ltd ammonium acid carbonate
Urea, ammonium acid
Sichuan Meifeng
000731 CH carbonate, melamine, and 924 N/A N/M N/A N/M N/A N/A N/A N/A N/A 2.16
Chemical Industry
liquefied ammonia
Chambal Fertilizers and Ammonia, urea, pesticides and
CHMB IN 445 2.44 2.92 0.92 12.49 0.77 11.26 0.55 10.65 0.88 1.34
Chemicals Ltd other agricultural applications
Ammonia/urea, formic acid and
Rashtriya Chemical and
RCF IN carbon dioxide and hydrogen 612 -11.72 4.19 1.33 9.97 0.62 15.70 0.76 8.62 0.71 1.52
Fertilizers Ltd.
peroxide
Fauji Fertilizers Bin
FFBL PA Granular urea and DAP 502 -28.45 9.63 2.38 29.91 1.48 12.72 1.17 6.93 0.94 3.91
Qasim Ltd.
Average -0.70 5.00 1.74 13.30 0.82 14.88 0.81 7.38 0.72 1.91
Median -4.75 4.19 1.33 9.97 0.63 12.72 0.76 7.77 0.80 1.52
Local peers
Petrovietnam Camau Fertilizers, especially granular
N/A N/A N/A 3.50 1.0 x 15.60 1.1 x N/A N/A N/A N/A N/A
Fertilizer Co Ltd urea
Lam Thao Fertilizers &
LAS VN Phosphorus, chemicals 117 N/A 16.15 5.83 30.25 2.06 5.71 0.43 4.19 0.44 1.68
Chemicals JSC
Average 8.09 3.41 15.21 1.55 5.71 0.43 4.19 0.44 1.68
Petrovietnam Fertilizer Fertilizers, especially prilled
DPM VN 554 -50.50 10.86 3.9 x 12.11 0.8 x 11.0 x 0.82 4.21 0.44 0.71
and Chemical JSC urea
(*) ROA, ROE, P/E and EV/EBITDA of DPM are 2014E’s numbers
Data as of February 27, 2015. Source: Bloomberg, VPBS
DPM’s ROA, ROE ratios are just slightly higher than its regional peers. We derive
DPM’s target P/E and EV/EBITDA at 10.9x and 6.8x, respectively, based on its regional
peers.
DPM’s stock price
Valuation method Relative VN-Index Target
(VND/share)
P/E 0.81 13.4x 10.9x 31,111
EV/EBITDA 0.72 9.5x 6.8x 38,646
SENSITIVITY ANALYSIS
Sensitivity of WACC and terminal growth rate to target stock price
WACC
10% 11% 12% 13% 14% 15% 16% 17% 18%
5% 37,600 35,600 34,200 33,100 32,600 31,500 31,000 30,500 30,100
4% 35,900 34,400 33,300 32,400 32,000 31,200 30,700 30,300 29,900
Terminal growth rate

3% 34,700 33,600 32,700 31,900 31,600 30,800 30,400 30,000 29,700
2% 33,800 32,900 32,100 31,500 31,200 30,600 30,200 29,800 29,600
1% 33,100 32,400 31,700 31,200 30,900 30,300 30,000 29,700 29,400
0% 32,600 31,900 31,400 30,900 30,600 30,100 29,800 29,500 29,300
-1% 32,100 31,500 31,000 30,600 30,400 29,900 29,700 29,400 29,200
-2% 31,700 31,200 30,800 30,400 30,200 29,800 29,500 29,300 29,100
-3% 31,400 31,000 30,600 30,200 30,000 29,600 29,400 29,200 29,000
-4% 31,100 30,700 30,400 30,100 29,900 29,500 29,300 29,100 28,900
-5% 30,900 30,500 30,200 29,900 29,800 29,400 29,200 29,000 28,800
Sensitivity of 2015 product selling price and gas price to target stock price
2015 selling price (% y-o-y change and USD/ton)

-30% -25% -20% -15% -12% -10% -5% 0% 5%
(% y-o-y change and USD/MMBTU)
244 261 279 296 307 314 331 349 366

