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VNM - Looking to the "new GT shirt" to help regain market share

Q1-FY25: Heavily impacted by GT channel restructuring (traditional channel via wet markets, small grocers, and local distributors)
• VNM’s Q1-2025 earnings were below our expectations, with net sales at VND 12,935 bn (-8.3% YoY) and NPAT-MI at VND 1,569 bn (-28.5% YoY). The shortfall was driven by a sharp drop in domestic sales caused bythe short-term impact of GT channel restructuring, and margin compression. Whole milk powder prices surged to a two-year high while sales discount expenses remained unchanged despite the revenue decline.
FY25 Outlook: Gradual earnings stabilization will be expected post-GT channel restructuring, but this will not be enough to deliver positive full-year profit growth.
• In 2025, export operations and foreign subsidiaries are expected to maintain record-high levels, as seen in 2024, thanks to market share gains. However, the key driver of VNM’s growth lies in the ongoing restructuring of the GT (general trade) channel, which aims to unlock better domestic distribution efficiency—currently accounting for over 80% of total revenue.
• In Q2-2025, domestic performance is set to stabilize as the GT restructuring wraps up. Notably, the unusually high inventory at the end of Q1 is expected to normalize in Q2, supporting a healthy QoQ rebound in sales. As a result, NPAT-MI is forecast to reach VND 2,727 bn (+24.3% QoQ, +2.1% YoY).
• Under the base-case scenario, VNM’s earnings will gradually recover from the Q1 low. However, without major product breakthroughs, revenue growth is likely to remain subdued. Combined with ongoing margin pressure, we forecast net revenue at VND 61,783 bn (-1.2% YoY), with NPAT-MI/EPS at VND 8,638 bn (-8.0% YoY) and VND 4,133, respectively.
Outlook & Recommendation
We believe that VNM’s earnings growth has stagnated post-COVID, as market share declined amid a sluggish domestic dairy market. Efforts to refresh the product portfolio and increase discounts have yet to yield significant results, despite margin compression. The effectiveness of the GT channel restructuring campaign still needs to be monitored, particularly in terms of the response of both new and existing distributors. This remains a key factor in shaping VNM’s medium-term outlook.
We value VNM using a blended approach of short-term P/E comparison and long-term discounted cash flow (DCF) at a 50:50 weighting. Our 12-month target price is VND 65,100 per share, implying a 2025F P/E of 15.8x. Based on the closing price as of June 18th, 2025, we assign a ACCUMULATE rating for VNM.