Company Quarterly Earnings Update – NTP VN – 2019 Q3

Summary of the 9M/2019 results of Tien Phong Plastic JSC (NTP VN) 

9M/2019 results: highlights
  • Net revenue was up by 5.6% y/y, mainly thanks to higher sales volume (+5.4% y/y). However, Q3 volume fell by 20.8% y/y as 1) NTP had a promotion program in June, which encouraged its distributors to purchase more goods in Q2, reducing their stockpiling needs in Q3 and 2) the slow government spending on public infrastructure temporarily softened demand for construction material. In fact, government spending disbursement fell by 5.9% y/y in 9M/2019. On the other hand, competition for NTP eased as one of its main competitors (the Hoa Sen Group – HSG) was contracting its plastic business. NTP managed to keep its selling prices stable during the period.
  • Operating profit rose at a faster pace than revenue, thanks to lower Selling, General and Administrative Expenses (SG&A) due to lower discounts given to distributors. The more favorable competition environment created more room for NTP to adjust its discount policy. All in all, the company’s net profit amounted to VND 301bn (+35.7 y/y).
  • By the end of 9M, NTP had VND 204bn of cash and cash equivalents, accounting for 4.6% of total assets. The leverage ratios improved (D/E and D/A of 0.7x and of 0.4x, respectively) as net debt declined.
  • Our longer-term view on the Vietnamese market for plastic construction materials didn’t change from our last report. It remains optimistic thanks to robust housing demand due to the population’s continued urbanization, and due to the need for more infrastructure development and strong industrial construction.
  • The competitive environment has improved for NTP due to deteriorating business prospects of one of its main competitor as mentioned above. In the longer run, we believe that NTP will remain the country’s top plastic pipe producer. Furthermore, the company should be able to expand its market share thanks to its long-established brand name and its large distribution network. We forecast 2019 and 2020 net profit to amount to VND 411bn (+23.9% y/y) and to VND 456bn (+10.9% y/y), respectively.

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