Summary of the 2020 Q1 results of Binh Minh Plastic JSC (BMP VN)
Q1/2020 results highlights:
- Revenue was VND1,019bn, up 9.5% y/y. While the average selling price declined slightly due to a change in product mix, the selling volume grew strongly (+12.7% y/y) enabling by 1) a strong demand from residential construction; 2) a higher demand for agricultural irrigation systems as salinity is higher this year in Mekong Delta area; and 3) a weaker sale of a major competitor, Hoa Sen Group.
- Profitability declined slightly as the improved gross margin, enabling by economies of scale, was offset by the increased trade discount to distributors for some large orders. Net financial expenses, on the other hand, retreated thanks to higher financial income (on higher bank balances). All in all, the net profit went up 12.4% y/y.
- BMP’s financial position stayed solid at the end of Q1/2020 with minimal leverage and cash/bank balances made up 39% of total assets.
- According to the company, although the selling volume was decelerated in April as a result of the social distancing measure, it was still positive. As Vietnam re-opened the economy fully on 22 April, we observe that businesses (except for airlines, tourism services, hospitality) have resumed to nearly pre-COVID-19 level. Hence, we view that the impact of COVID-19 prevention measures on companies, serving the domestic market like BMP, will be rather muted. Therefore, we project BMP’s volume growth to be slightly lower in H2, however, the company will still register a 5.7% and 7.5% growth rate for 2020 and 2021 respectively.
- Profitability will, however, improve from Q1 level thanks to the lower oil price. As the company typically stocks up 3-month rolling raw material inventory, the lower material price from late March will benefit BMP from Q2 onward. The company, however, may pass on part of the cost reduction to distributors in forms of higher commission. We estimate net profit to increase by 22.8% in 2020 and 4.5% in 2021.
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