Company Quarterly Earnings Update – VNM VN – 2020 Q1

Summary of the 2020 Q1 results of Vinamilk JSC (VNM VN)

Q1/2020 results highlights:
  • VNM’s revenue rose by 7.3%. Domestic sales were up by 7.9% y/y thanks to the premiumization strategy, solid growth of main channels, and the consolidation of GTN. Overseas subsidiaries’ sales grew only 0.8% y/y as schools in California shut down in mid-March, affecting Driftwood’s performance. Exports to the Middle East continue to perform well, with a 7.5% growth rate.
  • VNM was able to maintain its gross margin at 46.7%. However, due to the increase in marketing expenses to support sales during the COVID-19 outbreak and lower tax incentives, VNM’s net margin reduced to 19.6%, while its net profit was flat.
  • Cash and short-term investments accounted for 34.2% of total assets. VNM’s leverage was moderate with a D/E and a D/A of 0.19x and 0.14x respectively
Other developments:
  • We expect a final dividend payment of VND1,500/share after the AGM (26th June).
  • VNM registered to buy 17.5 million shares from the 21st May to 20th June 2020.
  • We retain our current view that the pandemic does not have any significant impacts on the company’s full-year performance in 2020.
  • As for 2020, we forecast VNM’s sales to rise by 9.8% y/y, reaching VND61,851bn, thanks to solid growth in the domestic market, whose milk consumption per capita is still below other Asian countries, and GTN’s consolidation. Excluding this, VNM’s growth would grow 4.6% y/y. We expect the net profit to increase by 6.0%, while the net margin is likely to stay at 18.1% thanks to a lower material cost.
  • As for 2021, we expect sales and profit to rise by 5.5% and by 5.6% respectively. The company should maintain its net margin of 18.1%.

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