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Company Quarterly Earnings Update – DBC VN – 2019 Q2

Summary of the H1/2019 results of Dabaco (DBC VN)

African Swine Flu (ASF) outbreak update

4.4 mn pigs (15% of Vietnam’s herd size) were culled since the disease was first discovered in February 2019. However, there was no reported case yet at an industrial-size farm of a large company such as CP or Dabaco.
After bottoming in Q2, live pig prices have started to increase in Q3, because of lower supply and increased cross-border trade to China, which supported record-high prices. The ASF was discovered 6 months earlier in China than in Vietnam. China’s ban of meat imports from the U.S. helped to keep pig prices high

H1/2019 results: highlights

DBC’s revenue increased by 11.5% y/y, but growth decelerated in Q2 due to lower pig prices. On a y/y comparison, core business profitability was similar as in H1 of last year. However, the lack of real estate revenue/profit and higher interest expenses lowered the company’s bottom line by 64.6% to VND37bn.
Leverage increased moderately in Q2 from Q1: Short and long-term loans amounted to VND 4,700bn (+6% q/q), leading to a D/A and to a D/E of 0.50x and of 1.71x respectively.
DBC moved its listing to the Ho Chi Minh Stock Exchange on 26 Jul 2019.

Outlook

We expect live pig price to stay elevated till at least Q2 of next year when the new breed can be slaughtered, helping to support the profitability of DBC’s pig breeding and farming activities.
We retain our latest profit forecasts for 2019 and for 2020. We expect net profit to fall to VND203 bn (-43.5% y/y) this year as there will be no real estate profit, but higher interest expenses. However, net profit is projected to rise to VND 240bn (+18.1%) in 2020

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COMPANY RESEARCH

10 October, 2019

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