20% 5.54 9,000 13,800 18,500 23,300 26,100 28,100 32,800 37,600 42,300
15% 5.31 10,100 14,900 19,700 24,400 27,300 29,200 33,900 38,700 43,400
2015 gas price
10% 5.08 11,300 16,000 20,800 25,500 28,400 30,300 35,100 39,800 44,600
5% 4.85 12,400 17,100 21,900 26,700 29,500 31,400 36,200 40,900 45,700
0% 4.62 13,500 18,300 23,000 27,800 30,600 32,500 37,300 42,100 46,800
-5% 4.39 14,600 19,400 24,100 28,900 31,800 33,700 38,400 43,200 47,900
-10% 4.16 15,800 20,500 25,300 30,000 32,900 34,800 39,500 44,300 49,100
-15% 3.92 16,900 21,600 26,400 31,100 34,000 35,900 40,700 45,400 50,200
-20% 3.69 18,000 22,800 27,500 32,300 35,100 37,000 41,800 46,500 51,300
Sensitivity of oil price from 2016 to 2019 to target stock price

Oil pirce (USD/barrel)
40 45 50 55 60 65 75 80 85 90 95 100
36,100 35,000 33,900 32,800 31,700 30,600 28,500 27,400 26,300 25,200 24,100 23,000
TECHNICAL ANALYSIS
The technical chart showed that DPM has fluctuated widely between VND29,000 and
September’s peak of VND34,000 after falling sharply from this level. In its weekly
chart, these levels are also the upper and lower bound of the mid-term sideways
range, within which DPM has been confined for almost a year.
The current accumulation below VND32,000 following consistent rising sessions
proved that this was a strong resistance level for DPM. With trading volume recently
remaining at only average to low level, the prospects for a breakout of the sideways
channel are quite poor. We expect that DPM could test the lower band of this channel
at around VND29,000.
Given the current circumstances, we recommend a HOLD for DPM at the time of
publishing this report.
As of February 27, 2015 (VND/share)
Horizon analytic 3 to 6 months
3-month highest price 33,200
3-month lowest price 28,800
Current MA200 days 31,400
Current MA20 days 31,200
Mid-term resistance level 34,000
Mid-term support level 29,000
Recommendation HOLD
CONCLUSION
We believe that the fertilizer industry in general and the urea sector in Vietnam in
particular are now reaching the mature stage of their life cycle. Fertilizer demand is
now facing slow growth due to sluggish expansion of planted areas and current high
levels of fertilizer usage. In addition, urea production has already outpaced its
demand in Vietnam thus ushering in pressure on decreasing urea prices and
reducing the profitability of urea producers, including DPM.
In addition to the downward trend of urea prices, rising gas prices in recent years is
also a main reason that DPM’s profitability has been reduced since its peak in 2011.
Since April 2014, DPM has begun to apply its input gas price based on market
benchmarks. Accordingly, the company’s profitability is likely to be more unstable in
the future once it is linked to fluctuations in oil prices.
Although DPM’s business environment is becoming more difficult in the long term, in
the short- and medium-term we believe that DPM will enjoy favorable business
results. Current low oil prices will sharply reduce the company’s production costs
and we predict that the effect from the decline in oil prices will ultimately trump the
otherwise adverse effects experienced from falling urea prices.
In our evaluation, apart from the DCF method on which we place the highest
weighting of 50%, we also use the P/E and EV/EBITDA method to calculate a fair
value for DPM. We recognize that price using comparable multiples method is a little
bit higher than DCF method as Vietnam market is now undervaluing urea companies
in comparison with other regional markets. We believe that the gap will be corrected
in the near future leading to an appreciation in stock price of DPM.
All factors considered, we adopt a long term HOLD recommendation for DPM stock
with a target price of VND30,600 per share.
Appendix 1: VPBS projection
Income Statement (VND billion) 2011A 2012A 2013A 2014* 2015F 2016F 2017F 2018F 2019F
Revenue
1. DPM Ure 6,401 8,164 7,067 6,282 5,410 5,228 5,085 5,228 5,085
Growth rate 28% -13% -11% -14% -3% -3% 3% -3%
2. Trading fertilizer 2,782 4,591 3,116 2,660 2,373 2,373 2,373 2,373 2,373
Growth rate 65% -32% -15% -11% 0% 0% 0% 0%
3. Others 44 566 181 606 599 747 599 747 599
Growth rate 1186% -68% 235% -1% 25% -20% 25% -20%
Net Revenue 9,227 13,322 10,363 9,549 8,382 8,348 8,058 8,348 8,058
Growth rate 39% 44% -22% -8% -12% 0% -3% 4% -3%
Cost of Goods Sold

