Company Quarterly Earnings Update – NTP VN – 2020 Q1

Summary of the 2020 Q1 results of Tien Phong Plastic JSC (NTP VN)

Q1/2020 results highlights:
  • Revenue declined by 4.2% y/y, which was solely due to the decline in the. selling volume as the average selling price stayed almost unchanged. Its product mix was still 80% PVC, 20% HDPE, and PPR pipes. The lower selling volume in Q1 was attributed to 1) the close gap between two public holidays this year (Solar and Lunar New Year were only 3 weeks apart), and 2) slow infrastructure development in Q1 amidst the increased corruption investigation.
  • Profitability as measured by operating margin increased slightly to 11.7% from 10.7% in Q1/2019. Net profit was VND75bn, +5.6% y/y.
  • Financial position at the end of the quarter was reasonable with moderate leverage (D/E and D/A of 0.5x and 0.3x respectively).
  • AGM approved 2019’s total dividend of VND2,000/share. Of which, the first half was paid in Jan and the 2nd half will be paid in Jun.
  • We forecast revenue to grow by 5.1% in 2020 and 9.3% in 2021. We assume that all the growth will be fueled by the volume growth, while the average selling price will be unchanged. The first revenue growth driver is the demand for residential construction, which is boosted by the long-term trend of urbanization and increased income. Even in April, when Vietnam exercised a soft lockdown nationwide to prevent Covid-19, NTP still reported a positive volume sale growth. The second driver is the demand from infrastructure development thanks to the increasing popularity of plastic pipes usage although its sale here is still small because of the higher price of plastic pipes vs. alternative products (cement or steel pipes).
  • Profitability will likely be higher in 2020 and 2021 thanks to lower input materials costs. Nevertheless, part of the benefit from lower input costs will be passed on in forms of higher commission to distributors (as a component of selling expenses), which can be cut back when input costs increase. Net financial expense is expected to reduce slightly as NTP continues to shorten its working capital turnover cycle and thereby lowering the need for short-term loans. All in all, we estimate net profit to grow by 12.8% and 13.9% in 2020 and 2021 respectively.

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