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- DCM announced Q4 2023 results with net revenue of VND3.6tn (-20% YoY) and NPAT-MI of VND493bn (-51% YoY). In our view, the YoY decline in NPAT-MI is mainly due to 1) DCM’s estimated urea average selling price (ASP) falling 37% YoY, 2) estimated input gas price increasing 12% YoY, and 3) 9x higher GA expenses. We note that DCM recorded VND67bn of provision expense for its science fund in Q4 2023 vs VND123bn of science fund reversal in Q4 2022.
- On a QoQ basis, Q4 2023 NPAT-MI surged 6.8x, which we mainly attribute to 1) lower depreciation expense in Q4 of VND59bn vs Q3 of VND320bn, 2) urea gross profit margin expanding to 32.1% in Q4 2023 vs 10.0% in Q3 2023, and 3) NPK gross profit jumping 5.3x QoQ (estimated NPK sales volume increasing 2.6x QoQ). We believe the better urea gross profit margin in Q4 2023 is due to DCM finalizing input gas costs for 2022 & 2023 in Q4, which reduces Q4 urea COGS by approximately VND100bn, as per DCM.
- In 2023, DCM recorded net revenue of VND12.6tn (-21% YoY) and NPAT-MI of VND1.1tn (-74% YoY), which are equivalent to 104% and 107% of our respective forecasts. DCM’s NPAT-MI beats our forecast mainly due to finalizing lower input gas costs. Meanwhile, higher-than-expected urea sales volume offset slightly lower urea ASP and higher-than-expected GA expenses. The sharp decline in NPAT-MI was primarily caused by 1) estimated DCM’s urea ASP declining 33% YoY, while estimated urea sales volume increased 8% YoY and 2) sales & marketing expenses increasing 13% YoY (due to the company carrying out promotional campaigns for NPK products).
- We see insignificant changes to our 2024F NPAT forecast, pending a fuller review. The average Middle East urea price was USD358/tonne (-49% YoY) in 2023 – in line with our forecast of USD360/tonne. In addition, we estimate DCM’s urea ASP in 2023 at USD398/tonne (-35% YoY), slightly lower than our forecast of USD410/tonne.
- We currently have an OUTPERFORM rating for DCM with a target price of VND33,800/share.
DCM’s Q4 & 2023 results
VND bn | Q4 2023 | YoY | 2023 | YoY | % of Vietcap’s 2023F |
Average Brent oil price (USD/bbl) | 83 | -6.7% | 82 | -16.8% | 99.1% |
Average fuel oil price (USD/tonne) | 453 | 18.7% | 448 | -10.7% | 99.5% |
Input gas price (USD/MMBTU), including VAT* | 9.4 | 11.8% | 9.2 | -7.7% | 100.3% |
Urea average selling price (VND/kg)* | 8,401 | -36.8% | 9,569 | -34.9% | 98.8% |
Total urea sales volume (thousand tonnes)* | 241 | 9.4% | 912 | 8.0% | 101.3% |
Revenue | 3,566 | -20.0% | 12,602 | -20.9% | 104.4% |
COGS | -2,700 | -15.1% | -10,620 | 3.9% | 102.7% |
Gross profit | 866 | -32.3% | 1,982 | -65.2% | 114.8% |
Sales & marketing exp | -217 | -14.7% | -786 | 12.5% | 102.8% |
General admin (GA) exp | -209 | 817.5% | -510 | -21.9% | 124.2% |
Operating profit (EBIT) | 440 | -56.1% | 687 | -84.2% | 124.5% |
Financial income | 106 | 26.4% | 570 | 89.3% | 99.4% |
Financial expenses | -10 | -50.6% | -27 | -54.7% | 102.9% |
Profit before tax (PBT) | 537 | -49.3% | 1,251 | -72.8% | 113.7% |
NPAT-MI | 493 | -51.0% | 1,107 | -74.3% | 107.3% |
EBITDA | 499 | -63.2% | 1,770 | -69.2% | 108.8% |
Source: DCM, Fiinpro, Vietcap (* Vietcap estimates)
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