1. DPM Ure 2,675 3,790 3,821 4,027 3,331 3,771 3,610 3,744 3,683
CGS % of segment revenue 42% 46% 54% 64% 62% 72% 71% 72% 72%
2. Trading fertilizers and others 2,516 5,207 3,190 3,094 2,809 2,949 2,809 2,949 2,809
CGS % of segment revenue 89% 101% 97% 95% 95% 95% 95% 95% 95%
Depreciation in CGS 190 213 250 269 273 276 178 181 184
Cost of Goods Sold (excluding depreciation) 5,001 8,785 6,762 6,852 5,867 6,444 6,241 6,511 6,308
Gross Profit 4,225 4,537 3,602 2,696 2,515 1,904 1,816 1,836 1,750
Gross Profit Margin 46% 34% 35% 28% 30% 23% 23% 22% 22%
Total Selling Expenses 493 637 635 702 503 543 524 543 524
% sales 5.3% 4.8% 6.1% 7.3% 6.0% 6.5% 6.5% 6.5% 6.5%
Total General & Admin Expenses 503 674 552 571 501 499 481 499 481
% sales 5% 5% 5% 6% 6% 6% 6% 6% 6%
Income from Affiliated Companies 11 (48) (36) (280) (99) (30) (7) - -
EBITDA 3,241 3,179 2,379 1,144 1,413 833 804 795 745
EBITDA Margin 35% 24% 23% 12% 17% 10% 10% 10% 9%
Depreciation 190 213 250 269 273 276 178 181 184
EBIT 3,050 2,966 2,130 875 1,140 557 627 614 561
Financial income 527 568 429 407 263 267 256 258 256
Financial expenses 74 7 8 5 8 8 8 8 8
Interest Expense 28 2 3 3 4 4 4 4 4
Net Financial Income (Expense) 453 561 421 402 255 259 248 250 248
Other Income 7 15 13 7 6 6 6 6 6
Pretax Income 3,510 3,542 2,563 1,284 1,401 822 881 870 815
Income Tax Expense 370 474 311 149 238 135 144 143 134
Effective Tax Rate 10.53% 13.39% 12.14% 11.57% 16.96% 16.40% 16.40% 16.40% 16.40%
Profit after tax 3,141 3,068 2,252 1,136 1,163 688 736 727 681
Minority Interests 36 51 37 38 39 23 25 24 23
Net Income 3,104 3,017 2,215 1,097 1,124 664 711 703 659
Net Profit Margin 34% 23% 21% 11% 13% 8% 9% 8% 8%
Average Number of Shares (million) 378 378 380 380 380 380 380 380 380
EPS (VND) 8,220 7,989 5,837 2,888 2,958 1,749 1,872 1,850 1,733
Dividends Per Share (VND) 3,500 4,500 5,000 2,500 2,500 2,000 2,000 2,000 2,000
Balance Sheet (VND billion) 2011A 2012A 2013A 2014* 2015F 2016F 2017F 2018F 2019F
Current Assets
Cash & Near Cash Items 4,070 5,629 4,032 5,078 5,243 5,020 5,061 5,026 5,012
Short Term Investments 202 62 1,735 76 578 578 578 578 578
Accounts & Notes Receivable 464 194 246 404 231 230 222 230 222
Inventories 1,160 1,171 1,341 1,492 1,277 1,403 1,359 1,418 1,373
Other Current Assets 144 147 139 149 136 147 142 148 144
Total Current Assets 6,041 7,204 7,493 7,200 7,466 7,378 7,362 7,400 7,329
Long-Term Assets
Gross Fixed Assets 6,791 6,936 7,213 7,326 7,447 7,508 7,570 7,631 7,692
Accumulated Depreciation 5,574 5,766 5,956 6,193 6,438 6,687 6,844 7,004 7,167
Net Fixed Assets 1,218 1,170 1,257 1,133 1,009 821 726 627 525
Long Term Investments 502 575 552 231 133 103 96 96 96
Intangibles 715 771 927 916 904 891 886 880 875
Other Long Term Assets 819 861 565 631 451 440 429 418 408
Total Long-Term Assets 3,254 3,377 3,302 2,911 2,495 2,256 2,137 2,021 1,904
Total Assets 9,295 10,581 10,795 10,110 9,961 9,634 9,499 9,422 9,233
Current Liabilities
Accounts Payable 336 611 717 404 346 380 368 384 372
Accrued Expenses 199 306 161 281 201 208 201 208 201
Short Term Borrowings 9 28 65 94 80 88 84 87 85
Other Short Term Liabilities 320 451 280 264 231.31 230.37 222.36 230.37 222.36
Total Current Liabilities 864 1,396 1,223 1,042 858 906 875 910 880
Long Term Liabilities

