- DCM announced its Q2 2023 results, including NPAT-MI of VND288bn (USD12.2mn; -72.2% YoY). The significant decline in NPAT-MI was due to the average selling price (ASP) of urea declining 38.6% YoY (per our estimates), which outweighed urea sales volume rising 13.9% YoY in Q2 2023. Nevertheless, Q2 2023 NPAT-MI increased 26% QoQ despite a 6% lower urea ASP QoQ.

- The average Middle East urea price was USD341/tonne in H1 2023 (-57.3% YoY). We believe global urea prices bottomed in Q2 2023 and will remain relatively flat in H2 2023. As DCM’s urea ASP in H1 2023 was equivalent to 119.6% of our full-year forecast of USD350/tonne, we foresee potential upside to our urea ASP assumption, which we expect will outweigh potentially higher input gas costs caused by changes in the input gas price mechanism (see our June 12, 2023 DCM AGM Note).

- We also expect DCM’s NPAT-MI to increase further in Q4 2023, which is partly due to the company’s urea plant becoming fully depreciated in September 2023. Although DCM’s H1 2023 NPAT-MI completed 46.8% of our full-year forecast, this result was slightly ahead of our expectation. We thus foresee the potential of slight upside risk to our 2023F forecasts, pending a fuller review.

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