Company Quarterly Earnings Update – QNS VN – 2019 Q3

Summary of the 9M/2019 results of Quang Ngai Sugar JSC (QNS VN) 

9M/2019 results: highlights
  • Net revenue declined by 1.6% y/y to VND 6,048bn. The two major revenue components moved in opposite directions: soymilk revenue (54.9% of total revenue) was up by 14.7%, while sugar revenue (21.0% of total revenue) declined by 27.8% y/y. The soy milk segment registered strong volume growth of 12.2%, mainly thanks to new products that were launched in Aug 2018 and in Jun 2019. Sugar sales declined, above all due to bad weather, which caused the 2019 sugarcane production to fall by 30% y/y.
  • The company’s bottom line increased by 2.4% y/y despite lower revenue as the improved margin of the soy milk segment outweighed the  negative factors such as the lower margin of the sugar segment  and the company’s overall higher tax rate as the tax incentives of  the Bac Ninh soy milk factory ended.
  • QNS’ financial position remained solid: cash and deposits made up 29% of total assets, and leverage was moderate (D/E and a D/A ratio of 0.23x and of 0.16x).
  • For 2019, we estimate the company’s revenue to amount to VND 7,612bn, -5.2% y/y, and net profit to come in at VND1,122bn, -9.5% y/y. We think that soy volume will increase by 6.0% y/y in Q4, while average prices should remain unchanged from Q3. Sugar revenue however is expected to decline by 78% y/y as the sugar inventory fell to only 30,000 tons, and the next crushing period has not started yet.
  • As for 2020, we estimate QNS’ revenue to increase by 22.7%, and net profit to go up by 12.1% y/y. Soy milk is likely to grow by 9.4%, similar to the industry growth forecast. In order to strengthen its already dominating position, QNS puts great  efforts to develop new products and to improve its digital marketing channels. We expect sugar revenue to double from 2019 thanks to the contribution from QNS’ RE factory, which is expected to run commercially from early 2020.

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