VHC - High fillet ASP will offset SG&A increase
Despite soaring SG&A costs, the strong pangasius fillet demand and ASP recovery will help VHC’s NPAT record a double-digit growth in FY21. Beyond FY21, we believe VHC’s earnings will accelerate due to fillet ASP improvement, cooling-down costs after COVID-19 under control and brighter long-term perspective of collagen & gelatin segment.
Using the 50:50 valuation mix of FCFF and SoTP methods, we arrive at the fair value of VHC share at VND 60,000, equivalent to an expected return of 22% with a 2% cash dividend yield on September 20th, 2021. We upgrade VHC to BUY from ACCUMULATE. Our target price increase is driven by (1) expanding GPM buoyed by higher ASP projections, resulting in a strong YoY NPAT-MI growth of 24%/32%/22% in the FY21-FY23 period, (2) a change in our valuation approach from PE multiple to PE-based SoTP as we believe C&G should trade at a premium versus the pangasius segment, (3) applying a 2021 PE ratio of 10x for pangasius segment as we view that the new growth cycle of the pangasius industry will bolster VHC to maintain its high business growth in FY22.
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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