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MCM – The cost pressure on the bottom-line is expected to ease in 2024

• Q3-2023, Mocchau Milk Jsc (Upcom: MCM) posted sales of VND816 bn (+3.3% QoQ; -1.9% YoY). The negative YoY growth was affected by the unfavorable income in Vietnam northern mountainous region. Net profit increased QoQ at a lower pace than the revenue, to VND95 bn (+2.1% QoQ; -4.0% YoY), as the surge in selling expenses.  
• In the context of slowing economic recovery, we suppose that the sales growth would be hard to illustrate high digit next year. However, we expect that MCM ‘s profitability would improve in 2024, in the pillar of, 1) easing raw material costs; and 2) selling costs optimization.
• We calculate that the negative expectations of MCM ‘s results has reflected on its stock price movement relying on the two main reasons. Firstly, MCM ‘stock is showing the worst performance compared to the beginning of the year among listed dairy stocks. The second is the downward trend of MCM ‘s P/E ratio which is translated into the trailing P/E of 13.1x – lower than its 3Y-Average P/E (13.9x).
• Based on the assumption that the sales still face many obstacles to grow under the slow economic recovery, we advise investors to closely watch MCM ‘sales growth to timing suitable opportunity to invest on this stock