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Company Quarterly Earnings Update – DBC VN – 2019 Q1

Summary of the Q1/2019 results of Dabaco (DBC VN) 

Q1/2019 results: highlights
  • Non-real estate revenue amounted to VND 1,687 bn, +27.7% yoy. Feedstock (+25.3% yoy) and farming activities (+36.0% yoy) contributed 43.4% and 39.8% respectively to total non-real estate revenue. The strong growth was driven by  both volume and price increases of feedstock, piglet and live hogs as live hog prices recovered from the bottom registered in Q2/2018. Furthermore, DBC added capacity in all segments (feed, piglet and pig farms).
  • The company’s gross margin increased to 13.4% from 10.8% in Q1/2018 thanks to higher live pig prices. However, live pig prices and profitability was softening on a qoq basis. Net profit recorded VND20bn, almost double from Q1/2018’s low base.
  • The financial leverage went up moderately in Q1. The D/A and the D/E increased slightly to 0.51x and to 1.60x respectively. DBC’s cash position was 6.4% of assets.
Other developments: the 2019 AGM approved to
  • Move the stock’s listing from Hanoi to the Ho Chi Minh Stock Exchange in Q3/2019.
  • Distribute another 5% stock dividend for 2018.
  • Continue DBC’s intention to raise up to VND 1,000 bn. The plan has been in place since 2017 AGM, but was not executed because of capital market conditions.
  • We think that live pig prices will resume their recovery in Q3 thanks to the government’s strict measures to contain an outbreak of the African Swine Flu in Vietnam. Vietnamese people are strong pork consumers as 59% of their protein intake is coming from this source.
  • Sales volume is expected to increase in all business segments. DBC’s capex in the last 2 years was mainly reserved to increase the capacity of the feedstock production, piglet/hen breeding facilities, and pig raising farms.
  • But profitability will suffer from lower pig prices in Q1/2019 and possibly also in Q2/2019. Therefore, we lower our 2019 net profit estimate by 9.0%.
  • We forecast 2020 revenue and net profit to increase by 12.7% and by 19.7%.

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