Long Term Borrowings - 8 3 1 1 1 1 1 1
Other Long Term Liabilities 19 11 23 61 54 53 52 53 52
Total Long Term Liabilities 19 19 26 62 55 54 53 54 53
Total Liabilities 883 1,415 1,249 1,104 913 961 928 964 932
Total Debt to Capital 0.1% 0.4% 0.7% 1.1% 0.9% 1.0% 1.0% 1.1% 1.0%
Equity
Share Capital & APIC 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800
Retained Earnings 2,669 1,975 2,109 1,471 1,513 1,138 1,036 923 765
Other Equity 1,758 3,185 3,426 3,518 3,518 3,518 3,518 3,518 3,518
Total Shareholders Equity 8,227 8,960 9,335 8,789 8,832 8,456 8,355 8,241 8,083
Minority Interest 185 206 210 217 217 217 217 217 217
Total Liabilities & Equity 9,295 10,581 10,795 10,110 9,961 9,634 9,499 9,422 9,233
Cash Flows (VND billion) 2011A 2012A 2013A 2014* 2015F 2016F 2017F 2018F 2019F
Cash From Operation Activities 2,125 3,280 1,529 696 1,364 578 663 584 616
Cash From Investing Activities (712) 135 (1,557) 1,838 (104) 231 195 194 189
Cash From Financing Activities (1,090) (1,855) (1,569) (1,488) (1,095) (1,032) (817) (813) (819)
Beginning Cash Balance 3,748 4,070 5,629 4,032 5,078 5,243 5,020 5,061 5,026
Net Changes in Cash 323 1,559 (1,597) 1,046 165 (223) 41 (35) (14)
Expected Ending Cash Balance 4,072 5,630 4,032 5,078 5,243 5,020 5,061 5,026 5,012
Free Cash Flow (FCFF) 1,453 2,941 1,323 519 1,301 515 600 522 553
Ratio Analysis 2011A 2012A 2013A 2014* 2015F 2016F 2017F 2018F 2019F
Valuation Ratios
Price Earnings 11.0 x 10.7 x 18.1 x 16.9 x 17.1 x 18.3 x
PEG (0.2) 4.4 (0.4) 2.4 (14.5) (2.9)
EV to EBIT 5.5 x 4.2 x 8.7 x 7.7 x 7.8 x 8.6 x
EV to EBITDA 4.2 x 3.4 x 5.8 x 6.0 x 6.1 x 6.5 x
Price to Book 1.4 x 1.4 x 1.4 x 1.4 x 1.5 x 1.5 x
Dividend Yield 11.0% 14.2% 15.8% 7.9% 7.9% 6.3% 6.3% 6.3% 6.3%
Profitability Ratios
Gross Margin (ex. Dep) 45.8% 34.1% 34.8% 28.2% 30.0% 22.8% 22.5% 22.0% 21.7%
EBITDA Margin 35.1% 23.9% 23.0% 12.0% 16.9% 10.0% 10.0% 9.5% 9.2%
Operating Margin 33.1% 22.3% 20.6% 9.2% 13.6% 6.7% 7.8% 7.4% 7.0%
Profit Margin 33.6% 22.6% 21.4% 11.5% 13.4% 8.0% 8.8% 8.4% 8.2%
Return on Avg. Assets 37.6% 30.9% 21.1% 10.9% 11.6% 7.0% 7.7% 7.7% 7.3%
Return on Avg. Equity 43.1% 35.1% 24.2% 12.1% 12.8% 7.7% 8.5% 8.5% 8.1%
Leverage Ratios
Interest Coverage Ratio (EBIT/I) 109.3 1,914.7 651.4 298.6 309.0 156.2 172.1 168.9 153.5
EBITDA / (I + Cap Ex) 4.5 9.3 11.2 6.2 20.3 12.0 11.6 11.5 10.7
Tot Debt/Capital 0.1% 0.4% 0.7% 1.1% 0.9% 1.0% 1.0% 1.1% 1.0%
Tot Debt/Equity 0.1% 0.4% 0.7% 1.1% 0.9% 1.0% 1.0% 1.1% 1.1%
Liquidity Ratios
Asset Turnover (times) 1.1 x 1.3 x 1.0 x 0.9 x 0.8 x 0.9 x 0.8 x 0.9 x 0.9 x
Accounts Receivable Turnover (day) 12 4 6 10 10 10 10 10 10
Accounts Payable Turnover (day) 24 25 39 22 22 22 22 22 22
Inventory Turnover (day) 85 49 72 79 79 79 79 79 79
Current Ratio 7.0 x 5.2 x 6.1 x 6.9 x 8.7 x 8.1 x 8.4 x 8.1 x 8.3 x
Quick Ratio 5.5 x 4.2 x 4.9 x 5.3 x 7.1 x 6.4 x 6.7 x 6.4 x 6.6 x
Appendix 2: Introduction of fertilizer products
Nitrogen, phosphate (phosphorus) and potassium are the three main
nutrients for plants
Fertilizers are an essential plant nutrient for a crop to attain optimal yield and quality.
There are three main nutrients for plants including nitrogen (N), phosphate (P 2O5 or
P) and potassium (K2O or K). Nitrogen is the main constituent of proteins which
determine a plant’s growth, vigor, color and yield; nitrogen makes up over 60% of
total fertilizer consumption. Phosphate is vital for adequate root development and to
help the plant resist drought. It is also important for the ripening of seeds and fruits.
Potassium (K) is also an important nutrient for the growth of a plant and for high-
yielding crops and helps to improve crop resistance to lodging, disease and drought.
Characteristics of nitrogen, phosphorus and potassium
Primary benefit Application Industry structure
K 16%
 Fewer suppliers,
 Improving crop  Annual application
production
quality not always done
P 23% discipline
 Increase crop  Annual application  Industry more

