- We downgrade our rating for DGC from BUY to OUTPERFORM despite raising our target price (TP) by 27% as we roll our TP horizon from end-2024 to mid-2025, raise our aggregate 2024-26F earnings forecast by 10%, and raise our target EV/EBITDA multiple. DGC’s share price has rallied 33% over the past three months.

- We cut our 2024F core EBITDA by 11% due to the lower-than-expected yellow phosphorus (P4) price. However, we raise our respective 2025F/2026F core EBITDA by 15%/27%, resulting from the addition of the new ethanol factory and increased phosphorus revenue projections.

- We also increase our target EV/EBITDA from 7.0x to 8.5x due to (1) our 49% core EBITDA growth forecast for 2025 and (2) DGC’s expanded phosphate rock reserve that could extend the current 80%+ phosphorus ROIC into the next seven years. Our new TP puts DGC’s respective 2024F/25F P/E at 14.5x/9.6x, higher than the five-year average of DGC’s TTM P/E of 9.1x.

- DGC announced preliminary Q1 2024 NPAT of VND700bn (-15% YoY) due to maintenance and weak P4 prices. However, DGC has resumed operating at full capacity utilization since March. 

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