DCM – Q1 results slightly trail our forecast – Earnings Flash
  • 2024-04-26T00:00:00
  • Company Research
  • DCM announced its Q1 2024 results with a net revenue of VND2,744bn (+0.3% YoY; USD110mn) and reported NPAT-MI of VND346bn (+51.1% YoY; USD14mn), which complete 19% and 20% of our respective full-year forecasts. We estimate that urea sales volume for Q1 was 243,000 tonnes (+9.1% YoY; 29% of our forecast) while the average urea selling price (ASP) slightly decreased to VND9,761/kg (-0.8% YoY, broadly in line with our expectation). 
  • We attribute the stagnant revenue growth to a 10% increase in urea revenue offseting a 66% decrease in the trading segment . 
  • DCM’s 51% YoY spike in Q1 2024’s NPAT-MI was predominantly due to 1) a tremendous 84% YoY plunge in the depreciation expense after its urea plant fully depreciated starting from September 2023, and 2) increases in financial income (+11% YoY) and other income (+83% YoY), which together outweigh a 22% increase in the selling expense as marketing expenditures increased 26% YoY (VND30bn). This is in line with DCM’s current target of increasing its market shares and sales volume as it strategically acquired a 100% stake in Korea-Vietnam Fertilizer Co., Ltd. (KVF), which will double DCM’s NPK segment capacity. We note that DCM usually books a high marketing expense in Q1 and lowers this expense in subsequent quarters.
  • We see a potential downside adjustment to our Middle East urea price forecast as industry players expect a continued downward trend for the urea price in Q2 after a weak Q1. The average price is USD339/tonne in Q1 2024, -9% YoY. This might outweigh higher-than-expected sales volume. Therefore, we see some potential slight downside adjustments to our 2024 earnings forecasts, pending a fuller review.
  • We currently have a OUTPERFORM rating for DCM with a target price of VND35,000/share.

DCM’s Q1 2024 results

VND bn

Q1 2023

Q1 2024

YoY

% of Vietcap’s 2024F

Average Brent oil price (USD/bbl)

                82 

                82 

-0.7%

99%

Average fuel oil price (USD/tonne)

              401 

             446 

11.3%

99%

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

              9.0 

              9.3 

3.4%

100%

Middle east urea price (USD/tonne)

372

339

-8.9%

97%

Urea average selling price (VND/kg)*

9,843

          9,761 

-0.8%

101%

Urea sales volume (thousand tonnes)**

             223 

             243 

9.1%

29%

Revenue

2,735

2,744

0.3%

19%

COGS

(2,166)

(2,034)

-6.1%

18%

Depreciation expense

(349)

(57)

-83.6%

23%

Gross profit

569

710

24.7%

26%

Sales & marketing exp

(277)

(337)

21.9%

41%

General admin (GA) exp

(144)

(115)

-20.5%

27%

Operating profit (EBIT)

148

258

74.2%

18%

Financial income

119

132

10.9%

28%

Financial expenses

(9)

(14)

55.8%

28%

Net other income/loss

4

8

83.2%

34%

Profit before tax (PBT)

262

383

46.2%

20%

NPAT-MI

229

346

51.1%

20%

EBITDA

498

315

-36.8%

18%

Source: DCM, Vietcap (* Vietcap estimates; ** Vietcap estimates based on DCM’s 2-month bulletins)

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