TRUONG THINH PETROCHEMICAL JOINT STOCK COMPANY

Credit Manager’s Financial Assessment of TRUONG THINH PETROCHEMICAL, JSC

1. Business Profile Risk

Truong Thinh Petrochemical is a privately held joint stock company established in 2020, operating in the high-risk petroleum trading sector. The company has a relatively small organizational scale with only 50 employees, yet reports very high sales volume (over USD 91 million in 2023). This mismatch raises concerns about operational capacity, internal controls, and the reliability of reported turnover.

The company maintains multiple branches across Đồng Nai and Lâm Đồng, suggesting distributed operations and increasing oversight complexity.

Shareholding is fragmented among four Vietnamese individuals with no dominant owner (31%, 30.6%, 30.6%, 7.8%), which may weaken strategic decision-making and capital support.

2. Financial Strength Analysis

Assets and Capital Structure

• Total Assets 2023: USD 5.57 million

• Equity 2023: USD 2.08 million

• Equity/Asset Ratio: ~37% (moderate but vulnerable for petroleum wholesale)

• Working Capital: only USD 696,997, which is very thin relative to annual sales.

The company expanded assets by 74%, but equity increased disproportionately from USD 762k to 2.08 million (+173%), indicating either capital injections or a correction in previous capitalization. Such sudden jumps may signal unstable financial structuring.

Profitability

Profit remains extremely weak:

• Profit 2023: USD 4,835

• Net profit margin: 0.005%, essentially break-even

• Profit has fluctuated heavily: from USD 15k (2021) → USD 2k (2022) → USD 4.8k (2023)

With USD 91 million in revenue but less than USD 5,000 in profit, the company operates at high volume with negligible margins, a pattern typical of fragile petroleum traders with limited bargaining power and high operational risk.

Revenue Quality

Revenue has multiplied dramatically:

• 2021: USD 5.84 million

• 2022: USD 55.25 million (growth +845%)

• 2023: USD 91.08 million (growth +65%)

Such explosive revenue growth without corresponding asset expansion or profit generation raises significant red flags for creditworthiness, including:

• Thin capitalization relative to sales volume

• Possible pass-through trading with limited value-added

• Potential reliance on supplier credit or customer prepayments

• High vulnerability to price fluctuations

Liquidity

Working Capital = USD 696,997, down slightly year-over-year.
Given revenue of USD 91 million, the company is likely operating on very tight cash cycles, exposing it to liquidity shocks if suppliers tighten terms.

No cash flow statement is provided, but given the razor-thin profit and lean capital structure, cash flow risk is high.

3. Credit Risk Evaluation

Strengths

• Strong topline growth and expanding market presence.

• Increased equity in 2023 provides some cushioning.

• Active operational status and multi-branch network.

Weaknesses and Red Flags

• Extremely low profitability despite huge sales volumes.

• High leverage in practice due to a small equity base relative to revenue size.

• Thin working capital, insufficient for a petroleum wholesaler.

• Sudden significant changes in sales and assets raise concerns about the stability of operations, potential speculative trading, or dependence on a small number of counterparties.

• Lack of a substantial institutional shareholder limits financial backing.

Overall Credit Rating (Qualitative)

High Risk / Weak Credit Quality

From a credit manager’s perspective, this company should be approached with cautious credit terms, preferably:

• Short payment cycles

• Collateral-backed arrangements

• Strict monitoring of transaction volumes

• Limited exposure until profitability and capital stability improve

4. Recommendation for Lenders & Suppliers

Before extending significant credit, counterparties should request:

• Updated audited financial statements

• Bank statements demonstrating cash flow capacity

• Detailed breakdown of major customers and suppliers

• Confirmation of inventory levels and turnover

• Clarification on revenue volatility and operational scale

Given current financial indicators, unsecured long-term credit is not advisable.