DRC - Higher input costs dampen Q3 2024 earnings - Earnings Flash
  • 2024-10-18T00:00:00
  • Company Research
  • 9M 2024 results: DRC announced its 9M 2024 results with net revenue of VND3.6tn (USD142.2mn; +5% YoY) and NPAT-MI of VND173bn (USD6.9mn; +14% YoY), fulfilling 73% and 68% of our respective full-year forecasts. Revenue tracked in line with our forecast, while NPAT-MI slightly trailed our expectation due to higher-than-expected input costs. As a result, we see potential slight downside risks to our 2024F forecasts, pending a more comprehensive review.
  • Q3 2024 results: Q3 2024 net revenue increased 8% YoY, driven primarily by a 7% YoY increase in sales volume for both radial and bias tires. However, Q3 2024 NPAT-MI plummeted 39% YoY to VND46bn (USD1.8mn), mainly due to lower GPM YoY, in addition to higher FX loss YoY. On a QoQ basis, revenue dropped 11%, which we attribute to lower sales volume as distributors had stocked up in late Q2 2024 ahead of DRC’s selling price hike effective from July 1, 2024. In addition, rising input costs dragged NPAT-MI to fall 41% QoQ.
  • Profitability: Gross profit margin contracted 4.3 ppts YoY/7.6 ppts QoQ to 12.5% in Q3 2024 due to increased input costs. On a positive note, SG&A expenses/net revenue fell to 6.1% in Q3 2024 from 13.3% in Q2 2024 (caused by high logistics costs during the container shortage), which we attribute to favorable shipping terms from shipping lines. As such, EBIT margin fell by 2.5 ppts YoY/0.4 ppts QoQ to 6.4% in Q3 2024.

DRC’s Q3 2024 & 9M 2024 results 

VND bn

Q3 2024

QoQ

YoY

9M 2024

YoY

9M 2024 as % of 2024F

Net revenue

1,218

-11%

8%

3,555

5%

73%

COGS

-1,065

-2%

14%

-2,967

1%

72%

Gross profit

152

-44%

-20%

588

31%

74%

Selling expenses

-53

-67%

-22%

-299

52%

72%

GA expenses

-21

-8%

-4%

-63

8%

80%

EBIT

78

-16%

-22%

227

17%

75%

Net financial income & net other income

-18

N.M.

191%

-11

19%

N.M.

PBT

60

-38%

-35%

216

16%

68%

NPAT-MI

46

-41%

-39%

173

14%

68%

Gross margin

12.5%

-7.6 ppts

-4.3 ppts

16.6%

3.3 ppts

 

EBIT margin

6.4%

-0.4 ppts

-2.5 ppts

6.4%

0.7 ppts

 

NPAT-MI margin

3.8%

-1.9 ppts

-3.0 ppts

4.9%

0.4 ppts

 

Source: DRC, Vietcap

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