FREE

FMC – Futher increase in export volume

• Net sales in Q3-2023 reached VND 1,793 billion (+2.3% YoY; +73.7% QoQ) as export shrimp volume increased by 11.4% and shrimp selling price in VND decreased by only 6.2% YoY. The NPAT-MI Q3-2023 continued to increase to VND 82 billion (+6.1% YoY; +14.7% QoQ) due to improved selling, general and administrative expense (SG&A expenses).
• Based on the projected performance in Q4-2023, we adjust 2023 revenue and NPAT-MI to VND 5,017 billion (-12% YoY) and VND 275 billion (-10.4% YoY), respectively. Reasons: (1) export volume in Q4-2023 is estimated to increase by 15% YoY, (2) gross profit margin improves due to increased shrimp output from new farming areas in Q4/2023; and (3) the ratio of S&GA expenses/revenue is stable.
• In 2024, we forecast net sales and NPAT-MI to be VND 5,517 billion (+10% YoY) and VND 325 billion (+18% YoY), respectively, due to (1) export volume increased by 10% YoY, (2) profit margin improved beacuse of the addition of 20 hectares of new farming area and the successful farming rate increased thanks to CP's high quality shrimp seed. Equivalent EPS is VND 4,921 (+18% YoY).
• We reduce our target price to 51,900 VND/share, down 2% from the previous valuation due to the lower earnings forecast compared to the latest projection (as of July 28, 2023). Plus the expected cash dividend of 2,000 VND, the expected profit in the next 12 months is 19.1% compared to the closing price of 45,250 VND/share on November 30, 2023, by (1) adjusting WACC down from 11.8% to 10.9% (2) using 2024 EPS for P/E valuation method, and (3) reducing profits of 2023 & 2024 compared to previous forecast. We recommend ACCUMULATE this stock for the long term.