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- We increase our target price (TP) for VNM by 6% and maintain our OUTPERFORM rating.
- Our higher TP is mainly driven by our 5% higher aggregate NPAT-MI forecast in 2024F-25F as we raise our projected GPM in 2024F/25F by 100/70 bps to 44.1%/44.7%, respectively, to reflect our more bearish view of input milk prices in 2024. We also increase 2023F NPAT-MI by 1% as we raise our export sales forecast by 7% because H1 2023 results were ahead of our forecast.
- We like VNM’s superior profitability, solid balance sheet and strong cash flow. We expect VNM to deliver a sales CAGR of 6% and EPS CAGR of 10% in 2023F-26F thanks to (1) rising disposable income in Vietnam as the labor market recovers and (2) improved gross margin amid softening milk prices. That said, we believe not until VNM successfully reclaims its market share and enhances its brand equity will the stock’s valuation be re-rated.
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