Company Quarterly Earnings Update – QNS VN – Q3 2022

Summary of the Q3/2022 results of Quang Ngai Sugar JSC (QNS VN)

9M2022 Highlights

  • Net revenue increased by 9.3% y/y to VND6,311bn. Soy milk (making up 53.7% and 75.6% of total revenue and gross profit, respectively): revenue was VND3,390bn (+4.8% y/y), while the gross margin improved from 41.2% to 41.8%, driven mainly by an increase in the average selling price while the total sales volume was 207 million liters, flat with last year’s high base. Sugar: following the anti-dumping and anti-subsidy taxes in Aug 2022, imported sugar fell significantly, resulting in an 89% y/y growth in Q3’s sales volume to 39,914 tons. Overall, sugar revenue grew by 17% y/y to VND1,449bn.
  • Despite the improvement in soymilk’s gross margin, the higher contribution from the sugar sector (which has a lower gross margin) resulted in an 0.8% decline in 9M’s gross margin to reach 29.7%. Additionally, SG&A as a percentage of sales rose 0.4% to 14.7%, above our expectation due to a 16.2% y/y increase in selling expenses including (1) promotion costs, supplier discounts, and (2) the launch of new nut-based drinking yoghurt (VEYO) in Q3. Overall, net profit decreased slightly by 1.4% to VND858bn.
  • QNS’s financial position remained solid. Cash and equivalent made up 40.6% of total assets. Leveraging was low with D/E and D/A ratios of 0.17x and 0.13x, respectively.

Outlook 2022-2023

  • For 2022: To meet the high market demand for Tet holiday, which comes earlier in 2023, we expect soymilk’s Q4 sales volume to return to pre-Covid levels (67 mn liters). Along with lower input prices & higher ASP, the gross margin will improve 2.5% y/y. Thus, Q4’s net profit is predicted to reach VND440bn (+18.3% y/y). Overall, due to a lower-than-expected 9M, 2022F net profit is revised down by 5.4% to VND1,294bn (+4.2% y/y).
  • For 2023: Plant-based nutrition and immunity boosters are two major trends of health-conscious consumers in Vietnam, according to Kantar statistics. To take advantage of this growing trend, QNS is diversifying into more products (outside of soymilk). The top line is set to grow by 15.6% y/y to VND9,852bn. The main drivers are: (1) Soymilk revenue is expected to rise 10.0% y/y, mainly driven by (i) a 4.9% stable growth in local demand, (ii) a new 3% contribution of nut-based drinking yogurt, and (iii) a greater contribution from the export market, and (2) Sugar sales are predicted to grow 26.4% y/y thanks to the expansion of sugarcane area from 21,000 to 25,000ha, a 11.7% rise in sugarcane yield, and high ASP supported by the tariffs on imported sugars. The bottom line is projected to rise by 19.5% y/y to VND1,546bn.


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