- We maintain our target price (TP) and reiterate our OUTPERFORM rating for VNM. We maintain our view that while our projected 2021-2026F EPS CAGR of 4.2% (vs 2015-2020 EPS CAGR of 7.2%) will restrain the stock from a strong valuation re-rating, VNM’s 2022F P/E of 17x looks undemanding vs a 5Y average peer median TTM P/E of 25x, in addition to the company’s strong operating cash flow and solid dividend yield.

- In this Update Report, we increase our aggregate 2022F-2024F NPAT-MI by 1% mainly due to our upward revision of VNM’s GPM by 60/230/250 bps in 2022/23/24F to reflect the recent decline in milk prices due to weakening demand while supply has remained limited, which is partly offset by increasing our aggregate 2022F-2024F selling expenses by 7%. Additionally, we have increased our risk-free rate and therefore our cost of equity assumption by 50 bps.

- Downside (Upside) risks: Weaker/(higher)-than-expected increase in selling prices to offset increased input costs; higher/(lower)-than-expected input costs; weaker/(stronger)-than-expected recovery of dairy consumption; worse/(better)-than-expected new product roll-outs.

Powered by Froala Editor