Summary of the 2021 H1 results of Phuoc Hoa Rubber (PHR VN)
H1/2021 results: highlights
- Net revenue surged by 52.9% y/y to VND757.8bn in H1/2021 thanks to strong growth in the rubber business. On the other hand, there was a sharp drop in sales from PHR’s industrial park (IP) development business due to a lack of booking revenue. The gross margin reduced due to a high sales contribution from rubber business which has a lower margin than the IP development business. Therefore, operating profit declined by 13.2% y/y to VND90.3bn. Other net income dropped significantly to VND64.5bn due to a lack of income from selling rubber growing land to other industrial park developers. All in all, net profit dropped 70.1% y/y to VND160.0bn in H1/2021.
- By the end of H1/2021, the company maintained a strong balance sheet with total cash & cash equivalent value of VND2,010bn (33% total assets) while total debt was relatively low at VND442bn, causing a low D/E ratio of 0.14x.
- Natural rubber business: Natural rubber products are currently traded around the band of $1,800-2,200 which is considered relatively low compared to historical prices. We expect PHR’s business to generate a stable net profit of VND100-130bn per year over the forthcoming years as we expect rubber prices to be traded around the current band.
- Industrial Park (IP) development business: PHR currently owns about 12,500 ha of rubber growing land in Binh Duong province. We expect the company will gradually convert such land into IP land over the coming years, bringing the company much more profit than the current rubber business. Binh Duong province is the production hub of the South of Vietnam with the highest occupancy rate of above 90%. As Vietnam needs to develop more IPs in the south. It is easier for the government to prioritize IP development in existing production areas. In addition, it will be more convenient and economically viable to acquire land banks from single suppliers rather than collect smaller land zones from many individual households.
- Due to delayed booking for the income from selling land, we expect net profit to decline by 74.6% y/y to VND 274.5bn in 2021 before surging by VND 972.7bn in 2022.
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