Company Quarterly Earnings Update – BMP VN – 2019 Q2

Factory at Binh Minh Plastic JSC

Summary of the H1/2019 results of Binh Minh Plastic JSC (BMP VN) 

H1/2019 results: highlights
  • Net revenue rose by 17.7% yoy, mainly thanks to strong volume growth of 20.5%. BMP managed to gain back some market share thanks to the fading business of its main competitor (HSG). BMP’s average selling prices declined by 2.3% yoy in H1/2019. The company applied a new selling policy: It reduced selling prices, but the distributors had to bear all the transportation costs, resulting in lower selling expenses for BMP.
  • The operating margin fell to 14.3% in H1/2019 from 17.6% in the same period of last year as (i) BMP still had to bear some transportation costs in H1/2019 to support its distributors with the implementation of the company’s new distribution policy, while BMP already reduced its selling prices and (ii) BMP has upgraded all its PVC products to become lead-free and eco-friendly. The better product quality resulted in higher production costs. Net financial expenses were about 13.2% higher than in the same period of last year. All in all, BMP’s net profit declined to VND 208bn (-8.0% yoy).
  • By the end of H1/2019, BMP’s financial position remained solid with cash/cash equivalent and short-term investments accounting for 21.5% of total assets, while debts are minimal. The company has no near-term CAPEX plan.
Outlook
  • Our longer-term view on Vietnam’s market for plastic construction materials remains optimistic thanks to the robust housing demand and the need for infrastructure development. The competitive landscape became more favorable for BMP as its major competitor, HSG, has trimmed its operations in the plastic pipe business. In the longer run, we think that BMP will retain its leading position in the plastic pipe market and will further expand market share thanks to its long-established brand name and its large distribution network.
  • We revise up the 2019 forecast for sales volume growth to 9.7% yoy thanks to higher than expected selling progress in H1. We expect the CAGR for net profit from 2019 to 2023 to amount to 15.1% thanks to solid sales volume growth (~8.5% in next 5 years) on the back of the promising industry outlook.
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