Summary of the 9M 2018 results of Tien Phong Plastic JSC (NTP VN)
9M/2018 results: highlights
- 9M net revenue fell by 3.6% yoy, mainly due to a 4.3% yoy lower sales volume, which amounted to 60,528 tons. The average net selling price grew modestly by 0.8%, purely due to a small change in sales mix towards higher priced product lines.
- NTP’s gross margin fell to 30.1% from 33.8% as a result of higher material costs. The company’s operating profit was down by 11.0% yoy to VND 315bn. Excluding an one-off income in 2017, net profit would have declined by 27.7% yoy.
- By the end of Q3, NTP had VND 108bn of cash and cash equivalents, accounting for 2.4% of total assets. The D/E ratio was 0.9x, up from 0.8x by the end of 2017 because of higher short-term borrowings to finance the company’s working capital.
- In our view, Vietnam’s real estate market will slow down in the short-term after a period of overheating. As a consequence, construction demand will lose momentum, negatively impacting the firm’s growth prospects. In the long-term, however, the construction sector should perform solidly due to strong housing demand and the need for infrastructure development. As a result, we project 2018’s top line to increase by 0.5% yoy and the bottom line to decline by 34.7% yoy. But we expect these results to improve strongly by 8.4% and by 25.7% yoy respectively in 2019.
- NTP’s net profit margin is currently at the lowest level in five years as the company is pursuing an aggressive pricing strategy that is aimed to squeeze the profitability of new market entrants and to kick them out of the plastic pipe sector. We think the situation will improve soon as NTP’s major competitor is facing financial difficulties. Hence, the company’s net margin should recover to a reasonable level for a leading plastic pipe producer in Vietnam. We forecast the net profit’s CAGR for the 2019 – 2023 period to amount to 10.7% p.a.
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