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Viet Dragon Securities
Son Tran

Analyst Pin-board MSH – High material cost to hurt gross margin in 2022

  • In Q1/2022, MSH achieved revenue and NPAT-MI of VND 1,291 Bn (+37% YoY) and VND 91 Bn (-2% YoY), respectively. Revenue growth was boosted by Nghia Hung Garment factory (SH10) into operation. However, gross margin fell to 14.7%, much lower than 22.8% in Q1/2021 because MSH mostly manufactures FOB level II (self-sourcing), hence it was hit worse than other manufacturers in the shortage of raw materials.
  • MSH has set a revenue and PBT guidance of VND 4,900 Bn (+3% YoY) and VND 500 Bn (-8% YoY) for 2022. The prudent plan was set by MSH due to: (1) The lockdown in China where the company relies heavily on imported fabrics; (2) Material prices and labor costs increased significantly due to global inflation; (3) Productivity of the newly opened SH10 factory is lower than in previous production areas.

Due to a stronger-than-expected fall in Q1 gross margin, we revise our 2022 revenue and NPAT forecast to be VND 5,741 Bn (or USD 250 Mn, +21% YoY) and VND 431 Bn (or USD 431 Mn, -2% YoY), respectively. The lack of raw materials is a short-term negative factor and NPAT from 2023 onwards could improve as raw material prices is expected to cool down when Russia-Ukraine war and China lockdown to ease, per our view. We maintain our TP of VND 90,000, implying 2022F PER of 10.8x at the target price. The drop in stock price will be an opportunity to ACCUMULATE for long-term holding

10/05/2022 7 EN
Underlying
Song Hong Garment
Song Hong Garment

Song Hong Garment JSC is a Vietnam-based company textile company primarily engaged in the manufacturing of garments and bedding products. The Company operates its production facilities in the province of Nam Dinh and exports its products to international markets, namely USA and Europe.

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VN000000MSH6 Hochiminh Stock Exchange Vietnam
Provider
Viet Dragon Securities
Viet Dragon Securities

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Son Tran

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