DPM - Higher revenue, stable expenses to drive bottom line earnings slightly ahead of our expectations - Earnings Flash
  • 2024-07-31T00:00:00
  • Company Research
  • DPM reported its Q2 2024 revenue of VND3.9tn (+6% YoY; +19% QoQ) and NPAT-MI of VND231bn (+129% YoY; -13% QoQ). We attribute the 6% YoY increase in Q2 revenue to a 7% higher urea ASP despite a 5% decrease in sales volume. This strong revenue growth, together with a smaller increase in COGS (3% YoY), 5%/7% decreases in sales & marketing/GA expenses, and an 80% drop in the income tax expense, translate to a significant 129% YoY surge in NPAT-MI. We note that COGS decreased 3% YoY in Q2 2024 due to a 59% substantial decrease in other cash costs, which outweigh the 36% increase in raw materials presumably as a result of a 7% increase in the input gas price.
  • For H1 2024, DPM announced revenue of VND7.3tn (+4.1% YoY) and NPAT-MI of VND495bn (+37% YoY). These complete 51% and 68% of our respective full-year forecasts, slightly ahead of our expectations. We estimate that the urea ASP for H1 2024 was VND9,701/kg (+4.5% YoY) and this, coupled with the ~4% YoY increase in urea sales volume, surpasses an estimated 6.7% YoY increase in the input gas price to derive a 26% YoY increase in the gross profit margin (GPM). Additionally, the GPM in the first half of 2024 increased 2.73 bps to 15.8% vs H1 2023, which greatly contributed to the 37% YoY increase in the bottom-line earnings. The NPAT-MI spike is also supported by (1) an 86% decrease in interest expense and (2) a 44% decrease in income tax expense.
  • Sales volumes for H1 2024 are generally in line with our expectations, with urea sales volume completing 56% of our 2024 forecast and NPK sales volume completing 49%. We therefore see insignificant changes to our current forecasts for sales volumes, as we expect the urea sales volume to be slightly lower in H2 than H1. 
  • As a result, we see some potential slight upside in our 2024F earnings forecast for DPMpending a more comprehensive review. We currently have a MARKET PERFORM rating for DPM with a target price of VND31,900/share.

DPM’s H1 2024 results 

VND bn

Q2 2023

Q2 2024

YoY

H1 2023

H1 2024

YoY

% of Vietcap’s 2024F

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

9.96

10.63

7%

9.99

10.66

6.7%

102%

Urea average selling price (VND/kg)*

8,961

9,600

7%

9,281

9,701

4.5%

101%

Total urea sales volume (thousand tonnes)*

267

255

-5%

480

500

4.1%

56%

Revenue

3,707

3,948

6%

6,972

7,255

4.1%

51%

COGS

-3,318

-3,403

3%

-6,060

-6,108

0.8%

50%

Gross profit

389

545

40%

912

1,147

25.8%

58%

Sales & marketing exp

-230

-219

-5%

-404

-418

3.4%

47%

General admin (GA) exp

-129

-120

-7%

-223

-225

0.7%

49%

Operating profit (EBIT)

30

206

595%

284

504

77.3%

80%

Financial income

185

53

-72%

255

81

-68.4%

27%

Financial expenses

-16

-7

-58%

-42

-9

-79.0%

21%

In which, interest expense

-16

-5

-71%

-32

-5

-85.5%

N.M.

Net other income/loss

2

2

-1%

3

1

-56.2%

156%

Profit before tax (PBT)

201

255

27%

502

578

15.2%

65%

Income tax expense

-96

-19

-80%

-134

-75

-44.1%

50%

NPAT

105

236

124%

368

503

36.9%

68%

Minority interests

-4

-5

13%

-7

-9

30.3%

116%

NPAT-MI

101

231

129%

361

495

37.1%

68%

EBITDA

128

304

138%

485

700

44.3%

68%

 

Q2 2023

Q2 2024

ppt Δ 

H1 2023

H1 2024

ppt Δ

 

Gross profit margin

10.5%

13.8%

3.32

13.1%

15.8%

2.73

 

Source: DPM, Vietcap (* Vietcap estimate)

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