Summary of the 2021 H1 results of Quang Ngai Sugar JSC (QNS VN)
H1/2021 Results: Highlights
- Revenue for QNS was VND3,670bn, +12.9% y/y. Soymilk, QNS’s primary profit driver, accounted for 52% of the total, growing modestly by 2.2%. Sugar revenue (23.7% of total) surged by 63.1% y/y with a 46.0% volume growth and a 11.7% price increase. The performance of other products was mixed: biomass revenue increased thanks to the higher availability of sugarcane bagasse while confectionary/ beer/ beverages saw their revenue decline.
- Net profit was up by 19.3% y/y. The gross margin was 28.3%, lower than in H1/2020 due to offsetting factors: 1) a lower margin for their soymilk segment because of lower average selling prices combined with higher soybean costs; 2) strong revenue growth from the low-margin sugar segment; 3) a stronger gross margin of the sugar segment thanks to a higher selling price of sugar. Net profit was further boosted by lower tax rate thanks to tax incentives for sugar production.
- Financial health is strong, with moderate leverage (D/E of 0.31x and D/A of 0.22x).
- In June, the Ministry of Industry and Trade (MoIT) imposed anti-dumping and anti-subsidy duties amounting to a total of 47.6% on all sugar products from Thailand.
- In the current 4th wave of COVID-19, lockdowns have been implemented in major cities and provinces. As QNS’s factories are located outside of those hot spots, production can carry out normally. With the exception of confectionary and beer, which are only small revenue contributors, QNS’s products are considered as essential. Thus, we project no major sales disruption. Compared to our previous estimates, we revise down revenue solely due to the lower Extra Refined (RE) sugar sales, while we increase our net profit estimate by 2.0% to VND1,186bn primarily thanks to the vastly superior Refined (RS) sugar segment margin.
- For 2022, we project revenue and net profit will grow by 15.7% and 18.3% respectively. Growth drivers are: soymilk volume thanks to the recovery of general consumption, and higher utilization of sugar mills thanks to a higher availability of raw materials and higher prices.
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