Earnings Report /
Vietnam

Vinh Hoan Corporation: 2019 results update and 2020 outlook; trim TP

  • Sharp drop in export prices and weak US exports pull down revenue and profit

  • Revise down export growth to 10.2% yoy and export price to China by 2% yoy, on coronavirus concerns

  • Reiterate Buy on positive long-term growth prospect, but trim TP

Tam Pham
Tam Pham

Fishery, Insurance

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Rong Viet
28 February 2020
Published byRong Viet

In 2019, export prices dropped sharply and weak export to the US market significantly pulled down the company’s revenue and profit. VHC recorded net revenue and profit before tax of VND7,867bn and VND1,309bn, respectively, decreasing by 15% yoy and 22% yoy. Adjusted for abnormal revenues and financial expenses from divestments in 2018 and 2019, PBT from core operation in 2019 reached VND1,203bn, down 32% yoy.

To reflect the adverse impact of Covid-19 on the company’s export activities, we revised down the growth of VHC’s pangasius export to 10.2% yoy from 15.4% yoy and export price to China down by 2% yoy, assuming Covid-19 will be contained by the end of March 2020 and trading activities will be back to normal from the beginning of Q2.

Slow customs clearance at Chinese ports will likely increase selling expenses and provision for devaluation of inventories. Accordingly, net revenue and PAT in 2020 are forecast at VND8,661bn (+10% yoy) and VND1,005bn (-14.8% yoy), respectively, decreasing by 6.4% in revenue and 20% in profit after tax, versus our previous forecast in the 2020 strategy report.

The stock price has been adjusted sharply for a short time due to concerns about the coronavirus outbreak. However, considering that Covid-19 has only a short-term impact while the long-term growth prospect is still supported by positive factors – including the ability to gain market share from Chinese tilapia in the US and the increasing production of collagen-gelatin segment which has outstanding profitability – we recommend Buy for VHC with a 1-year target price of VND41,400/share (adjusted down from the previous target price of VND49,200/share in the 2020 strategy report). The company does not pay cash dividends for 2019. The expected rate of return is 29% compared to the closing price of 26 February 2020.

Table 1: 2019 results
 VNDbn 2018 2019 yoy% 

Revenue 

9,271 

7,867 

-15.1 

COGS

-7,232

-6,334

-12.4

Gross profit

2,039

1,533

-24.8

       Gross profit margin 

22.0 

19.5 

 

Financial income

137

255

85.8

Financial expense

-167

-93

-44.4

       Interest expense

-56

-60

6.3

Selling expense

-210

-252

19.7

G&A expenses

-144

-149

3.6

PBT 

1,688 

1,309 

-22.4 

PBT adjusted 

1,757 

1,203 

-31.5 

Source: VHC, Rong Viet Securities