Company Quarterly Earnings Update – BMP VN – 2021

Summary of the 2021 results of Binh Minh Plastic JSC (BMP VN)

2021 results highlight

  • Q3/2021 has been somewhat of an anomaly for BMP as demand collapsed due to tight lockdown measures imposed in the south (BMP’s key market) from July to September, causing BMP to record a full year negative growth in sales volume for the first time ever (-16.3% y/y). Despite that, revenue only declined by 2.8% y/y to hit VND4,553bn, thanks to a higher selling price (+16.1% y/y) as the company increased selling prices on 4 occasions last year in response to rising input costs.
  • The gross profit margin declined from 26.6% to 15.3%. The practice of restocking inventory monthly means BMP’s input costs are tied very closely with the movement of PVC (polyvinyl chloride) Blocked demand, and soaring input costs have weighed heavily on the company’s Q3 margins but improved in Q4 as sales resumed. Net profit amounted to VND214bn (-59.0% y/y).

Outlook

  • Now that the short-term challenges have passed, the plastic pipe demand has recovered post-lockdown which is reflected in BMP’s Q4 sales volume growth of 135.6% q/q. The demand will increase further thanks to the government’s stimulus package in the near future, and Vietnam’s continued urbanization in the long-term.
  • For 2022, we expect the sales volume to rebound by 15% y/y. The selling price is expected to stay at current levels thanks to recovering demand (+7.9% y/y on average), and PVC prices will follow the uptrend of oil prices to reach an average of $1,500/ton (-3.4% y/y). Currently, BMP is buying more material than the usual 1-month inventory to take advantage of the relatively low prices, so gross margin will peak in Q2 before easing somewhat in H2. Revenue and net profit are forecast to be VND5,648bn (+24.1% y/y) and VND475bn (+121.6% y/y).
  • For 2023, we assume the sales volume will grow by 9.6% y/y, while sales prices will stay as high as in 2022, and PVC prices will decline to $1,300/ton (-13.0% y/y). The gross margin will expand, and BMP will pass on a portion of its profits to distributors in the form of higher trade discounts. With any change to the assumptions, BMP will manage to maintain EBITDA/ton at around VND8mn. That said, revenue is expected to reach VND6,189bn (+9.6% y/y), and net profit will be VND581bn (+22.2% y/y).

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