Summary of the 2020 results of Vinamilk JSC (VNM VN)
2020 results: highlights
- VNM’s sales grew by 5.9% y/y, reaching VND59,636bn, thanks to the consolidation of GTN amidst the COVID-19 outbreak and tropical storm in the Central region in the last quarter. Domestic sale, VNM’s main market, was supported by condensed milk, thanks to its affordability price range. Overseas subsidiaries’ sales declined by 9.9% y/y as schools in California were still closed, affecting Driftwood’s performance. The Middle East market performed well, +7.4% y/y.
- Gross margin declined by 0.8%, mostly due to a higher cost of input milk powder, which was purchase in Q4/2019. Operational expenses as a percentage of sales increased slightly to 25.8% due to the increased admin expenses caused by the consolidation of GTN. Net financial income doubled, reaching VND1,273bn, because of a higher cash level (+28.6% y/y). As a result, VNM’s net profit increased by 6.5% y/y, while its net margin was almost unchanged at 18.8%.
- VNM had a high cash balance, equivalent to 40.1% of total assets. The company’s leverage was only moderate with a D/E and a D/A of 0.24x and 0.15x, respectively.
- The Vietnamese milk market is steadily reaching its stability after many years of rapid expansion. However, there are still opportunities for further growth in this industry, given that the country’s milk consumption per capita is still relatively low, especially in the rural areas, where 65% of the country’s population lives.
- For 2021, we expect the economic activities to be fully recovered in Q3. Sales are estimated to rise by 6.5% y/y, reaching VND63,505bn, with the domestic market remain a key growth driver. Gross margin will stay at 46.4% as most of the input materials have been secured before the recent price increase. We estimate higher marketing expenses after the Covid19 year – 2020 and lower financial income because of the lower deposit rate. Overall, the bottom line will increase by only 0.6%.
- For 2022, we forecast sales to rise by 6.7% y/y, reaching VND67,790bn. The milk powder price will be normalized, helping the gross margin to get 47.4%, like its 2019 level. Overall, the bottom line should increase by 11.2% y/y.
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