Company Quarterly Earnings Update – VNM VN – 2019 Q2

Summary of the H1/2019 results of Vinamilk JSC (VNM VN) 

H1/2019 results: highlights
  • VNM’s net sales increased by 7.6% y/y. Domestic sales rose by 6.4% y/y due to higher average selling prices, expansion in distribution coverage and ongoing product innovation. The company’s foreign businesses (Driftwood & Ankor) and exports increased by 18.7% and by 11.9%, respectively.
  • VNM’s operating margin increased by 70bps to 23.7% in H1/2019. The company’s overall net margin remained at 20.5%, while net profit was up by 6.3% y/y.
  • The financial position remained solid: cash accounted for 27.3% of total assets. The leverage was moderate (D/E and D/A of 0.12x and of 0.09x respectively).
  • VNM will pay the first tranche (VND 2,000) of its dividend for the FY2019 on the 26th September. Based on the historical trend we expect the dividend payout ratio to reach 71% this year, implying a total dividend of VND4,000/share.
  • We maintain our opinion that the growth of Vietnam’s dairy market will decelerate after many years of rapid expansion. But still, Euromonitor forecasts the country’s dairy market to grow by a CAGR of 4.8% in the 2018-2023 period.
  • We expect VNM’s sales to rise by 6.3% in 2019 as a result of the recovery of the domestic and the export markets and thanks to the continuous expansion of its US and Cambodia businesses. We expect sales to increase by a CAGR of 5.3% in the 2018-2023 period, which is slightly above the market potential.
  • We estimate the company’s operating margin to increase by 30bps in FY2019, reaching 21.6% as the result of higher average selling prices and stable operating expenses. We expect the bottom line to go up by 5.9% and the net margin to remain at 19.4%.

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