KDC – Demonstrating resilience – Earnings update

• In 2Q21, KDC’s revenue and net profit grew 32.8% yoy / 373% yoy to VND2,576bn / VND183.5bn.
• KDC reported 1H21 top line and bottom line grew 33.6% yoy / 455% yoy to reach VND4,898bn and VND278bn, fulfilling 60.8% our FY21F’s forecast.
• Joint venture with Vinamilk and Chuk Chuk stores chain will be launched in 2H21 to unlock more growth potential for KDC in the future.

1H21 results: in line with our projection
• Edible oil grew 34% yoy to VND2,045bn, accounting for 79.3% of total 2Q21 revenue. Food product (ice cream, snack, confectionary) grew 28.3% yoy to VND531bn, accounting for 20.6% of 2Q21 total revenue. Among that, TAC – a subsidiary of KDC and also the largest contributor to KDC – recorded a revenue of VND1,425bn, equivalent to 55.3% of KDC’s 2Q21 total revenue. Overall, 2Q21 revenue significantly increased 33% yoy to VND2,576bn.
• Gross profit margin decreased 3.1% pts yoy to 19.8% in 2Q21 due to the rise of input material prices of food products segment, ie sugar, butter, flour.
• SG&A expense softened 18.1% yoy in 2Q21 thanks to the restructure of Kido group after merging with Kido frozen food (KDF) and the reversal provision of VND121.5bn for doubtful receivables in 2Q21.
• In 2Q21, KDC also booked a tax refund of VND24.1bn (vs VND35bn tax expense in 2Q20).
• Minority interest/net profit after tax ratio decreased by 39.7% pts yoy to 14.8% thanks to the merge with KDF as at end-FY20.
• As the results, 2Q21 net profit increased 273% yoy to VND184bn
• 1H21 net profit increased 5.5-fold to VND278bn, partially to be driven by the merging with KDF, coming in at 60.8% our FY21F’s forecast.
Concern over input material price hike likely ease in 2H21
According to KDC, they have fully stocked raw materials for ice cream production (sugar, milk, butter, flour) until 3Q21, which will partially mitigate the risk of food prices hike. Meanwhile, edible oil (especially palm oil) prices started decreasing since Jun 21 after 12 consecutive months uptrend. We expect the price of raw oil will stay flat in 2H21 following stable demand of major economies.
Joint venture with Vinamilk and Chuk Chuk chain will be launched in 2H21
Vibev – Joint venture (JV) with Vinamilk as well as Chuk Chuk stores (retailing premium ice cream products and soft drinks) has been completed and is expected to launch at the end of 2Q21. However, due to the impact of Covid-19 that these projects will be launched in 2H21. We expect these projects to open up new growth opportunities for KDC in the next from FY21F onward.

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