Company Quarterly Earnings Update – QNS VN – 2020 H1

Summary of the 2020 H1 results of Quang Ngai Sugar JSC (QNS VN)

H1/2020 results highlights:
  • Overall, QNS’s sale reached VND3,249bn, -20.2% y/y. Soymilk sales declined by 6.0% y/y as the COVID-19 affected consumers’ spending. Sugar’s sale declined by 49.3% y/y due to unfavorable weather, which also curbed the country’s output by 34.5%. Also, the sale Refine-Extra (RE) sugar will only start from H2. Therefore, QNS’s net profit was 1,092bn, -15.4%, while its margin was up by 70bps, to 13.5%.
  • In June, QNS started exporting to China, with two products, i.e. original flavor, and less sugary flavor, via supermarkets and e-commerce websites like JD or Tmall.
  • QNS’s financial position remained solid. Cash and made up 27% of total assets. Leverage was moderate with a D/E and a D/A of 0.27x and 0.19x respectively).
  • Vietnam has contained the COVID-19 outbreak very effectively, with minimal social distancing measures needed. As the COVID-19 situation will be soon under control, we think the consumption of soymilk will recover in H2. Whereas its long-term growth driver is still the gradual switch to branded products. For sugar, RE sale will start in H2/2020 to tap into the country’s shortage. For biomass, thanks to the new price, QNS will start using other input materials. We revised down 2020 revenue and profit forecast by 15.1% and 11.7% respectively to account for lower expected earnings, caused by the second outbreak. For 2021, we keep our last forecast, as the business will normalize and benefit from the above long-term trend.
  • For 2020, we estimate the QNS’s revenue to amount to VND7,428bn, -3.3% y/y, and its bottom line will decline by 16.7% y/y, reaching VND1,075bn.
  • For 2021, we estimate QNS’s revenue and net profit will recover strongly by 36.0% y/y and 26.8%, respectively. Its net margin will slightly reduce to 13.5%.

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