DGC - Advantages of an extended value chain
Using a blended P/B and P/E valuation method, we determine DGC's fair 12-month target price to be VND 108,400 per share, equivalent to a 2025F P/E of 13.5x and a P/B of 2.5x. Combined with a cash dividend of VND 2,700 per share, the total expected return is 7%.Revenue growth drivers: Yellow Phosphorus, Fertilizers, and Nghi Son Caustic Soda-Chlorine Plant. We estimate DGC's yellow phosphorus revenue to grow by 10.25% and fertilizer revenue by 17% in 2025. This growth is driven by the semiconductor and electronics industry for yellow phosphorus, and by domestic supply shortages for fertilizers. Additionally, the Nghi Son Caustic Soda-Chlorine plant, with a total designed capacity of 150,000 tons of chemicals per year, is expected to contribute an additional VND 800 billion in revenue to the Company in 2026.
Outstanding profitability in the Chemical and Fertilizer Sector. With an average ROE of 35% from 2019-2024, DGC is one of the most profitable companies in the chemical and fertilizer sector. This is largely supported by its consistently high and stable gross profit margins over the years. This strong performance is coupled with a healthy financial structure and low leverage, thanks to a significant portion of retained earnings in its asset structure. We expect the Company to maintain an ROE above 20% during the 2025-2026F period.
Extended value chain with long-term potential. The Company's new and ongoing projects (caustic soda-chlorine, alcohol, real estate, batteries, etc.) have significant room for development. These projects not only help expand the product portfolio but also optimize DGC's existing value chain. They are expected to further solidify the Company's position in the domestic chemical industry.
Risks
Yellow phosphorus will officially be subject to an export tax increase from 5% to 10% starting January 01, 2026 (and to 15% from January 01, 2027). In the base-case scenario, we assess that DGC’s business results in 2026 will not be significantly affected. However, if the company is unable to pass on the additional tax costs to selling prices, net profit attributable to shareholders (NPAT-MI) in 2026 is estimated to be impacted by approximately 3–5%.
If the Nghi Son Caustic Soda-Chlorine project is delayed, its projected revenue for 2026 could be lower than our current forecast.
Viet Dragon Securities belongs to top 20 biggest securities companies in terms of chartered capital in Vietnam. With a qualified, dedicated and professional team, a widespread network, advanced technology, diversified products and services, and good relationship with local and foreign institutions, we provide a wide range of services and products to our clients both individuals and institutions, both local and foreign. We commit to provide our clients with promising investment opportunities and a comprehensive and professional financial investment services.
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