Company Quarterly Earnings Update – VNM VN – 2020 H1

Summary of the 2020 H1 results of Vinamilk JSC (VNM VN)

H1/2020 results highlights:
  • Overall, VNM’s total revenue rose by 6.7% y/y, reaching VND29,648bn. Domestic sales were up by 7.7% y/y thanks to solid growth in the condensed milk and yogurt segment, and the consolidation of GTN. During the pandemic time, despite lower sales in restaurants, home consumption increased for basic necessity such as dairy products. Condensed milk sold well thanks to its higher affordability and yoghurt thanks to the consumers’ perception that it helps to enhance the people’s immune system. Overseas subsidiaries’ sales, declined slightly by 6.8% y/y as schools in California shut down, affecting Driftwood’s performance. The Middle East market still performed well, +7.3% y/y.
  • VNM’s gross margin was at 46.4%, down by 100bps y/y due to a higher input material cost and consolidation of GTN. Overall, VNM’s net profit increased slightly by 2.8%, while its net margin reduced by 70bps to 19.8%.
  • Cash and short-term investments accounted for 37.4% of total assets. VNM’s leverage was only moderate with a D/E and a D/A of 0.20x and 0.13x respectively
Other developments:
  • 1st trance of FY2020 dividend of VND2,000/share. There will also be a bonus share issuance of 20%. The ex-date for both will be on 29th Sept 2020.
  • We expect the company continued to perform well in the H2/2020 thanks to similar growth drivers as in H1. Therefore, we expect VNM’s sales to rise by 9.4% y/y, reaching VND61,620bn in 2020. We expect a higher financial income will help to compensate for VNM’s higher effective tax rate. The net profit is expected to increase by 9.3%, while the net margin is likely to remain at 18.7%.
  • As for 2021, we expect sales and profit to rise by 5.1% and by 5.4% respectively. The company should maintain its net margin of 18.1%.

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