DBC_BUY_TP 31,800 VND_Upside 25%_EXPECTATIONS FROM THE BOTTOM GO UP_BSC Company Update_030822

 PRICING PERSPECTIVES

We recommend BUY for DBC with a target price of VND 31,800/ SHARE for 2023, upside 25% compared to the price on 03/08/2022 with P/E method with a target P/E of 7.5 times.

BUSINESS RESULT FORECAST

BSC expects DBC's net revenue and NI from the core contract in 2022 to reach VND 13,159 billion (+22%YoY) and VND 557 billion (-28%YoY), respectively, lower than 39% of DBC's early 2022 profit on the basis of (1) adjusting business results to decrease -96%YoY of 1H.2022 (2) adjusting TB pig prices to VND 61,300 equivalent to the average pig price of 2021, respectively, but gross profit margin still suffered a decline from 17.1% to 13.8% due to a sharp increase in the cost of hogs and input materials of feed prices;

In 2023, we expect DBC's net revenue and NI from the core contract to reach VND 15,854 billion (+21%YoY) and VND 1,346 billion (+142%YoY), equivalent to EPS FW= VND 5,256, P/e FW= 4.9x due to (1) gross profit margin increasing from 14% to 18% due to an 8% increase in hog prices but a decrease of -4%YoY in hog prices;

INVESTMENT THESIS

• Profit margins recovered from a bottom of 14% (2022E) to 18% (2023F) due to an increase in hog prices of +8% YoY and a cooling of -4% YoY in feed prices.
• Taking advantage of scale and mastering the value chain in the 3F segment, optimizing livestock costs from 8-11% compared to small-scale household enterprises
• Owning a potential large land bank, catching up with the trend of tightening livestock land planning and reducing the size of small livestock households due to environmental regulations and

Catalyst

• Hog prices continue to rise or anchor at high levels according to Chinese pig prices and cooling grain prices.
• Recognition of one-time revenue from real estate projects that have been implemented
• The potential comes from investment cooperation with large enterprises.

RISK

• Fluctuations in raw material prices affect profit margins;
• Hog price fluctuations
• Legal problems in projects that are and will be implemented
• Diseases of cattle and poultry;