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VHC – Expect recovery in H2-2024

• In Q4-2023, we estimate the revenue and NPAT-MI to be VND 2,509bn (or USD 105mn) (+1% YoY; -7% QoQ) and VND 174bn (or USD 7,2mn) (-9% YoY; -9% QoQ), respectively, assuming volume and average price (ASP) to decrease by 1% QoQ and 13% QoQ, respectively. The gross profit margin for Q4-2023 is expected to reach 12.8% (-10,900 bps YoY; +230 bps QoQ) due to (1) a decrease in feed costs QoQ and (2) raw fish price decreasing faster than selling price.
• In summary, the revenue and NPAT-MI for the year 2023 to be VND 10,152bn (or USD 423mn) (-23% YoY) with volume and selling price decease 17.7% YoY and 21.3% YoY, respectively. NPAT-MI will be VND 1,022bn (-48% YoY), equivalent to an EPS of VND 5,575 (-48% YoY).
• In 2024, we forecast the revenue at VND 11,577bn (or USD 482mn) (+14% YoY) with assumptions of volume and ASP increasing by 15% YoY and 5% YoY, respectively, as (1) demand rebounds in the U.S. and EU markets in the second half of 2024, and (2) the supply of raw fish decreases. The gross profit margin improves from 15.1% to 18.5% due to (1) a reduction in feed costs and (2) selling price increasing faster than raw fish price. This supports NPAT-MI to achieve VND 1,420bn (or USD 59mn) (+39% YoY). The EPS for 2024 is expected to be VND 7,746 (+39% YoY).
• We reduce our target price to VND 76,900 per share, a 2.7% reduction from the previous target of VND 79,000 in August 2023. Combined with a dividend of 2,000 VND, the expected return for the next 12 months is 4,9% compared to the closing price on January 02, 2024. This adjustment is made by (1) reducing the WACC from 14.1% to 12.6%; (2) using the 2024 valuation year for the SoTP valuation method, and (3) decrease forecasted profits for 2023 & 2024 compared to the previous forecast. We recommend ACCUMULATE this stock for the long term.