Summary of the 2020 H1 results of Binh Minh Plastic JSC (BMP VN)
H1/2020 results highlights:
- Revenue was VND2,271bn, up 7.6% y/y. Total sales volume increased by 6.3% y/y, of which sales volume growth in Q2 was 1.5% despite a lockdown in Apr. Average selling price increased by 1.3%. Given the social distancing measures in Q2 due to Covid-19, volume growth in H1 could be attributed to 1) strong volume growth in Q1, and 2) less severe impact of Covid-19 in the South, BMP’s main market, compared to the rest of the country.
- Profitability increased due to substantially lowered prices of raw materials, which are derived from oil products. On the other hand, trade discount rose since BMP increased support to its distribution partners. Net financial expenses retreated thanks to higher financial income (on higher bank balances). All in all, net profit went up 22.4% y/y, reaching VND257bn.
- Financial position stayed solid at the end of H1/2020 with minimal leverage and cash/bank balances made up 42% of total assets.
- In the last note, we expected that Covid-19 would be contained by the end of Q2 or within Q3. However, as the pandemic lasted longer than we expected, with the current second wave of infection and pending development of vaccines, we expect growth in H2/2020 will be challenging to reach due to the prolonged deterioration of the business environment. Therefore, we revise down our projections for BMP’s 2020 volume growth to 2.2% (previously 5.7% growth), and 9.3% growth for 2021.
- Profitability will improve in 2020 due to lower input material costs, and will slightly decrease in 2021 as input material costs recover. Commission for distributors, which can be adjusted as raw material price fluctuates, will act as a cushion to lower the impact of raw material price movement on the company’s operating margin. We estimate net profit to increase by 14.9% in 2020 and 7.7% in 2021.
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