DPM – Moderating 2026 outlook with valuation at fair levels – HOLD

• We maintain our HOLD rating with 6.6% downside and a 4.1% dividend yield. We revise down our TP by 2.6% while the share price has increased 10.3% since our latest report.
• Our lower TP is due to rolling our valuation model forward to 2026 and a lower WACC assumption.
• TTM P/E of 18.8x is above the five-year historical average of 12.3x and already fairly reflects the stock’s valuation.

Financial Highlights

• We forecast revenue to decline 4.6% YoY, mainly due to lower urea selling prices.
• We forecast the blended GM to narrow by 0.5% pts YoY to 16.9% in FY26, mainly as lower urea ASP more than offsets the decline in input gas costs.

Investment Thesis

Despite lower oil prices, sharp selling price decline pressures urea GM

We forecast global urea prices to decline 15-18% YoY in 2026, after rising about 22.6% YoY in 2025, on expectations of a global supply recovery as China ramps up exports, which is expected to lower DPM’s urea ASP by 11.3% YoY. We also expect FO Singapore prices to fall a further 8.8% YoY in 2026, supporting a 3.3% YoY decline in urea feedstock gas prices despite the shrinking share of low-transport-cost gas. Nevertheless, while gas prices are expected to ease, we believe the sharper decline in selling prices will still exert pressure on urea GM in 2026 (-5.2% pts YoY).

Sales volume expected to soften amid factory maintenance, slowing exports

DPM has been conducting a major turnaround of its urea plant since December 22, 2025, with an expected duration of 38 days. Consequently, we forecast 2026 urea production volume to edge down by 1.4% YoY to 873,000 tons (equivalent to a 109% utilization rate). On the consumption side, while exports may face pressure from a projected recovery in global supply, we believe more favorable weather conditions and softer selling prices will stimulate domestic demand. This is expected to limit the decline in 2026 urea sales volume to just 1.1% YoY, reaching 873,000 tons.

Integrating DAP production helps optimize NPK plant utilization

DPM has recently launched DAP Phu My, produced on its chemical-technology NPK line. This is currently the only NPK plant in Vietnam capable of producing DAP, allowing the company to leverage operational flexibility to optimize production without investing in a new line. Although output is expected to be limited in the initial years (around 30,000 tons), we view this as a market-testing step, which could pave the way for more meaningful expansion in the coming years if successful.

Fair valuation amid a more challenging earnings outlook in 2026

DPM is currently trading at a TTM P/E of 18.8x, significantly above its five-year historical average of 12.3x, suggesting that the stock is fairly valued given a more challenging earnings outlook in 2026.

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