DCM - Financial gain from M&A to boost earnings, core NPAT-MI in line with our expectation - Earnings Flash
  • 2024-07-29T00:00:00
  • Company Research
  • DCM reported its H1 2024 revenue of VND6,607bn (USD261mn; +9.7% YoY) and reported NPAT-MI of VND915bn (USD36mn; +69% YoY). These results complete 48% and 63% of our respective full-year forecasts. We attribute strong NPAT-MI growth despite nearly flat YoY sales volume and ASP to the recognition of VND167bn (USD6.6mn) in financial gain from M&A. We believe this gain is from DCM’s latest acquisition of the Korea-Vietnam Fertilizers Co., Ltd. (KVF) in April with ~USD23.6mn of investing value. This acquisition helps DCM to double its NPK capacity to 660,000 tonnes per annum. DCM’s revenue growth is because of the higher contribution of the NPK segment as a result of DCM’s consolidation of KVF starting in Q2 2024.
  • Excluding the one-off gain from the KVF acquisition, DCM’s core NPAT-MI for H1 2024 is VND747bn (USD29.5mn; +38% YoY). This fulfills 52% of our 2024F NPAT and is in line with our current expectation. We attribute strong core NPAT-MI growth to an 83% significant decrease in depreciation expense as DCM’s urea plant was fully depreciated in September 2023, which outweighs an estimated 10% increase in the input gas price.
  • DCM’s H1 2024 urea sales volume was 453,210 tonnes (+2.7% YoY; 52% of our 2024F) and NPK sales volume was 76,880 tonnes (+38% YoY; 52% of our 2024F), which are in line with our current forecasts. DCM’s NPK sales volume stalled for the first four months of 2024 before it started to substantially increase in May and June when sales volume for these two months contributed 89% to H1’s total sales volume. We believe the demand picked up as farmers used up their inventory and began to restock.
  • We see insignificant change to our core NPAT forecast, pending a fuller review. We currently have an OUTPERFORM rating for DCM with a target price of VND36,000/share.

DCM’s H1 2024 results

VND bn

Q2 2023

Q2 2024

YoY

H1 2023

H1 2024

YoY

% of Vietcap’s 2024F

Average Brent oil price (USD/bbl)

78

85

9.1%

80

83

4.1%

101%

Average fuel oil price (USD/tonne)

434

502

15.5%

417

474

13.5%

105%

Input gas price (USD/MMBTU), including VAT*

9.0

9.9

10.0%

8.7

9.6

10.4%

103%

Middle east urea price (USD/tonne)

310

314

1.2%

341

326

-4.3%

102%

Urea average selling price (VND/kg)*

9,683

9,600

-0.9%

9,763

9,600

-1.7%

100%

Urea sales volume (thousand tonnes)*

218

192

-12.2%

441

453

2.7%

52%

Revenue

3,291

3,863

17%

6,026

6,607

9.7%

48%

COGS

-2,921

-3,253

11%

-5,087

-5,288

4.0%

46%

Depreciation expense

-353

-64

-82%

-702

-121

-82.8%

45%

Gross profit

370

610

65%

939

1,320

40.5%

58%

Sales & marketing exp

-100

-145

45%

-377

-482

27.9%

67%

General admin (GA) exp

-71

-147

106%

-216

-262

21.4%

62%

Operating profit (EBIT)

199

318

60%

347

576

66.1%

50%

Financial income

145

120

-18%

264

251

-4.8%

47%

Financial expenses

0

-16

-3871%

-9

-30

248.1%

47%

Net other income/loss

3

176

5111%

8

184

2334.8%

817%

Profit before tax (PBT)

348

598

72%

610

981

60.9%

60%

NPAT-MI

311

569

83%

540

915

69.3%

63%

Core NPAT-MI

311

401

29%

540

747

38.4%

52%

EBITDA

552

382

-31%

1,048

697

-33.5%

49%

Source: DCM, Vietcap (* Vietcap estimates)

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