Summary of the 2018 results of Tien Phong Plastic JSC (NTP VN)
2018 results: highlights
- Net revenue grew by 2.0% yoy, sales volume reached 89,717 tons (+3.0% yoy). Volume and sales mix remain the same compared to last year. NTP’s gross margin fell to 29.4% from 33.2% as a result of higher material costs. This is partially offset by a reduction in Selling and Administration Expense (SG&A) of net sales from 21.7% last year to 19.5%.
- Net financial expenses increased by 24.7% yoy mainly from higher interest expense due to higher short-term borrowings to finance the company’s working capital. The D/E ratio was 0.9x, up from 0.8x by the end of 2017. All in all, net profit amounted to VND 332bn (-32.7% yoy), 3.1% higher than our forecast.
- By the end of the year, NTP had VND 83bn of cash and cash equivalents, accounting for 1.7% of total assets.
Outlook
- Our longer-term view on the Vietnamese market for plastic construction materials doesn’t change from the last report and remains optimistic thanks to the robust housing demand from the continuing urbanization of the population, and the need for infrastructure development and industrial construction.
- NTP’s net profit margin was at the lowest level in five years as the company is pursuing an aggressive pricing strategy to squeeze the profitability of new market entrants and to kick them out of the plastic pipe sector. NTP’s major competitor, HSG, is facing many difficulties in their core business. Hence, we expect the competition will weaken from this year onwards and NTP’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 12.7% p.a.
Recommendation
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