BMP - Facing up to Challenge of Rising Input Price
BMP is a state-linked plastic pipe producer whose long-standing brand is widely recognized. Despite being a leading producer in a profitable industry, BMP recently faces up with fierce competition from new entrants that execute aggressive trade discounts. Additionally, plastic pipe producers including BMP are experiencing deterioration in their profitability due to the recent recovery of plastic resin price, which is correlated to the oil price. Assuming the current situation prolongs, we expect BMP’s profit to rebound only if the company manages to increase its sales prices.
We evaluate BMP price at VND89,000/share and anticipate a cash dividend of VND2,000 per share in the following 12 months, which results in a 19.7% total return from the closing price on 26 October 2017 and we rate NEUTRAL on the stock until there are positive signals for profit improvement. This target price is lowered from that in our Strategy report published in March 2017 due to recent unfavorable market conditions that affect forecasts for the upcoming years.
Binh Minh Plastics Joint Stock Company is a Vietnam-based company engaged in the manufacture of plastic products. The Company manufactures and trades plastic pipes and pipe fittings, such as uPVC (Unplasticized Polyvinyl Chloride) pipes and HDPE (High Density Polyethylene) pipes. Other products include plastic sprayers, helmets and soldering sticks, as well as adhesives, rubber washers and molds for plastic product manufacturing. Beside manufacturing plastic products, it installs plumbing systems and provides interior decorating services. As of December 31, 2012, the Company had one wholly owned subsidiary named North Binh Minh Plastics Limited Company, which is engaged in the manufacture and sale of consumer and industrial products from plastic and rubber.
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