Summary of the 2021 H1 results of Phu My Fertilizer (DPM VN)
H1/2021 results: highlights
- Net revenue increased by 25.8%y/y to VND4.876bn in H1/2021, thanks to an increase of 26.2% y/y in urea’s selling price and an increase of 73.5% y/y in in-house NPK volume, translating to the utilization rate of 71.2% compared to 35% in H1/2020.
- DPM’s gross margin improved to 28.2%, from 23.5% in H1/2020 thanks to (i) NPK’s higher gross margin due to greater utilization rates, (ii) a significant increase in NH3’s gross margin thanks to favorable selling prices, (iii) a higher gross margin for urea due to retro booking for the reduction in COGS. Excluding this adjustment, urea’s gross margin declined by 200bps to 32.2% as input gas prices outpaced the recovery of urea prices. DPM also booked an extraordinary income of VND91bn from insurance compensation. Overall, net profit surged by 62.9% to VND855bn. Excluding all these one-off adjustments, net profit was VND609bn, up 49.4% y/y.
- Global urea prices have surged since the begining of 2021, reflecting the surge in feedstock prices, rising crop prices, and tightened supply. Turning to August 2021, global urea prices are showing signs of softening as global supply has gradually ramped up in response to strong demand. For the Vietnamese market, domestic prices followed international trends, rising by 89.1% YTD (as of late July). Considering the outlook of global urea prices and the lagging of urea prices in Vietnam, we believe the domestic price will gradually subdue torwards the end of this year, before normalizing in 2022.
- For 2021: The company’s profitability will expand over the next two quarters as the rise in domestic urea prices will outpace the increase in input gas prices. Taking the year as a whole, net revenue is forecast at VND11,222bn, an increase of 44.6% y/y, 24.9% higher than the last forecast thanks to higher urea prices. Also, we revise net profit up by 135.4% to VND2,104bn, an increase of 204.4% y/y. Such a rise is attributed to (i) higher urea prices, (ii) Total one-off adjustments including VND155bn for a retro reduction in operating expenses and VND150bn in other income.
- For 2022: As urea prices normalize, net revenue is projected to decline by 12.1% y/y to VND 9,861bn, with the gross profit margin softening to 22.8%. Net profit is forecast to decline by 54.8% y/y to VND951bn. Without the one-off impact, 2022’s net profit should decrease by 47.2% y/y instead.
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