VNM - On track to exceed mid-single digit earnings growth target set for 2026 - Analyst Meeting Note

We attended VNM’s analyst meeting on May 8. Our key takeaways are as follows.

Q1 2026 Financial Highlights:

Revenue growth: Approximately 25% YoY.
Profit after tax growth: Approximately 55% YoY.
Key drivers: Strong growth is attributed to the low base of Q1 2025, robust sales performance, and effective cost management.
Gross profit margin: Margin improvement was supported by lower raw material costs from last year's procurement.
Domestic revenue: Showed strong recovery and growth in Q1.
Export sales: Grew by 15-16% YoY in Q1. The impact from the Middle East conflict was minimal as it began in mid-March, after January and February shipments were completed.

Subsidiaries in Q1 2026:

Moc Chau Milk: Showed impressive growth. Strong demand, especially for condensed milk, was bolstered by Cambodia-Thailand trade issues, creating an opportunity for Vietnamese products. The positive trend is expected to continue.
Driftwood (US subsidiary): Net profit increased by 25% due to price hikes on other products in anticipation of Q2 labor cost increases. The net profit margin is expected to decline in Q2.
Angkor Milk (Cambodia subsidiary): Performed "extremely well" in Q1, with high capacity utilization and strong market demand. This strong performance is anticipated to continue for the rest of the year.

Sales channel contribution:
- General trade (GT): 65% of revenue.
- Modern trade (MT): 20%.
- Vinamilk stores & e-commerce: This segment has grown from 11% to 15% of revenue during the last few years and is expected to continue expanding.
Store expansion: Vinamilk currently has 850 stores and plans to expand to 1,000 stores by the end of 2026, focusing on operational efficiency.
Vinamilk Care strategy: A new initiative to deliver milk to consumers based on long-term orders (adult orders for their children/parents). Long-term focus on improving direct-to-consumer (D2C) engagement through the company's e-commerce platform and the expanding network of Vinamilk stores. The goal is to enhance service quality, delivery speed, and after-sales support.
Sales restructuring: The restructuring in 2025 involved reassessing the performance of salespeople with more challenging KPIs, changing promotion policies, and replacing underperforming sales staff.

Green Farm: The key new premium brand that spans across many liquid milk categories, which continues to show solid, triple-digit CAGR since its launch in 2024 (low base).
Moc Chau Creamery: A new product line with positive initial feedback. It is positioned differently from Green Farm, emphasizing a 70-year heritage story. Distribution is expanding from the Modern Trade (MT) to General Trade (GT) channels.
Brand positioning: The company maintains distinct brand stories for Vinamilk Green Farm (modern) and Moc Chau (heritage/authentic).
New product development: After launching over 100 new SKUs in 2025, Vinamilk plans to introduce special products to celebrate its 50th anniversary in 2026.

Raw material costs: Costs for logistics, freight, and raw materials are trending upward. The company maintains a policy of stocking at least three months of raw materials in advance and does not anticipate any supply shortages.
GPM outlook: Expected to trend slightly downward in upcoming quarters due to rising raw material costs.
Pricing strategy: Vinamilk plans to pass on some cost increases to consumers with a maximum price increase of 2-3%. Adjustments will be made carefully to avoid market shock, but this may lead to long-term margin compression.
Consumer purchasing power: Increased tax allowances for households are seen as a positive, potentially increasing net income by 2-3% and boosting consumer purchasing power for FMCG products like Vinamilk.
Tax policy impact: Concerns from last year's tax changes for small businesses have subsided after the tax-exempt threshold was clarified at VND1bn per year, stabilizing the retail market.

Q2 2026 outlook: The company expects positive growth in Q2, but at a much lower rate than Q1 due to a high comparison base from Q2 2025.
Full-year 2026 guidance: The full-year target approved at the AGM remains unchanged at 5% revenue and NPAT growth. The company is committed to this minimum target and hopes to deliver a "special" result for its 50th anniversary.
Export sales forecast: Exports are expected to decline in Q2 due to shipping disruptions, affecting the Middle East market. However, the company is seeking alternative shipping routes and maintains its full-year export target for now.
Export disruptions: The Middle East conflict is causing shipping delays and will likely impact Q2 export sales to the Middle East.
ESOP (Employee Stock Ownership Plan): An ESOP is unlikely to be issued this year. Approval requires shareholder consent, and the major shareholder (SCIC) has historically been opposed due to concerns about diluting its 36% stake.