Vinamilk: An In-Depth Analysis of Growth and Market Position
Broker Name: Maybank Research Pte Ltd
Date of Report: November 13, 2024
Overview of Vinamilk’s Performance
Vinamilk (VNM VN) remains a giant in Vietnam’s dairy industry, holding the top spot in market share across a wide range of products, including liquid milk, powdered milk, condensed milk, yogurt, and health drinks. Despite the temporary setbacks in the third quarter of 2024, due to Typhoon Yagi’s impact on domestic demand, Vinamilk continues to present an attractive investment opportunity with a strong export growth strategy and a stable long-term outlook.
Q3 2024 Financial Performance
The third quarter of 2024 proved challenging for Vinamilk, with flat sales growth and a 3.6% year-over-year decline in net profit after tax and minority interest (NPAT-MI). This downturn was primarily attributed to the typhoon’s impact on domestic consumption, particularly in the Northern regions of Vietnam, which account for a significant portion of domestic revenue. Despite these challenges, the company’s export sales and overseas subsidiaries achieved robust growth of 10.3% and 8.5% year-over-year, respectively.
Boosting Export Drives Growth
Vinamilk’s strategic focus on expanding its export markets has been pivotal to its growth. In addition to traditional Middle Eastern markets, the company has diversified its export destinations to include Japan, China, South Korea, and Africa. This expansion has been supported by the addition of the HORECA channel in the US market. Condensed and powdered milk remain key export products, and international sales are expected to continue driving growth, with a projected 12.6% year-over-year increase in FY25.
Stable Long-Term Outlook
Despite the temporary weaknesses in Q3 2024 results, Vinamilk’s outlook remains stable. The company anticipates a recovery in domestic sales in the fourth quarter, driven by stronger sales in October 2024. Earnings forecasts for FY24 and FY25 have been slightly adjusted downward by 1.6% and 1.5%, respectively, with projected NPAT-MI of VND9.7 trillion (+9.7% YoY) for FY24 and VND10.4 trillion (+7.1% YoY) for FY25. The forecasted revenue growth for FY25 includes a 4% increase, supported by domestic and international sales growth of 2.1% and 12.6%, respectively.
Valuation and Market Position
Vinamilk’s shares are trading at 16 times trailing P/E, which is below its five-year mean and the regional peer average of 21 times. This valuation does not fully reflect Vinamilk’s superior returns, such as net margins and return on assets (ROA), compared to its peers. With potential foreign inflows anticipated following Vietnam’s upgrade to Emerging Market status by FTSE, Vinamilk’s valuation offers an attractive entry point for investors.
Future Growth Prospects and Risks
Vinamilk’s future growth prospects are bolstered by its strong cash generation capabilities, high dividend payout policy, and strategic expansion into new markets. The company’s commitment to sustainable development through green energy investments and its focus on food safety further enhance its market position. However, potential risks include rising competition from local players, fluctuations in raw material prices, and any adverse events that could impact its brand image.
Conclusion
Vinamilk remains a strong player in the dairy industry with a robust export growth strategy and a stable long-term outlook. Despite temporary challenges, the company’s strategic initiatives and attractive valuation provide a compelling investment opportunity. Investors looking for exposure to the growing dairy market in Vietnam and beyond may find Vinamilk an appealing choice.
