We attended DCM’s Analyst Meeting on December 23, 2024. We see downside risk to our 2024/25F earnings forecast despite the positive impact of VAT Law, pending a fuller review. We currently have a BUY rating for DCM with a target price of VND43,100.

* DCM’s 2024 preliminary results: revenue of VND13.7tn (USD546mn, +8.4% YoY) and PBT of VND1,270bn (USD51mn, +1.5% YoY), completing 100%/71% of our respective full-year forecasts. Preliminary sales volumes for urea and NPK reached 810,000 and 156,000 tonnes, meeting 98%/95% of our 2024F estimates. However, urea ASP averaged ~VND9,200/kg, ~4% lower than our forecast, while the input gas price is higher than our forecast (USD9.7/MMBTU vs USD9.3/MMBTU).

* Q4 2024 performance: revenue of VND4.4tn (USD176mn, +26% YoY) and PBT of VND141bn (USD5.6mn, -74% YoY). We attribute the divergence between the top line and bottom line to (1) the higher-than-expected input gas prices, finalized for the full year and booked in Q4, (2) a higher-than-expected USDVND rate, pushing input gas prices, (3) maintenance costs finalized at year-end, booked in Q4 2024, and (4) lower YoY ASP.

* 2025 guidance: A conservative plan with revenue of VND13.3tn (USD532mn, +18% YoY vs 2024G) and NPAT of VND764bn (USD30.6mn, -3% YoY vs 2024G). Overall, 2025 guidance shares the same YoY movements with our 2025 forecast in key metrics, including YoY increases in sales volume, ASP (VND9,560/kg, +4% YoY), and lower gas prices (~USD8.7/MMBTU, -11% YoY). However, we attribute the almost flat YoY guided NPAT to (1) the exclusion of ~VND450bn financial income and (2) the exclusion of expected gains from 5% VAT in H2 2025, per DCM management. 

* Risks to forecasts: We note that DCM’s 2023 actual PBT was 25% higher than the prelim figures. However, we still see downside risk to our 2024F PBT forecast (VND1.8tn, USD712mn, +42% YoY) due to higher-than-expected gas prices and maintenance expenses, pending a fuller review. We also see downside risks to our 2025F PBT forecast due to (1) potentially lower-than-expected urea ASP (due to lower-than-expected export price) and (2) 6 months delay in the effective date of 5% VAT in July 2025 (vs our assumed Jan 2025); these outweigh potentially lower-than-projected gas prices, pending a fuller review. 

* 5% VAT impact: DCM estimates the input VAT deduction accounts for ~3.8% of DCM’s 2024 total COGS, ~VND423bn, per our estimation. However, the final gain will be subject to how much DCM supports farmers by lowering ASP, which we estimate ~VND300bn on average p.a. for 2025-2028.

* Capex pipeline: DCM outlined plans for 18 projects during 2024-2030, focusing primarily on warehouse development to (1) capitalize on restocking cheap input materials and (2) enhance product delivery to capture rising ASPs.

+ KVF: 2024 full-year reported loss of VND26bn, 2025G profit of VND9bn, sales volume of 120,000 tonnes (+32% YoY).

+ Expand urea plant designed capacity to 125% (~1 million tonnes/year) with capex of VND836bn and CoD in 2028, leveraging additional gas sources from Nam Du – U Minh and Khanh My – Dam Doi fields.

+ Business diversification: (1) Develop a port terminal (Nhon Trach, Dong Nai province) to support NPK trading and offer commercial services to external customers post-2028, and (2) expand into fruit cultivation, processing, and export, with implementation expected in 2028.

DCM’s 2025 guidance vs Vietcap’s forecasts

Source: DCM, Vietcap (* Vietcap estimates; Has not been factored based on our latest Brent oil price projection of USD70/bbl for 2025F)

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