PTB – Brighter outlook from FY24F – Update

• PTB’s 1Q23 net profit (NP) reached VND63bn (-55.4% yoy), fulfilling 13.8% of our previous full-year forecast.
• We expect PTB’s NP to decline by 25.2% yoy in FY23F and bounce back by 49.8% yoy in FY24F as we expect demand for wood and stone products to recover in both domestic and export markets after FY23F.
• Upgrade to Add with higher target price (TP) of VND56,000 as we roll valuation model to mid FY23-24F.

1Q23 recap: Revenue shrank but stone products export was a spotlight
PTB reported a slump in 1Q23 revenue and NP by 18.0%/55.4% yoy, fulfilling 21.7% and 13.8% of our previous FY23F forecast, respectively. Wood segment fell 22.4% yoy in revenue as it continued to be hit by weak demand in the US (PTB’s major export market), while stone segment recorded positive figure of 16.3% yoy growth thanks to the contribution of quartz products export business.
Wood revenue will continue to dive in FY23F before rebounding in FY24F
PTB’s export value of wooden product (accounted for 94.7% of total wood revenue) dropped by 55% yoy in 1Q23, as demand was constrained by difficulties in the US’s housing market and the cutbacks of non-essential spending. We expect the tightening cycle to be halted by 4Q23F, thus we expect the US’s property market to recover from FY24F, followed by wooden furniture consumption. We forecast wood export revenue to slide 7.3% yoy in FY23F to VND2,807bn and spring back 24.0% yoy to VND3,480bn in FY24F.
There are tailwinds carrying stone products consumption growth in FY23-25F
The company has widen customer base for quartz products in the US market, which led to an upsurge of 64.5% yoy growth in 1Q23 stone products export revenue. We forecast FY23F stone export to reach VND1,073bn in revenue, of which VND1,000bn come from granite. As we expect consumption in the US market to accelerate from FY24F thanks to lower borrowing cost – thus reinforce new orders for granite products, we forecast granite revenue to reach VND2,131bn and VND2,553bn in FY24-25F (+6.5%/19.9%yoy) respectively.
Upgrade to Add with higher TP of VND56,000
We raise our TP by 16.2% as we roll valuation model to mid FY23-24F, we decrease 19.9% of FY23F EPS and increase FY24F EPS by 2.8% from previous projection. Upside catalysts include (1) better-than-expected home furniture demand in the US thanks to inflation cooling down and (2) domestic consumption extends thanks to earlier-than-expected recovery of property market’s activities. Downside risks include: (1) slower-than-expected revenue growth of quartz business as the market is highly competitive and (2) delay in recognizing revenue from Phu Tai Residence.

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