Company Quarterly Earnings Update – VNM VN – 2021 9M

Summary of the 2021 9M results of Vinamilk JSC (VNM VN)

9M/2021 results: Highlights

  • According to GSO, employee average income fell by 10.4% y/y in 9M/2021 due to the COVID-19 outbreak, leading consumers to switch to more affordable alternatives and stockpile supplies due to mobility constraints. VNM benefited from their strong affordable products, as seen by their 1.0% market share growth, which resulted in a 3.7% y/y growth in Q3’s domestic revenue. However, it could not cover the drop in 6M/2021’s domestic sales. As a result, in 9M/2021, total net revenue reached VND45,100bn (-0.2% y/y). Domestic sales (a major contribution of 84.7% to VNM’s sales) declined slightly by 1.4% y/y to VND38,182bn. On the other hand, net export revenue rose by 7.5% y/y due to high demand from the Middle East and new contracts from the U.S, Taiwan, and China. Overseas subsidiaries’ revenue (Driftwood & Angkor Milk) grew by 5.1% y/y, driven by the U.S reopening their schools and the well-controlled COVID-19 in Cambodia.
  • Since of (1) the strong up-cycling trend of input materials (milk, packaging, sugar), (2) a robust growth of international freight costs, and (3) the adoption of the “3 on-site” during the COVID-19 period, 9M/2021 net profit declined by 6.4% y/y to reach VND8,420bn, with a net margin of 18.7% (-124bps y/y).
  • Financial health is solid (cash&deposits accounting for 41.9% of total assets), and moderate leveraging (D/E and D/A ratios of 0.28x and 0.18x, respectively).

Outlook 2021-2022

  • For 2021: Q4’s net revenue will grow by 12.2% y/y thanks to (1) +13.3% y/y of the domestic market due to higher market shares in Q3 and the reopening of traditional trade channels, and (2) +6.7% y/y of foreign markets with new contributions from the Filipino market. Overall, we project 2021F revenue to rise by 2.8% y/y to VND61,289bn (virtually unchanged vs our previous projection). 2021F net profit is revised up by7% to VND11,169bn (-0.6% y/y), with a net margin of 18.2%.
  • For 2022: We predict net sales to grow by 8.2% y/y to VND66,320bn thanks to a larger contribution from the export markets and VNM’s dominant position in response to the affordable segment growth. Net profit is expected to grow by 4.0% y/y to VND11,616bn (2.1% lower than our previous projection) due to a lower gross margin as a result of rising input material prices.

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