VHC_BUY_TP 108,500 VND_Upside 26.0_BSC Company Update

Valuation  

• We maintain our BUY recommendation for VHC stock with a target price of VND108,500 (+26% compared to the price on August 23, 2022) for 2022 after adjusting the target P/E from 13 to 9 due to (i) increase in adjusted interest rates (ii) decrease in growth rate compared to profit in the first six months of the year.  

Forecasting business results  

• In 2022, BSC forecasts VHC's revenue and profit after tax at VND12,524 billion (+39.5% YoY) and VND 2,318 billion (+112% YoY) respectively.  EPS 2022 = VND 12,600, P/E FW = 6.9 times.

Business Update

• Accumulated in the first 6 months of the year, VHC recorded outstanding growth with revenue of 7,494 billion (+81% YoY) and profit after tax of 1,341 billion (+242% YoY). Q2 recorded revenue and profit after tax of 4.226 billion (+80% YoY) and 788 billion (+202% YoY) respectively.
• Positive revenue growth came from traditional product groups: Pangasius reached 4,955 billion (+82% YoY) and By-products reached 1,170 billion (+48% YoY). Revenue from other products (BSC combined other revenue, shrimp, and rice bulging revenue) grew strongly to 853 billion, accounting for 11% of revenue in the first six months of the year.
• Profit grew faster than revenue due to a sharp increase in gross profit margin to 25% compared to a margin of 17% in the same period. BSC assumed that the gross profit margin increased due to positive export prices in markets: Vietnam's export price to the US increased by 60% YoY, to the EU increased by 34% YoY, to China increased by 38% YoY.    
• SG&A expense margin reached 3.7%, down sharply from the margin of 7.0% in the same period due to faster revenue growth (+81% YoY) compared to the increase in costs (+22% YoY).