Result Update Report: VNM - Growth momentum comes from subsidiaries
“We suggest that VNM is not a good investment opportunity in 1H2022 due to 1) diminishing growth in its organic sales; and 2) deterioration in profitability due to expensive input prices. However, we expect that VNM ‘s performance will start to recover in Q3 2022 thanks to higher contribution from subsidiaries which will enhance the top-line. In detail, 2022 Sales are expected to be mainly driven by the two-digit growth of subsidiaries, including Moc Chau Milk (larger brand coverage) and Driftwood (strong recovery after the Covid-19 pandemic). We combine FCFF (50%) and multiples comparison (PER) (50%) valuation methodology to evaluate the company’s fair value. Our target price comes at VND83,500 per share. Adding a cash dividend of VND3,850, the 12-months expected return is 21% compared to the closing price on Jun 30th, 2022. Based on the rosy outlook in the next five years and current low PER, we recommend it is better to wait to see positive signals of the operation improvements which we expect to happen in 3Q22. The organic sales would grow at a high single-digit rate is for example, to BUY this stock.”
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