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DPM – Deductible input VAT helps boost profits in 2025

• In 1Q24, the revenue of the Urea/NPK segment grew by 17% YoY and 23% YoY, respectively, compensating for the decline in the import segment, resulting in a net revenue of VND 3,307 bn (+1% YoY). Thanks to the cooling of input material costs, the NPK and import businesses achieved a gross profit margin (2% to 5%), leading to an increase in the overall gross profit margin to 18% compared to 16% in 2023. However, NPAT-MI in 2024 remained equivalent to last year, reaching VND 264 bn, due to an increase in SG&A expenses.
• For Q2/2024, we estimate revenue and net profit after tax (NPAT) to be VND 2,841 billion (USD 113 million; -23% YoY) and VND 276 billion (USD 11 million; +162% YoY), respectively. For the full year 2024, we estimate revenue to reach VND 13,809 billion (USD 548 million; +2% YoY), assuming stable selling prices and Urea output compared to 2023. The NPAT attributable to shareholders is expected to increase by 55% YoY to VND 826 billion (USD 33 million), driven by profitable operations in the NPK and Kali segments following underperformance in 2023. The corresponding EPS is VND 2,094.
• DPM's stock price has surged over 24% from its low in April, largely reflecting positive investor expectations regarding the potential approval of the amended VAT law in the October session of the National Assembly, which is anticipated to benefit businesses. According to our estimates, if the VAT law is passed as expected, the NPAT for 2025 will increase by more than 50% compared to the scenario where it is not passed (assuming stable prices and sales volume). Under this scenario, the fair value based on the discounted cash flow (DCF) method is VND 47,500 per share, compared to a fair value of VND 38,500 (based on DCF) in the scenario where the law is not passed.
• DPM's stock price is highly sensitive to news about the amended VAT law, though this is not the only factor impacting the company's business results. Therefore, we believe that investors might consider waiting for more concrete information regarding the VAT law amendments being discussed by the National Assembly in the May session before making investment decisions on this stock.