Result Update Report: VHC - Favorable supply-demand to lead strong earnings growth
“We are optimistic that VHC's 2022 profit will grow much stronger than the 2018 peak, driven by both high demand and tight supply. Moreover, the shortage of white fish in the U.S. market will also strengthen VHC's profit growth prospects. Using a 50:50 valuation mix of FCFF and SoTP methods, we arrive at the fair value of VND 114,600, equivalent to an expected return of 6% including a cash dividend yield of 2%. We have an ACCUMULATE recommendation for this stock. Based on the target price, 2022 forward P/E is at 9.9x, higher than the five-year average of 7.9x. This is appropriate given the improved long-term earnings growth prospects and the gradual transformation of VHC into a healthcare-based F&B company with new business segments that will bring better profitability and stability.
The recent stock rally has curtailed the upside potential. With Q2 2022 earnings are expected to continue to increase strongly QoQ, the uptrend may continue in the short term. However, longer-term holding should be weighed against the risk of global pangasius demand cooling down, or in other words, VHC's profit in the following quarters has a risk of decreasing compared to Q2 2022”
Vinh Hoan Corp. Vinh Hoan Corporation is a Vietnam-based seafood processing company. It manufactures and exports fresh and frozen pangasius fillets, as well as value-added products from pangasius. The Company's products also include other value added seafood products including those from barramundi, shrimps, scallop and others; the by-product from seafood processing such as fish oil, fin nuggets and belly nuggets and other products such as gelatin powder, collagen powder and rice. The Company is also involved in aquaculture activities, the manufacturing and trading of aquaculture feeds, veterinary medicine and fertilizer.
Viet Dragon Securities belongs to top 20 biggest securities companies in terms of chartered capital in Vietnam. With a qualified, dedicated and professional team, a widespread network, advanced technology, diversified products and services, and good relationship with local and foreign institutions, we provide a wide range of services and products to our clients both individuals and institutions, both local and foreign. We commit to provide our clients with promising investment opportunities and a comprehensive and professional financial investment services.
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