PTB - A Growing Demand For Natural Stone

​The positive demand of natural stone brought a rapid growth for PTB in the past and we think this growth will continue in the next two years. At the moment, the market size for natural stone products is quite small. Meanwhile, many projects are being completed in the construction industry, which will be the driving force for the company’s sales volume. Regarding Phu Cat wood processing factory, we have an optimistic view on the demand given the recovery of the wooden products exports in Vietnam. However, the company will face challenges in finding a stable raw materials supply for its wood production business. There will be a slowdown in cars consumption in 2017 because of the ASEAN tariff reductions, so we think PTB’s automotive retail segment will follow the industry’s trend. After a 20% bonus share in early June 2017, PTB will continue to issue additional shares to raise capital for its expansion on stone and wood business in Khanh Hoa and Binh Dinh. This is the third consecutive year that PTB raised capital through additional issuance. However, we see that PTB's EPS has steadily grown annually with an average of 14% in 2014-2016. In this report, we revised down our revenue forecast due to a slower growth in the automotive retail segment. Conversely, there is a slight increase in PAT due to preferential tariffs for Dong Nai and Hung Yen stone processing factories. Revenue and PAT in 2017 are estimated at VND4,386 billion and VND343 billion, respectively, equivalent to EPS of VND11,897. Based on the 3 valuation methods of FCFF, PE and SOTP, we recommend a BUY rating on PTB with a target price of 128,800 VND/share, unchanged from the recommendations in the Strategic Report 2017 that RongViet Research released earlier this year.