Company Quarterly Earnings Update – DHC VN – 2021 9M

Summary of the 2021 9M results of Dong Hai Ben Tre JSC (DHC VN)

9M/2021 results: Highlights

  • In Q3/2021, domestic demand for packaging paper weakened as lockdown measures to contain the 4th wave of COVID-19 were implemented for almost the entire quarter. However, DHC still managed to run its paper facilities at full capacity as the company increased its exports to compensate for the loss in domestic demand. Meanwhile, cardboard box facilities were run at 84% capacity as most of DHC’s customers for cardboard boxes are agricultural producers and exporters in the Mekong Delta region, who were heavily impacted by the lockdown.
  • Overall, for 9M/2021, DHC’s revenue rose 50.6% y/y to VND3,046bn thanks to both price increases (as the company passed on surged raw material costs) and sales volume growth (the paper volume increased 12.2% y/y and the cardboard box volume was up 18.6% y/y). The gross margin was 17.8%, slightly down from 18.0% in 9M/2020. Net financial expenses reduced by 88.6 y/y as the company paid off its long-term loans and reduced short-term loans. Overall, 9M net profit stood at VND389bn (+64.3% y/y).

Outlook

  • For 2021: Turning to Q4, the demand for packaging paper strongly rebounded thanks to the recovery of manufacturing activities in the domestic market and high Chinese import demand. OCC prices will lessen somewhat over the coming months, improving DHC’s profitability. For the year as a whole, we keep 2021’s revenue estimates unchanged from our previous forecast at VND4,143bn (+43.5% y/y), but revise net profit down 4.7% to VND501bn (+27.7% y/y) due to higher-than-expected OCC prices in Q3.
  • For 2022: Revenue is expected to decline by 8.3% y/y due to lower selling prices as OCC prices normalize. Meanwhile the cardboard box volume will increase thanks to the new factory coming into operation. Net profit is expected to rise 9.3% y/y to VND547bn mainly due to a higher gross margin thanks to the higher contribution of cardboard box revenue which has a higher margin than that of paper.

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