EUR 11.40 For Business Accounts Only

DPM - Product diversification – a suitable strategy in long run

​“DPM is a leading urea producer in Vietnam. With advantages from the stability of sales activities and tail wind from a plunge in crude oil price, DPM’s profitability has rebound since Q4/2014. Based on the current oil price’s movements, 2016 DPM’s gross profit margin is expected to maintain positive. However, as opposed to the benefit from low oil price, we believe that DPM will face these obstacles this year: (1) unfavorable weather conditions may affect the sales volume and urea prices; (2) increasing competition from abundant domestic and imported supply; (3) DPM might have to make additional provisions for the guaranteed loans of PVTex if this affiliate company goes default.

In long-term, we appreciate DPM’s leading position and business capabilities in fertilizer industry. Moreover, its orientation to expand the business into chemical segment, NPK… is a notable highlight if we compared with other companies whose stuck in terms of finding new growth drivers.

In our base-case scenario, we estimated the revenue and NPAT for DPM in 2016 at about VND8,895 billion and VND1,664 billion, respectively, basic EPS is forecasted at VND3,614. Using the P/E and P/B method, we estimated the reasonable price for DPM at VND32,500 share, 12.5% higher than the closing price on April 14^th 2016. Therefore, we rate the stock as ACCUMULATE in the INTERMEDIATE TERM.”