Company Quarterly Earnings Update – DHC VN – 2018 Q4

Summary of the 2018 results of Dong Hai Ben Tre JSC (DHC VN) 

2018 results: highlights
  • 2018 net revenue rose by 14.4% yoy thanks to higher selling prices and higher sales volume. Sales volume for industrial Kraft paper reached 55,715 tons (+5.3% yoy), while carton boxes reached 31mn units (+8.7% yoy). Kraft paper production only slightly increased because the factory was already operating at full capacity.
  • DHC’s gross margin rose to 22.1% from 16.3% in 2017 as the company’s selling prices increased more than average input material prices, which were up by 1.9% yoy. All in all, net profit amounted to VND 134bn, +67.1% yoy.
Other developments
  • The production start of the Giao Long 2 factory can be delayed until June 2019 at the latest due to the absence of power supply since the local authorities haven’t finished the construction of the nearby power pole. In the best-case scenario, management expects this problem to be solved by the end of February/early March, and the factory can start operating about one month later.
  • The company also has plans to expand its carton boxes factory. Since this project with a relatively small CAPEX of VND 150bn still needs approval from the 2019 AGM, we haven’t considered it for our valuation target yet. We wait for the official announcement.


  • Thanks to the added capacity, DHC’s total industrial Kraft paper capacity will fivefold from mid-2019. We are confident that the company will be able to sell all of its considerably higher output. Today it can only serve a small part of customers even though the current factory is operating at full utilization. Domestic demand is still robust with a forecasted annual average growth rate of 15.0% in the next 5 years. We expect DHC to ramp up the utilization of its new factory from 40% in 2019 to 100% by 2022 on the back of strong domestic consumption.
  • We expect a lower gross margin from 2019 onwards. This is mainly because of the higher proportion of lower-margin Kraft paper from the new factory in the product mix. All in all, we project a net profit of VND 196bn (+46.1% yoy) for 2019 and of VND 238bn (+21.5% yoy) for 2020.



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