Company Quarterly Earnings Update – DPM VN – 2020 H1

Summary of the 2020 H1 results of Phu My Fertilizer (DPM VN)

H1/2020 results highlights:
  • Net revenue increased by 10.6% y/y to VND3,876bn in H1/2020 mainly thanks to strong urea sales, enabling by its factory’s normal operation compared with a 71-days closure for maintenance during this time last year. The in-house NPK sales posted a decent growth of 8.7% y/y. On the other hand, sales from other products, mostly from trading imported fertilizer products, reported a decline of 22.6% y/y.
  • Gross profit surged by 71.2% y/y to VND909bn while gross margin rose to 23.5% from 15.1% in the same period last year both thanks to a higher sales contribution from the urea business and a lower input gas price. Additionally, the NPK business reported a positive gross margin for the first time since its operation. Net profit jumped almost five times to VND408bn in H1/2020 thanks to higher gross margin, lower administration expenses, and higher interest income.
  • By the end of H1/2020, DPM’s cash and cash equivalent were VND4,456bn, accounting for 37.6% total assets of the company. Financial leverage was low with D/E of 0.14x. As a result, DPM had a strong net cash position of VND3,287bn, which made up about 60% of the company’s market cap.
Outlook
  • The H1/2020’s results were on track with our expectations in our previous report. However, as the oil price has recovered faster than our forecast, it will reduce the urea business’ profitability in H2/2020. On the other hand, the NPK business should be profitable in 2020, which is better than our last projection.
  • We expect DPM’s net profit to increase by 92.4% y/y to VND727bn in 2020 mainly thanks to the recovery of urea business. 2021’s net profit should decline by 3.6% y/y to VND701bn due to higher oil prices.
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