·      1Q2022 NPAT Post-MI dropped to VND2,266 bn (-12.1% YoY), driven by the stronger-than-revenue growth in total costs, especially input costs. By the end-2021, the whole milk powder (WMP) price reached USD 3,867/MT (+20.5% YoY) before moving to roughly USD 4,757/MT (+9% YoY) in the beginning of Mar-2022. Therefore, 1Q22 profit margins sharply declined.

·       2022 revenue and NPAT Post-MI of VNM are forecasted at VND64,564 (+6.0% YoY) and VND10,731 bn (+1.9% YoY), respectively, driven by the growth of both parent and subsidiaries. We expect the gross margin to improve from 3Q22 thanks to the operation of Lao-Jargo farms which will add 8,000 new cows in 2Q22. The higher self-produced rate of raw milk will partly compensate for the increase in total raw milk costs.     

·       We suggest that Vinamilk is not clearly a good investment opportunity in 1H22 due to the deterioration in profitability. However, based on the rosy outlook in the next five years, and the target price of VND91,100, we recommend Waiting To See positive signals of the operation improvements which we expect to happen in 3Q22 such as the profit margins recovery, or the organic sales grows at a high single-digit rate.