VHC – Stand strong against headwinds – Update

• 3Q21 revenue and net profit grew 23.9% yoy and 45.6% yoy to VND2,231bn and VND255bn, respectively
• We expect pangasius export volume and average selling price (ASP) to accelerate into FY22F following increasing demand.
• We increase TP to VND69,500 but downgrade to Hold as price is close to fair value.

3Q21 recap: solid earnings growth despite social distancing
3Q21 net revenue increased by 23.9% yoy to VND2.231bn, regarding 9.2% yoy growth on pangasius export volume and 12.1% yoy increase ASP, according to our estimate. 3Q21 blended gross margin expanded 5.6% pts to 18.3% as pangasius ASP surged 12.1% yoy while average raw fish price inched up only 1.2% yoy. 3Q21 net profit hiked 45.6% yoy to VND255.4bn. For 9M21, revenue jumped 24.9% yoy to VND6,361.3bn while NP increased 17.2% yoy to VND646.6bn, fulfilling 71.9% of our full-year forecasts.
The best is yet to come
The robust 9M21 performance of VHC backed by 1) effective production plan to cope with COVID-19, 2) pangasius average selling price rally, and 3) VHC’s negotiating ability to pass an increase in shipping costs to the customer. Thus, we expect FY21F revenue/net profit to grow 27.4%/34.4% yoy, respectively. But the best is yet to come, FY22F will be even more stellar for VHC with NP is expected to surge 40.4% yoy as we believe 1) demand from main export markets (USA, EU, China) will be fully recovered, 2) pangasius ASP will increase 9.0% yoy, in our estimate and 3) when the Mekong Delta is covered with vaccines which limiting the impact of supply chain disruption, VHC’s capacity will get back to pre-lockdown level helping boost production volume.
But the valuation looks fair enough
We increase our TP by 39.0% to reflect 34.4%/40.4%/6.7% increase in FY21-23F net profit and higher targeted P/E to reflect solid outlook. However, we think current surge of VHC’s stock price reflects bright view of the company post pandemic with strong export revenue growth in Sep/Oct-2021 (+18.8%/+6.1% yoy). Therefore, we downgrade our rating to Hold as we believe the recent share price rally has largely priced in VHC’s positive outlook in FY22F, so that the risk/reward level looks balance now. Our TP is based on an equal weighting of five-year DCF valuation and target FY22F P/E.
Upside risks/downside risks
Upside catalyst include higher-than-expected ASP and stronger pangasius demand. Downside risks include unfavorable changes in export market regulations and prolonged COVID-19 impacts

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