Company Quarterly Earnings Update – BMP VN – Q1 2022

Summary of the Q1/2022 results of Binh Minh Plastic JSC (BMP VN)

Q1/2022 results highlight

  • BMP’s net revenue rose 17.0% y/y to reach VND1,350bn thanks to a 32.4% increase in the average selling price, which were lifted last year. The sales volume declined by 11.5% y/y to 22,635 tons, likely as a combined result of 1) a time lag between plastic pipe consumption versus other construction materials like steel, 2) a shortage of construction labor during the peak of the Omicron wave in March 2022.
  • The gross margin expanded by 5.7 percentage points to 23.6%. Selling and administration expenses in relation to net sales increased from 7.9% to 10.1% due to the higher commission as the company shared benefits with its distributors as their gross margins improved. Overall, net profit amounted to VND127bn (+ 51.3% y/y).
  • By the end of March, BMP’s financial position remained solid with cash and short-term investment accounting for 35.4% of total assets. Leveraging was low with D/E and D/A ratios both at 0.02x.

Outlook

  • All pandemic-related factors which had slowed down plastic pipe consumption over the past two years have passed. Plastic pipe consumption normally experiences a two-to-three-month lag versus other construction materials like steel. As Vietnam’s domestic steel consumption increased 13.2% y/y in Q1, we expect plastic pipe consumption to follow and improve from Q2/2022. Meanwhile, our long-term view of the Vietnamese plastic pipe industry remains positive thanks to the continued urbanization and need for infrastructure development.
  • For 2022, we forecast the sales volume to grow by 10% y/y to 101,858 tons. The average selling price is expected to increase 21.3% y/y as a result of price increases end of last year, while PVC prices are likely to be stable at around $1,430/ton. The operating profit margin will rebound sharply to 10.8% from a very low position of 7.2%. Overall, revenue and net profit are forecast to be VND6,073bn (+33.4% y/y) and VND451bn (+110.4% y/y) respectively.
  • For 2023, we expect total sales volumes to return to the long-term growth rate of 9.6% y/y to 112,000 tons. Net revenue should grow similarly by 9.6% y/y as we expect no change in selling prices. PVC prices are projected to decline 5.9% y/y to $1,350/ton, while the operating profit margin is estimated to increase only slightly to 11.4% and part of the lower cost will be used as commission for distributors. Overall, net profit will amount to VND527bn (+16.8% y/y).

 

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