DGC - Shrinking GPM, rising SG&A expenses weigh on earnings - Earnings Flash
  • 2024-10-23T00:00:00
  • Company Research
  • DGC announced its Q3 2024 results with revenue of VND2.6tn (+2% QoQ; +4% YoY) and NPAT-MI of VND706bn (-17% QoQ; -7% YoY). Overall, 9M 2024 revenue and NPAT-MI fulfill 69% and 67% of our full-year forecasts, respectively. We foresee minimal changes to our forecasts, pending a fuller review. 
  • In Q3 2024, sales of industrial phosphorus chemicals (IPC) grew 23% QoQ, mainly due to a 53% increase in P4 sales volume, supported by customers restocking as their inventories reached a healthy level. We expect the IPC segment to continue recovering moving forward, driven by improving orders and P4 selling prices.
  • For agricultural phosphates (AP), in Q3 2024, DGC converted all WPA into fertilizers, which benefit from geographical advantages in the domestic market. We expect the company to continue maintaining this strategy for the rest of 2024.
  • GPM fell to 34.5% in Q3 2024, down from 39.2% in Q2 2024. This decline was caused by a 5% QoQ decrease in P4 prices and a 20-25% rise in input apatite ore prices, as the ore supply was disrupted by Typhoon Yagi, capping the ore mining volume quota.
  • SG&A/revenue rose to 8.1% in Q3 2024, compared to the 6.1% average from 2021 – H1 2024, mainly due to a spike in shipping costs from July to August. However, we expect this ratio to normalize in Q4 2024, as shipping costs have been declining since September. 
  • Additionally, financial income fell to VND151bn in Q3 2024 (-26% YoY; -9% QoQ), which further contributed to the company’s slightly lower-than-expected earnings.
  • We maintain our expectations for DGC’s ethanol factory to begin operating and its chlor-alkali project to begin construction in Q4 2024.

DGC’s 9M 2024 results

 

Q3 2023 

Q2 2024 

Q3 2024 

QoQ 

YoY 

9M 2023 

9M 2024 

YoY 

9M 2024/2024F 

2024F 

ASP (VND mn/tonne) 

70 

74 

75 

0% 

7% 

77 

74 

-4% 

102% 

73 

Industrial phosphorus chemicals 

95 

98 

93 

-5% 

-2% 

108 

96 

-11% 

98% 

98 

Agricultural phosphates 

45 

49 

57 

10% 

26% 

47 

52 

11% 

110% 

47 

Revenue 

2,464 

2,505 

2,558 

2% 

4% 

7,360 

7,447 

1% 

69% 

10,757 

In which: 

 

 

 

 

 

 

 

 

 

 

- Industrial phosphorus chemicals 

1,494 

1,291 

1,581 

23% 

6% 

4,589 

4,144 

-10% 

71% 

5,871 

- Agricultural phosphates 

902 

1,014 

829 

-23% 

-8% 

2,452 

2,849 

16% 

71% 

4,002 

Gross profit 

840 

983 

881 

-10% 

5% 

2,670 

2,630 

-1% 

71% 

3,727 

Selling expenses 

-118 

-117 

-168 

44% 

43% 

-340 

-390 

15% 

76% 

-514 

G&A expenses 

-39 

-53 

-40 

-25% 

2% 

-110 

-133 

21% 

78% 

-171 

EBIT 

683 

813 

673 

-17% 

-1% 

2,220 

2,107 

-5% 

69% 

3,042 

Financial income 

203 

165 

151 

-9% 

-26% 

549 

481 

-12% 

61% 

793 

Financial expense 

-22 

-16 

-22 

39% 

2% 

-67 

-56 

-16% 

71% 

-80 

Others 

-1 

-9 

-2 

-81% 

90% 

-2 

-10 

535% 

N/M 

PBT 

864 

953 

800 

-16% 

-7% 

2,701 

2,522 

-7% 

67% 

3,756 

NPAT-MI 

761 

842 

706 

-16% 

-7% 

2,391 

2,221 

-7% 

67% 

3,313 

EBITDA 

777 

919 

760 

-17% 

-2% 

2,474 

2,406 

-3% 

71% 

3,402 

Margin 

 

 

 

 

 

 

 

 

 

 

GPM 

34.1% 

39.2% 

34.5% 

 

 

36.3% 

35.3% 

 

 

34.6% 

SG&A as % of revenue 

-6.4% 

-6.8% 

-8.1% 

 

 

-6.1% 

-7.0% 

 

 

-6.4% 

EBIT margin 

27.7% 

32.5% 

26.3% 

 

 

30.2% 

28.3% 

 

 

28.3% 

NPAT-MI margin 

30.9% 

33.6% 

27.6% 

 

 

32.5% 

29.8% 

 

 

30.8% 

EBITDA margin 

31.5% 

36.7% 

29.7% 

 

 

33.6% 

32.3% 

 

 

31.6% 

Source: DGC, Vietcap

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