size critical fragmented
61%  Most important  More dynamic
N and commonly prices, but stable
lacking nutrient volume
Source: International Fertilizer Industry Association (IFA) (season 2013/2014 estimate, May 2014), Yara
Fertilizer Industry Handbook (December 2014)
Apart from the three main nutrients, plants also need secondary nutrients including
sulfur (S), magnesium (Mg) and calcium (Ca) for their optimal growth. Other nutrients
called micro nutrients are also important to the plant as well and they consist of
chlorine (Cl), iron (Fe), manganese (Mn), boron (B), selenium (Se), zinc (Zn) and
copper (Cu), among others.
Urea, DAP and MOP are three key products to provide nitrogen, phosphate
and potassium, respectively
Urea, containing 46% nitrogen, provides about 56% total nitrogen consumption
around the world. This portion is increasing and the majority of new and pipeline
nitrogen capacity in the world is in the form of urea. Other nitrogen products include
ammonia, DAP/MAP, NPK, AN/CAN and UAN.
About 56% of phosphate nutrient demand is provided by DAP/MAP products. Both
DAP and MAP contain 46% phosphate (measure in P 2O5) next to NPK with a 20%
share. For potash nutrient, MOP and SOP supply 72% of total potash consumption
(measured in K2O).
Fertilizer consumption by 5 key markets
N P K
60
Million tons
50
Others
40 China
29%
29%
30
20
Russia Brazil
India
1% 7%
10 14%
West/Central
United
0 Europe
States
China India United States West/Central Brazil Russia 9%
11%
Europe
Global consumptions of key products

