Back to Previous Page
Company Quarterly Earnings Update – DHC VN – Q1 2024
Summary of Q1/2024 results and outlook of Dong Hai Ben Tre JSC (DHC VN)
- Net revenue reached VND811bn (-4.3% y/y). DHC’s volume sales still exhibit positivity, with nearly full utilization of the kraft paper mills, and a notable increase of 41.6% y/y in cardboard box volume. Meanwhile, increasing shipping fees from Europe to Asia amid the intensified geopolitical tensions have led to raised OCC prices. However, the selling price increased at a slower pace, given Vietnam’s kraft paper industry was still under pressure from FDI paper manufacturers products, who temporarily prioritized local sales due to sluggish demand recovery from China (noted that since DHC serves mostly the Southern region, while most FDI dumping activities are in the North, DHC is not much impacted). Lagging increases in selling prices have failed to offset the rise in OCC prices, resulting in DHC’s gross margin contracting to 12.8%. This led to a 35.4% y/y decrease in net profit to VND56bn.
- Despite the lower-than-expected Q1 results, recovery is anticipated as strong local demand will enable an increase in selling prices. For 2024, given the kraft paper mills have run at their maximum utilization, revenue increase will mostly come from increasing cardboard box sales as the cardboard box factory added since 2022 continues to increase its utilization. The gross margin will gradually improve towards year-end thanks to (1) higher sales proportion from cardboard box, and (2) higher margin of kraft paper thanks to the ability to increase the selling price.
- Looking further, the Vietnam Paper and Pulp Association expects the kraft paper demand to grow at a rate of 15% per annum during 2024-2029, driven by both general consumption (from spending on goods, export, and e-commerce activities) and the government’s aim to reduce plastic consumption. This forecasted trend benefits DHC’s strategic plan to expand kraft paper production with the new Giao Long 3 kraft paper mill. Scheduled to commence construction in Q4/2024 and expected to last 2.5 years, Giao Long 3 will begin commercial operations from H2/2027 onwards. This expansion is poised to significantly enhance DHC’s business results starting in 2027, particularly through the production of higher-margin kraftliner paper, for which there is insufficient local production capacity in Vietnam
Company ratings and target prices are accessible for clients only.
If you are interested in getting full access to our paid Primary Research Materials feel free to get in touch with us at your convenience.
Our team is actively covering 50 companies in the listed Vietnamese equity space for our clients.
Featured image credit: https://dohacobentre.com.vn/
