We attended DHC’s AGM in Ben Tre Province on April 25. We see potential downside risks to our forecasts as paper prices have been recovering slower than we expected. Our key takeaways are as follows: 

2024 guidance: DHC guides for revenue and NPAT of VND3.3tn (+1%YoY) and VND300bn (flat YoY), equivalent to 90% and 77% our respective full-year forecasts. Per management, the company has set conservative targets.

In Q1 2024, revenue edged down 4% QoQ and was flat YoY, but NPAT-MI dropped 26% QoQ and 35% YoY as the price spread narrowed. ASP improved by ~3% YoY but the OCC price also increased by 9%, coupled with the escalation of other costs, particularly electricity and steam. Sales volume (in paper content) edged down 4% YoY.

Giao Long 3 has been scaled down and its timeline delayed due to legal requirements on capital. Regulatory stipulations mandate that for projects developed on land exceeding 10 hectares, a minimum of 20% of the investment cost must be financed through equity. This implies that Giao Long 3 requires an equity investment of VND360bn from equity. Per management, DHC has contributed VND180bn and plans to invest the remaining amount after the AGM. However, management expressed uncertainty over the plan's progress. Project information after the adjustment is as follows:

- Capex: VND1.8tn vs VND2.4tn previously.

- Capacity: 1,000 tonne/day vs 1,200 tonne/day previously. 

- Construction commencement: Q1 2025 vs Q1 2024 previously. 

- Operation date: Q3 2027 vs Q1 2027 previously.

Additionally, Giao Long 3 will focus on kraftliner and testliner to compete with domestic and FDI competitors, instead of low-end products which are in oversupply.

Carton box factories are expected to operate at full capacity in the next 2-3 years. Until Q1 2024, the two carton box factories are operating at ~60% capacity. Management expects that the entire packaging division will be fully operational within 2-3 years. The third carton box project is scheduled to commence in 2025, with an estimated investment of VND250bn.

Issuance plan:

- Rights issue: Every 100 existing shares receive the right to buy 10 new shares at VND25,000/share. The subscription rate of the issuance must be 70% or higher in order to be conducted. The VND201bn of expected proceeds serve to help fund GL3. 

- ESOP: 3 million shares at VND25,000/share (3.7% of outstanding shares) with a lock-up period of three years. The VND74bn of expected proceeds serve to supplement DHC's working capital. 

Dividends:

FY2023: VND2,000/share, already paid.

FY2024: 20% of par value in cash and/or in stock.

Powered by Froala Editor