RAL_BUY_TP 124,200 VND_Upside 20%_Compelling valuation_BSC_Vietnam Company Update_EN_ICB3722

Valuation
We recommend BUY RAL with the target price of VND 124,200/share, upside 20% under P/E method. Currently, RAL is traded at VND 103,800/share, equivalent to P/E trailing of 7.54x, much lower than other peers and VNIndex.
Earnings forecast
BSC forecast that RAL’s revenue and EAT in 2018 will be VND 3,470 billion (+6.1% yoy) and VND 225 billion (+5.13% yoy) respectively. EPS will be VND 14,694, after deducting 25% welfare and bonus fund.  
Company Update
•    Net revenue reached VND 1,498 billion, gained 5.98% yoy and EAT is VND 80 billion, (-3.77% yoy) in 1H2018.
•    Profit margins have improved. Operating margin increased to 8.55% in 1H2018, higher than the margin of 8.09% of DQC.
•    RAL got new export contracts to Srilanka (10 million lamps) and Cuba.
•    The asset value of Ha Dinh, its headquater, (57,000sq.m) is not recorded in the balance sheet.
•    RAL ask for shareholders’s approval for real estate as new business segment.
•    RAL make 25% cash dividend payment for the first time in 2018, ex-right date was 05, September 2018.
Catalyst
•    Earnings continue to grow.
•    Selling or building office at Ha Dinh street.
Risks
•    High competition, especially with Chinese enterprises, negatively affects the consumption of RAL products.
•    Cost of sales, promotion were substantial and continue to increase
•    High receivables and inventory account may destroy profit margin and make negative cash flow of the company.