VALUATION
We recommend BUY for DCM with target price VND 21,100/share, upside 20.9% compared to the price on 31/3/2021 with DCF method and P/E, with weight 40% - 60%.
FORECAST OF BUSINESS RESULTS
BSC forecasts that revenue and net profit in 2021 will reach VND 9,493 billion (+23.5% YoY) and VND 888 billion (+34.3% YoY). EPS fwd = VND 1,366 and P/E fwd= 13x, P/B fwd = 1.4x.
INVESTMENT THESIS
§ Improved gross profit margin thanks to the expectation that selling price will increase faster than input material price - Due to high oil price and maintaining positive signal from fertilizer demand in 2021.
§ We expected that Ca Mau fertilizer plant will be almost depreciated by 2024, improving the company's net profit (+125.9% YoY).
§ Expectation of tax refund when the tax law is revised in 2021:
According to the P/E method:
- Base scenario: Target Price 2021 = VND 18,440
- Adjustment of VAT
· Conservative scenario: Target Price 2021 = VND 22,210
· Best Scenario: Target Price 2021 = VND 28,070
§ Tracking information: PVN plans to divest capital at DCM, NPK Factory go on operation in 2021, M&A add another NPK factory and cooperate in investing in factories producing organic fertilizers and micro-organisms.
TECHNICAL VIEW
Investors can buy the stock with the target price located at 20-20.5, consider to stop loss if the support level of 12.5 is penetrated.
RISKS
§ Input gas price increased faster than forecast and adjusted selling price was lower than expected;
§ Performance of plants is lower than expected due to routine maintenance.
COMPANY UPDATE
§ Revenue and net profit in 2020 reached VND 7,563 billion (+7% yoy) and VND 665 billion (+56% yoy), respectively, thanks to a sharp drop in input gas prices and high demand for fertilizer export.
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