DPM - High urea price to ease the negative effect of rising gas price
The 1Q2021 possibly outstanding performance may not last long into the next quarters, given the rapid recovery of gas prices as global energy consumption is growing more rapidly than supply. For the whole year, we think rises in fertilizer prices may not be large enough to offset the strong increase in gas costs. In the long-term, DPM has not much growth potential but is merely a dividend payer with cash dividend stable at VND 700-1,000/share, equivalent to a dividend yield of 3.5%-5.1% at the current market price. Combining the FCFF and P/E methods, we raise the target price for DPM from VND 17,000/share to VND 21,400/share. With an expected cash dividend of VND 1,300/share in the next 12 months, the total return is 18%, based on the closing price of March 26th, 2021. We recommend to ACCUMULATE DPM.
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