VHC – Poised for another successful year – Update

• VHC’s 4Q21 net revenue/net profit grew 38.5%/171.1% yoy, respectively.
• We are confident about VHC’s FY22-23F outlook with the revenue and net surge 25.8%/6.5% yoy and 27.4%/5.6 yoy thanks to demand recovery and high ASP in main export market.
• Reiterate Hold with a higher TP of VND80,600 following a 7.6%/6.6% upward revision of FY22/23F EPS.

4Q21 impressive performance following pent-up demand from US market

VHC’s 4Q21 net revenue soared by 38.5% yoy to VND2,693bn on the back of 1.2% yoy pangasius export volume growth and 35.9% yoy pangasius average selling price (ASP) increase, per our estimate. US market was the key revenue growth with 91.2% yoy in export revenue. Additionally, 4Q21 gross margin (GM) expanded 11.4% pts yoy to 23.7% thanks to high ASP and low-cost raw fish inventory. 4Q21 net profit hiked 171% yoy to VND454.7bn, stronger than that of 46% yoy of 3Q21. For FY21, VHC’s net revenue/net profit (NP) jumped 28.7%/53.1% yoy to VND9,054bn/VND1,101bn, fulfilling 101%/116% of our full-year forecast.

We are confident about VHC‘s FY22-23F outlook…

… due to (1) solid demand of US market is expected to drive revenue to grow 23.9% yoy, (2) China and EU market are expected to get back on track after low base FY21, (3) the Collagen & Gelatin (C&G) segment to rebound from the trough 2021 on growing beauty demand, and (4) ASP is likely to stay at US$3.45/kg in FY22F due to tight raw fish supply until 1H22F as Vietnam pangasius farming area have significantly narrowed down since 3Q21 during the outbreak. Being able to self-supply 70% its input material, VHC will ride on the selling prices surge with minimal concern over supply shortage.

Changes to our FY22-23 earnings forecasts

We revise up FY22/23F pangasius revenue by 3.8%/0.8% and other products revenue forecast by 20.8%/6.7% following strong recovery of demand and ASP in exporting markets. We lower FY22/23F C&G segment revenue forecast by 16.9%/4.3% due to slower-than-expected recovery. Overall, we expect FY22F top line and bottom line to surge 25.8%/27.4% yoy, respectively, then decelerate to 6.5%/5.6% yoy in FY23F.

The strong outlook has been priced in, in our view

We raise our 1-year TP to VND80,600 as 1) we roll forward our DCF valuation to FY22F, and (2) we revise up FY22/23F EPS by 7.6%/6.6%. However, we believe the market price is currently close to fair value, thus, we re-iterate Hold rating. A re-rating catalyst is the higher-than-expected recovery in ASP and stronger demand in target markets. Downside risks include higher-than-expected raw fish price and shipping cost.

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