DPM_FOLLOW_TP 63,100_Upside 26%_Highest Net Profit Expectations In History_BSC Company Update_14052021

 VALUATION

▪ BSC recommends FOLLOW for DPM shares with a target price of VND63,100 per share for 2022, equivalent to 26% of the closing price on July 4, 2022 based on the P/E method with a target ratio of 4.5x.

FORECASTING BUSINESS RESULTS

▪ BSC forecasts that DPM's NET REVENUE and NPAT in 2022 will reach VND 20,182 billion (+58% YoY) and VND5,548 billion (+78% YoY) respectively. EPS 2022F = 14,032 VND (+81%YoY) and P/E fw= 3. 5 Based on assumptions: (1) Urea's average selling price in 2022 will be VND 14,644/kg (+25% YoY); (2) Urea consumption reached 865 thousand tons (+15.5% YoY); (3) Gross margin improved to 41% (compared to the 2021 high of 37%).

INVESTMENT THESIS

▪ Selling prices remained high over the same period and business output grew positively;

▪ Factors to be monitored that have not been included in the valuation: VAT refund when the law is amended;

▪ Enterprises maintain regular annual cash dividend payments with high payout ratios.

RISK

▪ Input gas prices rose faster than forecast and selling prices fell more sharply than forecast;

▪ High fertilizer prices push farmers to reduce fertilization, causing domestic demand to recover slowly;

▪ NPK factory capacity achieved lower performance and lower selling prices than forecast.

BUSINESS UPDATES

▪ DPM's NET REVENUE and NPAT in Q1/2022 reached VND 5,829 billion (+254 %YoY) and VND 2,126 billion respectively thanks to: (1) the average selling price increased more strongly than the increase in input gas costs and (2) positive export output with high selling prices.

▪ DPM adjusted plan 2022: (1) NET REVENUE and NPAT are VND 17,239 billion (+4% YoY) and VND 3.473 billion (+9% YoY, respectively); (2) Urea and NPK output of 865 thousand tonnes (+4%YoY) and 165 thousand tonnes (+2%YoY) respectively and (3) raising the 2021 dividend plan from 10% to 50% and maintaining the 2022 cash dividend at a rate of 50%.