• We attended DCM’s annual general meeting (AGM) at its HCMC office on June 11, 2024, along with ~143 shareholders (representing 83.88% of total voting rights). Overall, management is optimistic about a 5% VAT on fertilizers to be approved in late 2024, strong NPK volume in H2, and its high utilization rate of 115% to be maintained in the coming years. 

• Shareholders approved a cash dividend of VND2,000/share for 2023, higher than previously approved in the 2023 AGM of VND1,600/share, and in line with our expectation of VND2,000/share. 

• Shareholders approved a conservative cash dividend of VND1,000/share for 2024 vs our forecast of VND3,000/share. 

• DCM’s 2024 guidance is conservative with revenue of VND11.9tn (USD475mn) and NPAT of VND795bn (USD32mn). These figures are equivalent to 86% and 55% of our respective full-year forecasts. We attribute this to the company’s cautious outlook for selling prices vs our assumption for DCM’s ASP to be flat YoY. The price of urea was resilient in Q1, declined in April and May, and rebounded slightly in June.  

• Overall, we see insignificant changes to our 2024 earnings forecasts for DCM while approval of the 5% VAT for fertilizer is an upside to our 2025-2028 NPAT projection, pending a fuller review. 

DCM’s management shares optimism in the passage of VAT law on fertilizers. Currently, fertilizers belong to the VAT-exempted category and industry players are proposing for these to be VAT taxable, with a proposed VAT of 5%. DCM is positive that this law will be discussed and approved in the November meeting of the National Assembly (NA), which might take effect starting in 2025. If the VAT law is approved, DCM will save VND250-270bn p.a. in COGS, thus increasing the bottom line by ~10%. We see this as an upside potential to our earnings forecasts starting from 2025 onwards, pending official approval in the NA. 

In April, DCM had completely taken over a 100% stake in Korea-Vietnam Fertilizer Co., Ltd. (KVF), which doubles DCM’s NPK capacity to 660,000 tonnes per annum (TPA). According to DCM’s management, despite having generated a net loss since its operation (except for one profitable year), after the takeover and under their management, KVF has preliminarily turned profitable for the month of May, 2024. This is a positive sign for DCM over the long term for the NPK segment and the company’s overall earnings. DCM notes that it has invested ~USD23.6mn (70% equity, 30% debt) to acquire this company (included in the approved capex) and expects KVF to contribute 100,000 tonnes in 2024 (in line with our forecast). We currently forecast KVF to generate VND15bn in 2024, contributing 1% to DCM’s NPAT. 

DCM’s 2024 guidance is conservative with revenue of VND11.9tn (USD475mn) and NPAT of VND795bn (USD32mn). These figures are equivalent to 86% and 55% of our respective full-year forecasts. The revenue comes from 858,500 tonnes of urea sales volume (99% of our 2024 forecast) and 180,000 tonnes of NPK sales volume (excluding KVF, 122% of our forecast). We attribute the conservative revenue and NPAT guidance to 1) DCM being a State-owned company and 2) the company’s conservative view for selling prices (global urea price outlook in 2024 to be stagnant due to increased supply from new urea plants in China and India) and declining domestic demand due to reduced farming land and salinization. On the other hand, the strong NPK sales volume guidance is because DCM’s management is optimistic in the recovery of this segment in H2 2024. Overall, we currently see insignificant changes to our earnings forecasts for DCM, pending a fuller review. 

Input gas price is expected to increase vs actual 2023, yet still dependent on the oil price movement. The average input gas price in 2023 was USD9.46/MMBTU (+9% vs 2023G of USD8.7/MMBTU), with gas structure of 60% from PVN and 40% from Petronas.  As of this AGM, the average input gas price in Q1 2024 was USD10.01/MMBTU (+6% vs actual 2023). DCM’s management shared that this is due to the high fluctuation in oil prices since the beginning of 2024, ranging from USD76-91/bbl. The input gas price for 2024 is expected to not fluctuate significantly, given that DCM’s management expects the oil price for 2024 to stay within USD75-80/bbl and the input gas source to maintain stable. 

Shareholders approved a cash dividend of VND2,000/share for 2023. We note that this 20% par value dividend for 2023 is higher than the previously approved dividend of VND1,600/share in the 2023 AGM. The 2023 cash dividend is in line with our expectation, which is also VND2,000/share. Additionally, DCM’s management stated that they will make an effort to pay the dividend within 30 days of the approval, a reduction from their track record of within three months (vs six months requirement by the SCC). Shareholders also approved 30% of 2023 NPAT for the research and development fund (VND333bn; USD13mn) and 14% of 2023 NPAT for the bonus and welfare fund (VND157bn; USD6mn), based on the actual 2023 NPAT.  

Shareholders approved a cash dividend of VND1,000/share for 2024. The 2024 dividend is lower than our current forecast of VND3,000/share. However, we note that DCM has a track record of raising its dividend, depending on the actual performance of the year. For example, it is now paying VND2,000/share for 2023 vs the previously approved amount of VND1,600/share. Shareholders also approved the 2024 NPAT allocation plan of 30% towards the research and development fund (~VND238bn; USD9.4mn) and ~14% (VND109bn; USD4.3mn) towards the bonus and welfare fund, based on the expected 2024 NPAT of VND794bn.  

Shareholders approved capex for 2024 at VND1.6tn (~USD63mn), which is in line with our expectation. This expenditure is for fourteen projects , which have passed feasibility studies (FS), including acquiring KVF (~VND656bn), opening a new office in HCMC (VND500bn), an industrial gas plant (VND300bn),  self-produced self-consumed solar rooftop of 5MWp (VND66bn), the Binh Dinh fertilizer plant (VND120bn), and others (center for research and technology transfer, raincoat rooftop upgrade for a urea plant, buidling a warehouse with 12,000 tonnes capacity, employee housing, a carbon dioxide plant, among others). Over the longer term, DCM will spend a total of VND2,887bn on the aforementioned projects. DCM is also working on several other projects’ FS to be included in the future.  

Shareholders approved the amendment to the corporate charter of DCM. In order to fully reflect the actual business activities of the company and to facilitate the FOL at 49%, DCM proposed to add further details to its business registration and corporate charter accordingly. Specifically, the amended business code 7120 will detail and exclude the business activities that are restricted for foreign investors, making DCM more accessible to foreign investors.