CVT_Quality & Quantity Growth_05032018_BSC_Company Update

Valuation
We recommend BUY for CVT with a target price of VND 52,710/share based on comparable valuation method using target P/E of 8x, with the expectation on effectiveness of newly introduced lines of soluble salt absorbent granite, which has been put into operation since Feb 2018.

Outcome Forecast
BSC forecasts the production quantity of CVT in 2018 will increased by 20% YoY with the assumption that the new line fulfills 90% capacity in this year (this line has been put into operation since February and also throughout Tet holiday). Net revenue is expected to arrive at VND 1,470 billion (+24.6% YoY), EAT of VND 194 billion (+11.4% YoY) equivalent to EPS 2018 = VND 6,530/share (calculated on the outstanding shares right now and the assumption of 10% deduction of bonus & welfare funds; if estimation is based on number of shares after dividend issuance, EPS 2018 = VND 5,068/share), P/E fw = 7.3x – considerably lower than CVT’s valuation after changing its listed stock exchange from HNX to HOSE.
 
Catalyst
The line of soluble salt absorbent granite (+21.4% current capacity) is expected to be CVT revenue driver in 2018.
Investment Risks
• Risk of operating new production line
• Risk of reducing price due to strong competition
• Risk of fuel price increases

Corporate Update
(1) Soluble salt absorbent granite line has been put into operation since Feb 2018.
(2) Maintaining reasonable profit margin compared to the average of listed firms in the industry.
(3) Dividend payout plan: Estimate dividend ratio 45% by cash and stock.
(4) Changing the land using purpose of factory CMC1.
(5) Ambitious expanding plan :  The firm intends to  further invest in   factory CMC3 producing tiles and porcelains between 2019-2020.