Company Quarterly Earnings Update – VNM VN – 2018 Q3

Summary of the 9M 2018 results of Vinamilk JSC (VNM VN) 

9M/2018 results: highlights
  • Revenue was up by 2.2% yoy. Domestic dairy sales declined by 2.3% yoy, Liquid milk revenue was still growing, while powder milk sales fell the most among VNM’s business segments. Some possible reasons are a loss of market share, to imported products through online sellers.
  • VNM’s margins declined as the company consolidated a newly acquired and less profitable subsidiary, VietSugar which refines sugar. The domestic dairy margin remained stable. Net profit declined by 7.3% yoy.
  • The financial position remained solid: cash and deposits was 24.0% of total assets, and a low leverage (D/E and D/A of 0.05x and of 0.04x respectively).
  • Ex-date of the second 2018 dividend (VND 1,000/share) will be 28 Dec 2018, and the payment will occur on 28 Feb 2019). In Q3, VNM issued a share bonus with a ratio of 20%, and advanced the first 2018 dividend of VND 2,000/share (VND 1,666/share, after adjusting for the share bonus).
Other develompents
  • Two major shareholders, F&N and Platinum, have a pending registration to purchase an additional 1.0% stake each.
Outlook
  • We estimate the 2018-2022 annual revenue CAGR to reach 6.0%. Domestic dairy sales growth should amount to 5.2% p.a., a bit lower than the industry growth rate of 6.2% (estimate by EuroMonitor), as competition from imports and from online channels will grow.
  • However, profitability is expected to remain at 2018’s levels thanks to the company’s more efficient use of economies of scale.
  • We project revenue growth of 3.5% in 2018, while the profit should remain unchanged from 2017. As for 2019, we project revenue and net profit to increase by 6.8% and by 4.2% respectively.
Recommendation

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