Company Quarterly Earnings Update – BMP VN – 2019 Q3

Factory at Binh Minh Plastic JSC

Summary of the 9M/2019 results of Binh Minh Plastic JSC (BMP VN) 

9M/2019 results: highlights
  • Net revenue rose by 11.8% y/y, mainly thanks to strong volume growth of 15.3%. BMP’s average selling prices declined by 3.1% yoy in 9M/2019. The company applied a new sales policy: It reduced selling prices, but the distributors had to bear all the transportation costs, resulting in lower selling expenses for BMP.
  • Operating profit declined by 2.9% y/y, the operating margin fell to 14.7% in 9M/2019 from 16.9% in the same period of last year as 1) BMP assumed some transportation costs to support its distributors with the implementation of the company’s new sales policy, 2) the company increased the discounts for some distributors that sold directly to construction projects, 3) BMP upgraded its PVC products to become lead-free. The better product quality resulted in higher production costs. All in all, BMP’s 9M net profit declined to VND 328bn (-3.6% yoy).
  • By the end of 9M/2019, BMP’s financial position remained solid with cash/cash equivalent and short-term investments amounting to VND 638bn, making up 22.5% of total assets, while debts were minimal. 9M CAPEX totaled VND 175bn, mainly for the material automation system. The company has no major near-term CAPEX plan to expand its capacity.
  • Our longer-term view on Vietnam’s market for plastic construction materials remains unchanged from the latest assessment. The competitive landscape is likely to become more favorable for BMP as its major competitor, HSG, has trimmed its operations in the plastic pipe business. BMP reportedly managed to gain back some market share. In the longer run, we are confident that BMP will retain its leading position on the plastic pipe market, thereby further expanding market share thanks to its long-established brand name and its large distribution network.
  • Compared to our last forecast, we retain most of our major assumptions for 2019 and for 2020. We project 2019 and 2020 net profit to rise by 7.6% y/y and by 12.4% y/y, respectively.

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