Summary of the Q2/2022 results of Quang Ngai Sugar (QNS VN)
H1/2022 Results: Highlights
- Net revenue grew by 9.7% y/y to VND4,015bn. For soy milk (making up 53.2% and 73.9% of net revenue and gross profit, respectively): revenue was VND2,135bn (+12.0% y/y) mainly driven by (1) a 6% rise in sales volume to 131.3 million liters, (2) an est.6% increase in average selling price (ASP) to lessen the impact of high input material costs. Despite the higher ASP, consumer demand remains high, fueled by new products (new flavor soymilks, nut-based drinking yogurts). Sugar’s revenue declined by 3.1% y/y to VND842bn due to mixed factors: (1) est.22.0% y/y decline in sales volume caused by a significant hike in Thai sugar transshipped to other Asian countries and then exported to Vietnam (+169% y/y in volume) to evade the import tariffs on Thai sugar, and (2) +19.0% y/y in ASP during the global sugar prices uptrend.
- The operating margin reduced due to a 20.7% hike in selling expenses including promotional and advertising expenses, transportation, and sales staff costs to launch new products. All in all, net profit increased slightly by 3.8% y/y to hit VND541bn.
- For 2022: Soymilk sales will maintain double-digit growth in H2/2022 due to (1) a strong recovery within the FMCG sector from last year’s lockdown, (2) a new contribution from nut-based drinking yogurt, and (3) higher ASPs. We retain 2022F soymilk sales of VND4,752bn (+16.2% y/y). For sugar: net revenue is revised down 9.6% due to significant impacts from Thai sugar transshipped and imported via other Asian countries. As soybean prices fell 18.9% from Q2/2022, the gross margin will improve in H2 thanks to lower input soybean costs. We maintain our expectation for a 15.4% hike in average soybean prices this year, while QNS raised the ASP by 5-6% to mitigate the impact on profit margins. As a result, our 2022F gross margin projection remains 29.8% (-90bsp y/y).Overall, due to underestimated sugar performances, we lower our net profit forecast by 4.5% to VND1,367bn (+10.1% y/y).
- For 2023: We project the top line will expand by 17.2% to VND10,665bn. Key drivers are: Soymilk revenue is expected to rise 9.7% y/y (better than the industry growth of 4.9%) combined with an improved profit margin thanks to the further easing of soybean prices. Sugar sales look set to jump 38.6% y/y due to (1) a strong sugarcane area expansion, (2) a 37.1% growth in sales volumes, supported by the MoIT’s anti-dumping and anti-subsidy taxes on imported sugar from ASEAN countries for 4 years from August 2022. Overall, we expect the bottom line to be VND1,653bn (+20.9% y/y).
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