Summary of the Q2/2022 results of Binh Minh Plastic (BMP VN)
H1/2022 results highlight
- Net sales rose 11.5% y/y to VND2,909bn thanks to a 27.0% y/y increase in average selling prices, which have remained unchanged since the previous hike in November 2021. The sales volume declined 12.3% y/y to 49,035 due to less construction activities amid rising construction material prices, albeit this sales volume is equal to pre-Covid levels in 2019. Most people were reluctant to build residential projects as they plan to wait for materials prices to cool down. In addition, Vietnam’s real estate market experienced some unfavorable developments related to prolonged construction licensing acquisition, tightening of the corporate bond market, etc.
- The gross margin expanded by 9.4 percentage points to 24.4% driven by higher selling prices, while the average price of PVC (polyvinyl chloride) was similar to the same period last year. Selling and administration expenses in relation to net sales increased from 7.9% to 10.9% due to higher commission as BMP partly shared benefits with its distributors when gross margins improved. As a result, the operating margin improved by 6.3 percentage point to 13.5%. Net profit amounted to VND273bn (+116.8% y/y).
- By the end of June, BMP had VND1,020bn of cash and term deposits (accounting for 34.7% of total assets), no long-term debts, and short-term debts accounted for only 1.9% of total assets. Leveraging was very low with D/E and D/A ratios both at 0.02x
- After a strong increase in the first half, construction material prices have significantly corrected, with delayed construction projects expected to gradually resume following a wait for material prices to cool. As such, plastic pipe consumption is expected to perform better in the second half of this year.
- PVC resin prices has started to fall quickly since mid-June with Chinese sellers’ aggressive offers in the regional markets amid a falling real estate market in their country. Given the fall in crude oil prices and the currently weaker PVC futures quotes we expect PVC prices to normalize to $1,000-1,200/ton in 2022-2023 from our last projection of 1,300-1,400/ton. BMP will probably lower selling prices, but at a slower pace than the input price drops, leading to better profit margin in H2. Overall, we project a net profit of VND 589bn (+174.8% y/y) for 2022 and VND 536bn (-8.9% y/y) for 2023.
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Featured image credit: binhminhplastic.com.vn