Company Quarterly Earnings Update – VGC VN – 2018 Q3

Summary of the 9M 2018 results of Viglacera Corporation (VGC VN) 

H1/2018 results: highlights
  • VGC reported slightly lower sales and net profit in H1/2018, mainly due to the rather poor performance of the building glass and of the terracotta business, while the bottom line held up fairly well thanks to certain segments of the real estate business. The gross margin of the building materials segment was negatively affected by higher fuel prices and lower selling prices due to unexpected supply from new producers. However, demand for the whole building
    sector is still strong and should support the company’s profitability going forward.
  • The company’s net revenue declined by 4.3% yoy to VND 4,104bn. Sales of the building materials segment fell by 1.6% yoy, while the real estate business posted 12.8% yoy lower sales. VGC’s gross margin declined to 22.8% in H1/2018 from 24.5% in H1/2017. Net profit was lower by 7.6% yoy, amounting to VND 325bn in H1/2018.
Outlook
  • VGC’s building materials businesses is likely to be supported by the bright longterm outlook of the Vietnamese real estate market: The country’s rate of urban population is still low (34.9%). However, urbanization growth is higher than in most other regional countries (2.7% p.a on average). In comparison, the urban population grew by 3.1% p.a in Vietnam during the last five years.
  • Vietnam is the most obvious destination to replace China as the global workbench as the world’s second largest economy is moving up the value chain and as the trade war between the US and China is intensifying. As the biggest IP developer in the Northern Vietnam (total leasable area of 2,288 hectares), VGC’s IP development business should become the main driver for the company’s profitability in the years ahead.
  • We expect the profitability of the building materials segment to bottom out this year. VGC’s net profit is likely to increase by 3.7% yoy in 2018, and by 5.6% yoy in 2019. From 2020, we expect several on-going projects to increasingly contribute to the bottom line, which we then project to rise 22.3% yoy.
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