DPM – 2H23 earnings could be more positive regardless of unimpressive 1H23 business results
- DPM announced 2Q23 results with a revenue of VND3,707bn (-26% YoY), and an NPAT MI of VND101bn (-92% YoY). The unimpressive results were mostly caused by a decline in urea selling prices as well as the high gas input. However, 2Q’s revenue showed an improvement in QoQ thanks to a better urea sales volume. In 1H23, DPM posted VND6,972bn revenue (-36% YoY) and VND361bn NPAT MI (-90% YoY), respectively.
- Nevertheless, we have a fairly optimistic forecast for 2H23 compared to 1H23, owing mostly to (1) support export turnover, (2) the improvement of domestic urea selling prices, and (3) lower tariff price.
- Global urea selling prices tend to increase before India’s bid opening on Aug 9th. Bloomberg anticipates that India’s Aug tender could reveal a 45% price increase from the last deal USD280/ton. Urea exports were 64,000 tons in 1H23 and DPM anticipates growth to 80,000 tons in 2H23 owing mostly to the next India’s tender (from Aug 9th to Aug 26th).
- In the domestic market, DPM’s urea is trading at VND10,000/kg, up from VND9,250/kg in Jul, as a result of global’s momentum. We expect this price will hold through 2H23, especially when the Winter-Spring season approaches.
- In 1H23, the gas sources completely came from Cuu Long Basin (an expensive source). But DPM expects gas sources can distribute among the expensive source in Cuu Long Basin (66%) and Bach Ho – Rong Doi Moi Gas Field (34%) in 2H23, and hence anticipate the tariff might decrease.
- Considering the above factors, we are convinced that DPM could achieve a revenue of VND13,834bn (-25.7% YoY) and an NPAT MI of VND1,131bn (-79.6% YoY) in 2023, which contributes majority by 2H23’s profits.
- With the 2023 earnings forecast of VND1,131bn, the P/E 2023 will be 13.8x, which is not attractive in our opinion. However, with the expected bright sides in 2H23, results in the potential cash dividend of VND4,000 in FY23-24 ~ dividend yield of 10%/year could be a positive catalyst for DPM shares. Furthermore, given the unpredicted movement of global urea selling prices, for prudent, we recommend NEUTRAL for DPM with a target price of VND36,200/share.
PetroVietnam Fertilizer and Chemicals Corp. PetroVietnam Fertilizer and Chemicals Corporation is a Vietnam-based manufacturer of agricultural chemicals. It manufactures and trades diversified fertilizer products, including urea fertilizers; nitrogenous phosphatic potassic (NPK) fertilizers, liquefied ammonia, as well as other industrial gases and chemicals used for oil and gas exploration and refinery. The Company is also involved in the provision of technical services in fertilizer and petrochemical production.
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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