VHC – Back to buy territory – Update

• VHC’s 1Q22 net revenue/net profit surged 82.7%/318.3% yoy, fulfilling 29%/39% of our full-year forecasts, respectively.
• We expect FY22F revenue/NP to grow robustly 52.8%/77.9% yoy, riding on strong export demand and expanding gross margin.
• Upgrade to Add with a higher TP of VND105,600 following a 39.7%/26.5% upward revision of FY22/23F EPS.

1Q22 buoyant performance following on demand and ASP surge

VHC’s 1Q22 net revenue soared by 82.7% yoy to VND3,267bn on the back of 19% yoy pangasius export volume growth and 51% yoy increase in average selling price (ASP), per our estimate. US market was still the key revenue growth driver with 127% yoy while revenue from China & EU market grew 32.5%/46.4% yoy, respectively. 1Q22 gross margin (GM) expanded 8.5% pts yoy to 23.8% thanks to 1) 51% yoy increase in ASP with strong demand from all markets and the surge production costs on global scale, 2) low-cost raw fish inventory. Thus, 1Q22 NP hiked 318% yoy to VND548bn, stronger than that of 171% yoy in 4Q21.

We believe VHC will keep shinning in FY22

In 2022, we expect VHC to record strong increase of 22.0% yoy in export volume following 1) pent-up demand when the food service keep recovering and inventory in target markets are at low level after the pandemic, 2) there will be no production disruptions like in the 3Q21, and 3) the Vietnamese pangasius can be benefited from the white fish supply gap left by Russia supplier due to the conflict between Russia and Ukraine. In this favorable situation together with the low base in 1H21, we expect the pangasius average selling price (ASP) will soar 30.4% yoy in FY22F. The C&G segment will rebound from the trough FY21 after witnessed a 40% yoy revenue increase in 1Q22 following the recovery of global beauty and healthcare demand.

Changes to our FY22-23 earnings forecasts

We revise up FY22/23F pangasius revenue by 21.5%/18.5% and other products revenue forecast by 24.9%/15.8% following stronger than expected recovery of demand and ASP in exporting markets. We maintain FY22/23F C&G segment revenue forecast, which increase 55%/35% yoy. Overall, we expect FY22F top line/bottom line to increase 52.8%/77.9% yoy, respectively, then decelerate to +3.9%/-4.3% yoy in FY23F.

Upgrade to Add with a higher TP of VND105,600

We believe the recent market correction has brought VHC share back to buy territory. We upgrade our rating to Add with higher TP of VND105,600 following a 39.7%/26.5% upward revision of FY22/23F EPS. A re-rating catalyst is the higher-than-expected ASP and stronger demand in target markets. Downside risks include higher-than-expected raw fish price and shipping cost.

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