Summary of the 2018 results of Dabaco (DBC VN)
2018 results: highlights
- Net revenue from the non-real estate business segments increased by 30.8% to VND 6,535bn. Farming and food processing revenue surged by 70.4% yoy (37.1% of total revenue), supported by the recovery of live pig and piglet prices as farmers rushed back to the market. Revenue from animal feed increased by 10.6% yoy on both higher volume and higher average selling prices (46.0% of total revenue).
- Profitability sharply recovered with an operating margin of 7.5%, compared to a loss in 2017. However, substantially lower real estate revenue/profit and no one-off financial gain as in 2017 offset the jump in the operating profit. Net profit increased by 80.0% to VND 360 bn.
Outlook
- Pig farming in Vietnam is facing a new challenge: the African swine flu has spread to 20 provinces only 1 month since it was first discovered. Unlike during the last pig crisis, there is now a strong price support at VND38,000/kg, which is also the government’s compensation price for culled pigs. This disease cannot be transmitted to humans. Therefore, we expect demand for pork to resume soon. The Vietnamese consumes more than 50% of its protein needs in pork.
- We forecast DBC’s net profit to decline by 38.1% in 2019, before profits should start increasing again in 2020 (+15.6%).
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