KDF - An Attractive Business Model
Kido Frozen Foods JSC (KDF:Upcom) is the market leader in manufacturing and distributing ice creams. The competency of KDF resulted from its manufacturing process, modern technology, large scale distributing system and experience in understanding and meeting the taste of the consumers. The prospects of KDF comes from the growing breadth of the ice cream industry which is in companion with the economic growth and the improved income per capita. In 2016, KDF completed the new plant in Bac Ninh province, aiming at the strategy of augmenting the efficiency in distributing and selling in northern Vietnam. Concurrently, based on its distinguished competence in the frozen products distribution system, KDF has its ambition of expanding the business model by doing the first move in the new product: dumpling. However, we think the ambition to become a King in frozen foods industry needs time to reach the “tipping point” in growing the operating efficiency. Based on the business result in nine months of 2017, RongViet Research estimates the company’s revenue and NPAT at around VND1,633 billion (+16.9% YoY) and VND168 billion (+17.9% YoY), equivalent to EPS of 2,852 dong, PE forward ~21.0x.
In term of valuation, we use two methodologies (DCF and PE) to evaluate the intrinsic value of KDF at VND68,000 per share, with the upside of 13% compared to the listing price of VND60,000 as of 28 September 2017. Therefore, we recommend NEUTRAL on this stock despite that KDF is a very attractive business model in F&B industry.
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