Nitrogen N (111 million tons) Phosphate P2O5 (42 million tons) Potash K2O (30 million tons)
Others
Others Others
UAN 5% TSP 6% 3%
12% 8%
NPK 26%
AN/CAN SSP 10%
9%
NPK 7% Urea 56% DAP/MAP
NPK 19% 57% MOP/SO
P 71%
DAP/MAP
7% Ammonia
4%
Global fertilizer demand and outlook
N P K
250
Millon tons
200
200 184
32.6 33.4 34.2
28.7 30.2 31.0 31.8 2014-2018 CAGR
27.4 28.0
150 27.2 29.1 23.7
23.1 43.5 44.4 45.4 46.2
41.4 41.1 41.7 42.6 N: 1.18%
38.5 37.6 40.5
38.8 33.9
100
P: 2.05%
112.2 114.3 116.0 117.3 118.6 119.8
50 96.9 100.8 98.3 102.2 104.3 107.9 108.8
K: 2.49%
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: IFA, DPM
GUIDE TO RATINGS DEFINITION
VPBank Securities (VPBS) uses the following ratings system:

Buy: Expected return, including dividends, over the next 12 months is greater than 15%.
Hold: Expected return, including dividends, over the next 12 months is from -10% to +15%.
Sell: Expected return, including dividends, over the next 12 months is below -10%.
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PETROVIETNAM FERTILIZER AND

CHEMICALS CORPORATION (DPM)

INITIATING COVERAGE: HOLD

Please see important disclosure information at the end of this report

TECHNICAL ANALYSIS .......................................................................................................................... 29

Appendix 1: VPBS projection ................................................................................................................................................. 31

World urea production 10 largest urea producers (2013)

10 largest urea exporters (2013) 10 largest urea importers (2013)

Source: IFA, Yara Fertilizer Industry Handbook (December 2014)

And China sets the urea price floor

Compare urea price in major markets

10 1000 500 240

8 800 400 200

6 600 300 160

4 400 200 120

Urea price is still on a downward trend due to oversupply situation

Global urea price trend, demand and capacity

Source: IFA, IFDC, Green Markets, Bloomberg

Vietnam fertilizer demand and supply Fertilizer demand by products

Total demand Total production

Demand of fertilizer increased slowly over the last five years

Demand of fertilizer over years

Source: MARD, DPM

Urea supply capacity Urea producers in Vietnam

Phu My Ha Bac Ninh Binh Ca Mau Capacity

Vietnam fertilizer demand should grow slowly due to sluggish expansion of

Planted area over years Fertilizer consumption

Vietnam 323.3 311.5 297.1

13,500 39% Indonesia 181.5 198.4 194.8

12,500 33% India 179.1 177.9 163.7

2003 Establishment of Petrovietnam Fertilizer and Chemical Corporation (PVFCCo)

2008 Transformation into Petrovietnam Fertilizer and Chemicals Corporation

2014 Petrochemicals plant starts operation in Vung Tau

SHARESHOLDERS AND OWNERSHIP

Shareholders (>1%) Ownership structure as of January 12, 2015

BOARD OF DIRECTOR SUPERVISORY BOARD

NORTH PETROVIETNAM CENTRAL PETROVIETNAM

SOUTH EAST PETROVIETNAM SOUTH WEST PETROVIETNAM

DAM PHU MY PACKAGING JSC PETROVIETNAM SOUTHERN

 PVC-Mekong: was established in 2007 in Ca Mau province. Its main businesses

Market share in 2014 Revenue contribution by market

Source: DPM, VPBS

Volume of selling fertilizer Revenue breakdown in 2014

GAS MAKES UP ABOUT 70% UREA PRODUCTION COST

Cost structure of urea production Cost structure in 2014

120 7 P = Pn + Tcl = 46% * MFO + 0.92(USD/MMBTU)

Source: DPM, Bloomberg, VPBS

HIGHEST SELLING PRICE BUT LOWEST PRODUCTION COST

BIGGEST THREAT FROM CHINA UREA

FUTURE PROJECTS: DRIVING FUTURE GROWTH

Chemical business will steadily improve profitability of the whole

NPK project focuses on high quality products: At present, NPK production

Revenue and net profit Urea selling volume and price

12,000 800 8,000

9,000 600 6,000

6,000 400 4,000

3,000 200 2,000

Cost structure over years

 The proportion of selling expenses in revenues climbed from 6.1% in 2013 to

(*): Unaudited; Source: DPM, VPBS

Total assets Shareholder’s equity

ROA and ROE Dupont analysis

ROA ROE Asset turnover Asset/Equity Net profit margin