DCM - BUY - 21,100 - Continue the expectation race in 2021

VALUATION

We recommend BUY for DCM with target price VND 21,100/share, upside 20.9% compared to the price on 31/3/2021 with DCF method and P/E, with weight 40% - 60%.

FORECAST OF BUSINESS RESULTS

BSC forecasts that revenue and net profit in 2021 will reach VND 9,493 billion (+23.5% YoY) and VND 888 billion (+34.3% YoY). EPS fwd = VND 1,366 and P/E fwd= 13x, P/B fwd = 1.4x.

INVESTMENT THESIS

§  Improved gross profit margin thanks to the expectation that selling price will increase faster than input material price - Due to high oil price and maintaining positive signal from fertilizer demand in 2021.  

§  We expected that Ca Mau fertilizer plant will be almost depreciated by 2024, improving the company's net profit (+125.9% YoY).

§   Expectation of tax refund when the tax law is revised in 2021:

According to the P/E method:

-       Base scenario: Target Price 2021 = VND 18,440

-       Adjustment of VAT

·         Conservative scenario: Target Price 2021 = VND 22,210

·         Best Scenario: Target Price 2021 = VND 28,070

§  Tracking information:  PVN plans to divest capital at DCM, NPK Factory go on operation in 2021, M&A add another NPK factory and cooperate in investing in factories producing organic fertilizers and micro-organisms.

TECHNICAL VIEW

Investors can buy the stock with the target price located at 20-20.5, consider to stop loss if the support level of 12.5 is penetrated.

RISKS

§  Input gas price increased faster than forecast and adjusted selling price was lower than expected;

§  Performance of plants is lower than expected due to routine maintenance.

COMPANY UPDATE

§  Revenue and net profit in 2020 reached VND 7,563 billion (+7% yoy) and VND 665 billion (+56% yoy), respectively, thanks to a sharp drop in input gas prices and high demand for fertilizer export.