STK – 4Q21 earnings growth slow down due to labor shortage – Earnings update

• STK posted a 10.2% yoy increase in 4Q21 net profit (NP), lower than 200% yoy level seen in 3Q21.
• STK’s FY21 revenue edged up 15.1% to VND2,042bn, while NP soared 93.0%, fulfilling 101% of our FY21 earnings forecast.

4Q21 operating profit was hit hard by labor shortage

• In 4Q21, STK’s revenue decline 13% yoy to VND497bn, lower than 9M21 growth of 29.1% yoy. In 4Q21, after the “3-on-site” operation stopped in October 2021, workers returned home and some of them get COVID-19 infection from their relatives, according to STK. Thus, the company’s factories were lack of labor and could not run at full capacity in 4Q21. As a results, recycle yarn revenue drop significantly 44.4% yoy while virgin yarn revenue increase 30.8% yoy thanks to remaining inventory.
• Gross margin (GM) declined 2.4% pts yoy to 15.1% in 4Q21 as rising oil price started weighting on STK’s input PE price. In 4Q21, STK’s Polyetylen (PE) average price increased 27% yoy.
• 4Q21 pre-tax profit decrease 28.4% yoy following GM decline. However, 4Q21 net profit increased 10.2% yoy (to VND75.1bn) due to tax refund of VND21bn for Trang Bang 1-2 projects.
• STK’s FY21 revenue edged up 15.1% yoy to VND2,042bn, while NP soared 93.0% yoy, fulfilling 101% of our FY21 earnings forecast.

Key take-away from Analyst meeting on 21-Jan-22

• STK is expected to gain more market share from domestic market thanks to take advantage from anti-dumpling tax on China yarns. According to STK’s management, imported yarns ASP from China in 1H21 was 10-12% lower than ASP of STK. We expect anti-dumping tax support for STK improve the GPM in FY22-23F.
• STK’s management expect STK’s revenue to increase by 13% in Jan 2022 when compared to monthly average of 4Q21 thanks to the recovery of clients’ order flow and the company’s production capacity
• STK is supplementing and providing more information and documents to apply for the securities offering license with the State Securities Commission. STK’s management expect to complete the further issuance of shares for existing shareholders (~ 20% stake) in 1Q22

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