Company Quarterly Earnings Update – NTP VN – 2020 H1

Summary of the 2020 H1 results of Tien Phong Plastic JSC (NTP VN)

H1/2020 results highlights:
  • H1 revenue declined by 13.4% y/y, while sales volume dropped 10.4% y/y. Sales volume in Q2 dropped 21.7%, which can be attributed to 1) more severe development of Covid-19 in the North compared to the rest of the country, 2) slow public investment in H1, and 3) delayed construction approval for residential projects.
  • Operating margin decreased slightly to 11.9%, mostly due to a VND80bn provision for doubtful receivables, which the company expects to retrieve in H2.
  • Financial expense decreased by 50.9% y/y, mostly thanks to decreasing interest expense and a VND13bn reversal of the provision for long-term investments in Q2. Net profit was VND204bn, -6.7% y/y.
  • Financial position at the end of the quarter was still reasonable with moderate leverage (D/E and D/A of 0.60x and 0.35x, respectively).
  • In the last quarterly note, we expected that Covid-19 would be fully contained globally by the end of Q2 or within Q3, and that the business environment would normalize around that period. However, the pandemic lasted longer than our initial expectation, with the current second wave of infection and pending development of vaccines for Covid-19. For NTP, its H2 revenue will be better than in H1 as public investments are being pushed to counter the negative impacts on the general economy, and approval for large residential projects will also be speeded up for the same reason. We revise down our forecast revenue for 2020 to decrease by 0.4% y/y (previously a 5.1% y/y growth). For 2021, we forecast revenue to increase by 9.3%.
  • Profitability, as measured by operating profit margin, will increase in 2020 to 12.0% before normalizing in 2021 to 11.4% due to movements of input materials costs. We expect management to continue supporting its distribution partners by passing on part of the cost savings from lower input costs in the form of higher commission, which can be cut back when input costs increase. We project net profit to be VND456bn (+11.6% y/y) in 2020, and VND490bn (+7.5% y/y) in 2021.

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