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Company Quarterly Earnings Update – BMP VN – Q4 2023
Summary of 2023 results and outlook of Binh Minh Plastic JSC (BMP VN)
- Net revenue decreased by 11.2% y/y. BMP’s sales volume declined by 10.9% y/y given lowered construction demand. The selling price was nearly unchanged (vs. NTP’s price of -9.1% y/y), as BMP only offered drip-feed commissions to distributors in short periods. The two companies could maintain different selling prices because their customers are based on their geographic locations to ensure product compatibility with the local pumping system. Besides, BMP had a higher bargaining power as it mostly sells to self-built houses, who prefer to buy from a leading company like BMP, while NTP has a higher sales contribution from large real estate/infrastructure projects, thus needing to keep prices competitively lower.
- The operating margin increased by 1.5 times to 25.9%, driven by (1) a significant drop in PVC resin prices (-26.9% y/y), (2) a nearly unchanged selling price, and (3) efficiency improvements through automation. On a quarterly basis, Q4’s margin was slightly narrower than Q3 due to increased commissions to boost sales at year’s end, causing higher selling expenses. However, BMP’s strong bargaining power allowed the company not to pass all benefits from input materials to distributors and customers. Overall, net profit reached a record high of VND1,041bn (+49.5% y/y).
- Solid financial position: cash and short-term investments amounted to 61.8% of total assets. Leverage remained low with D/E and D/A ratios both at 0.02x.
- Going forward, several macroeconomic factors will support BMP’s sales volume. The low interest rate environment is expected to encourage house-buying decisions, new self-housebuilding and renovation demand. Additionally, the amended Real Estate Business Law and Land Law (approved in November 2023 and January 2024, respectively) will gradually solve the legal problems, helping several stalled real estate projects resume their construction works. As it takes time for the policies to take effect, we expect to see a clearer impact on the real estate sector and construction materials demand from H2/2024 onwards.
- For 2024, we expect BMP’s sales volume to follow the recovery construction demand mentioned above, but the selling price will likely be reduced to maintain its competitiveness. For 2025, we project sales volume will drive the revenue to grow. As we expect PVC resin prices to gradually increase from H2/2024, the operating margin will be normalized but still higher than the average of 15.2% during 2018-2022.
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Photo image credit: https://www.binhminhplastic.com.vn/
