Summary of the 2021 results of Phuoc Hoa Rubber (PHR VN)
2021 Results: highlights
- Net revenue increased by 19.0% y/y to reach VND1,942bn in 2021 thanks to a 32.0% y/y increase in their rubber business sales, reaching VND1,398bn. PHR sold 33,600 tons of rubber in 2021, up 5.9% y/y while the average selling price rose 24.7% y/y. In contrast, industrial park (IP) development sales declined by 11.3% y/y to VND252bn.
- The gross margin improved from 23.8% to 26.4% thanks to a higher margin from the rubber business and other businesses. Operating profit advanced by 34.8% y/y to VND371bn. However, other net income dropped significantly from VND 973bn to VND80.0bn during the same period last year due to a lack of income from selling rubber growing land to other industrial park developers. All in all, net profit dropped 49.9% y/y, hitting VND542bn in 2021.
- Although 2021’s net revenue was nearly the same, net profit was about VND185bn (52%) higher than our initial forecast. The main reasons are (i) higher profitability in the rubber business after the company re-calculates production costs for the whole year; (ii) other businesses from subsidiaries posted strong results in Q4; (iii) higher dividend income from associates.
Outlook
- Natural rubber business: We expect rubber prices to plateau in 2022 and 2023 as a combined impact of weakening global demand and rising production costs for natural rubber come into effect. However, the rubber business will only play a relatively minor role in the income stream of PHR over the next 5 years.
- IP development business: As per current pipelines, this business line will generate minimal revenue for PHR in 2022 and 2023, yet, it will create strong growth from 2024 onwards. As VSIP 3 IP acquired its investment license in Jan 2022, PHR will be able to deliver rubber land to the developer of VSIP 3. Accordingly, PHR will book an extraordinary income of VND898bn from such transactions, causing its net profit to jump to VND1,222bn in 2022 before declining to VND588bn in 2023. From 2024 onwards, we expect all other IP projects of PHR can start to be leased, generating significant income for PHR. We forecast PHR’s net profit will grow with a CAGR of 60.4% during 2023-2026.
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