DCM - The thrust from selling price is not strong enough
We value DCM shares using two methods: discounted cash flow (DCF) and sum of the parts (SoTP), with equal weighting of 50:50. The results indicate that DCM's long-term fair price is 34,500 VND/share, which corresponds to the projected P/E ratios of 12.6x for 2025 and 13.1x for 2026. By adding a cash dividend of 2,000 VND/share, the total expected profit is set to reach 17%.• DCM is the second largest urea fertilizer company in Vietnam, with an average market share of 26-30% nationwide and dominating the Mekong Delta region with a market share of 60-65%.
• DCM's growth is centered on its branding strategy and product promotion to boost consumption, especially when domestic demand for urea and NPK fertilizers saturates and supply exceeds demand.
• The selling price of urea fertilizer fluctuates mainly due to gas costs, especially when fertilizer products are linked to national food security. Therefore, NPAT-MI is projected to rise slightly by 2%/year, growing from VND 1,420 billion in 2024 to VND 1,572 billion in 2029, as the selling price becomes challenging to increase.
• Gross profit margin is projected to reach 20.6% in 2025 (+190 bps YoY) and stabilize at 20.4% for 2026 - 2029, thanks to the VAT Law No. 48/2024/QH15 in 2H2025 and the expectation that gas costs will decrease more rapidly than fertilizer selling prices. After 2028, the gross margin is expected to gradually decline as the supply of inexpensive gas decreases.
• The NPK fertilizer segment is expected to grow at a CAGR of 8% for 2024-2029 because of exporting and gaining market share from competitors with single-grain NPK products.
• DCM's loan ratio remains safe when the loan capital structure is low, with short-term loans. The proportion of debt is expected to decrease gradually as businesses use profits to pay off loans.
Additionally, stock movements strongly correlate with global fertilizer prices, implying that fluctuations in fertilizer prices can have a short-term impact on stock prices.
Risks
• Selling prices increased due to rising global fertilizer costs linked to high gas prices, geopolitical risks, and tariffs. They decreased with the return of China's fertilizer exportsand a rapid fall in global fertilizer prices as gas prices fell rapidly.
• Input gas prices rose due to the use of expensive gas sources, impacting the gross margin
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