QNS_BUY_TP 56.800_Upside 22.0_OPPORTUNITIES FROM SUGAR INDUSTRY _BSC_Vietnam company update

VIEWPOINT OF PRICE

We recommend a BUY with stock ticker QNS with a target price of VND56,800 – Upside 22% from the closing price on September 23, 2022, following the DCF method with WACC =10%. Based on (1) the positive outlook of the sugar industry; (2) material prices cooled down and (3) healthy financial structure.

FORECAST FORECAST OF INCOME STATEMENT

BSC expects QNS's revenue and net profit in 2022 to reach VND 8,147 billion (+11%YoY) and VND 1,352 billion (8%YoY), EPS FW = VND 3,637, P/E FW =12.8 times. Revenue growth was mainly driven by (1) revenue from sugar segment up 14%YoY; (2) revenue from soy milk segment up 9%YoY.

In 2023, DTT and NPAT will reach VND 8,950 billion (+10%YoY) and VND 1,527 billion (+13%YoY) respectively, mainly from (1) Sugar segment supported in both price and operating efficiency of the house. RE sugar machine increased from 8% CS (2022E) to 13% CS (2023F) (2) Gross profit margin of Soy milk segment improved from 39.7% to 41% thanks to the downtrend in raw material prices.

INVESTMENT THESIS

▪ Gross profit margin improved from 2H/2022 thanks to (1) domestic sugar price supported by Decision 1514/QD-BCT dated August 1st, 2022 and (2) soy milk segment: increased selling price in 1H/2022 and the price of raw materials tends to decrease.

▪ Healthy financial structure, stable dividend from 4%-5%/year.

Catalyst

▪ Domestic sugar prices are supported by Decision 1514/QD-BCT dated August 1, 2022, applying measures to combat trade remedies for some imported cane sugar products from 5 Asian countries.

▪ Strategic investors and BOM increase their ownership ratio. ▪ Potential comes from investment cooperation with large enterprises.

RISK

▪ Fluctuations in world sugar prices and smuggled sugar output increased after Decision 1514/QD-BCT.

▪ Price fluctuations of raw materials due to political instability in the world .