Investment Recommendation

VHC_NEUTRAL_TP 39,000 VND_Upside 6%_The worst time has passed_BSC Company Update

Date

31/08/2020
Security code

VHC
Company

Vinh Hoan Corp.
Language

Tiếng Anh
Number of Downloads

470

Detailed report

Valuation

We maintain our NEUTRAL recommendation for VHC stock with latest target price of 39,000 VND per share (+ 6% upside) as we upgrade P/E multiple from 5.5 to 6.5 based on these following assumptions (i) expectation for recovery in the second half of 2020 (+ 28% YoY) (ii) high growth in 2021 from low level of 2020 (EPS 2021 fw – 7,067, PE fw 2021 =4.7)

Business forecast

In 2020, BSC expect VHC to post a respective VND 8,544bn (+8.6% YoY) and VND 951bn (-19.4% YoY) which is equivalent to a growth rate of +28% YoY in the second half of this year. EPS 2020 reaches VND 5.169 per share, P/E fw 2020 reaches 7.1.

Investment themes

Expectation for impressive recovery in the second half of this year

Growth from new Collagen and Gelatin production line, supporting a more sustainable business model

Risks

Potential upsticks in corona virus cases in major exporting markets

Delay of new Collagen and Geltain production line

Company Business Result Update

The first half of FY 2020 suffered a significant drop in earning due to (i) high base result in FY 2019 (ii) exporting value slumped during corona virus lockdown. Net sales totaled VND 3,266bn (-14.3% YoY) and NPAT posted VND 368bn (-49.5% YoY)

Exporting value to major markets maintain our previous forecast: USA market revenue swung to a strong decline of 462% QoQ while Chinese market strongly bounce back by a growth rate of 285% QoQ.