VHC - Management remains cautious in 2024 earnings outlook – AGM Notes

• We attended VHC’s AGM in Dong Thap Province on April 17. The meeting focused on the company’s 2024 business outlook as well as its strategic direction for 2024-2025. 
• For 2024, management guides for (1) base case revenue of VND10.7tn (USD428mn; +7% YoY) and NPAT-MI of VND800bn (USD32mn; -13% YoY), representing 87% and 48% of our respective forecasts; and (2) best case revenue of VND11.5tn (USD460mn; +15% YoY) and NPAT of VND1.0tn (USD40mn; +9% YoY), equivalent to 94% and 60% of our respective forecasts. 
• FY2024 cash dividend: VND2,000/share (yield of 2.9%), in line with our forecast. The payment date will be determined by the BOD. 
• VHC plans capex of VND930bn (USD38mn) in 2024, mainly allocated in feed factories, fish meal, and filet factories, collagen factory capacity expansion, rice-product factories, and pangasius farming.
• VHC’s Q1 2024 net profit is estimated to exceed VND150bn (-32% YoY; +215% QoQ) and fulfills 9% of our current full-year forecast. As net profit for Q1 usually accounts for 20% of full-year results, we see potential downside risk to current projection, pending a fuller review.

Management estimates net profit of VND150bn in Q1 2024; export activities to see stronger rebound in Q3 2024. VHC’s management estimates that revenue from the US market will increase by approximately 20% QoQ, while total profit is expected to exceed VND150bn (-32% YoY; +215% QoQ) in Q1 2024. The company has secured order backlogs for Q2 2024 and foresees higher growth in Q3 2024. Management also expects continued QoQ price improvements in 2024. However, the firm is cautious in its 2024 earnings outlook due to growing sales contributions from the Chinese market, which typically yields thin profit margins. Overall, VHC prioritizes maintaining market share and increasing sales volume, though this strategy may result in a slower recovery of profit margins in 2024.

VHC’s long-term strategy is focusing on innovating its product portfolio. According to VHC, research into genetic development for pangasius fish breeding is progressing as planned, with the aim of enhancing the quality of filets and related products. The company is also striving to enhance efficiency in both farming and processing to mitigate cost fluctuations, having successfully achieved 80% internal sourcing of raw fish materials. Additionally, VHC is conducting trials for salmon processing and exploring alternative white-meat fish options to pangasius, aiming to capitalize on different raw material seasons. In the collagen and gelatin business, new capacity is set to commence operations by the end of April 2024, which is expected to increase current capacity by 50% and serves as a pivotal driver for this segment. VHC's collagen meets GMP-WHO standards, enabling the firm to produce dietary supplement, with the potential for manufacturing hard capsules.

Powered by Froala Editor