VNM Update – BUY

VIETNAM DAIRY PRODUCTS JSC (VNM VN)

The company reported a plunge of 8.3% YoY in net revenue and 28.1% YoY in EAT in 1Q2025, lower than our expectations. Although a BUY recommendation is maintained, we revise our target price down by 6% to VND68,300/share from the prior update.

VNM reported net revenue at VND12,935bn and EAT at VND1,587bn, slipping by 8.3% YoY and 28.1% YoY in 1Q2025, completing 21% and 18% of our revised projections for the whole year, respectively. Sales of finished goods, responsible for 94% of the total, dropped by 8.3% YoY.

Domestic revenue fell by 13.3% YoY in 1Q2025 due to restructuring its traditional distribution system. 

Expansion of Vinamilk store network persists. The company targets to reach 800 stores (run by both VNM and partners) by the end of May 2025, as mentioned in 2025 AGM, from 618 stores at the time of writing. Nevertheless, contribution from these stores remained humble at less than 5% of the overall revenue.

In contrast to domestic revenue, overseas revenue extended growth at 11.8% YoY, enlarging its contribution to 24% of sales of finished goods. 

The drop in EAT was driven by a divergence in the SG&A to net revenue ratio, besides a squeeze in gross margin in consequence of milk materials prices trending upward and weaker sales volume (despite unavailable details). The company increased selling prices by 2.6% in 1Q2025 while already settling prices for some materials till 2Q and 3Q2025.  

The company likely sees little direct negative impacts from the US’s higher tariff policies in view of its predominantly domestic exposure and the fact that export revenue mostly come from Middle East, Africa, and Asia rather than the US. Driftwood, the U.S. subsidiary wholly owned by VNM, also witnesses the same situation as it uses 100% local ingredients, with all production and distribution occurring within the U.S. However, indirect impacts might be felt through changes in consumer spending if macro-economic uncertainties escalated.

We project VNM’s net revenue and EAT at VND60,855bn (-1.5% YoY) and VND9,034bn (-4.4% YoY) in 2025, 5% and 7% lower than the prior update, respectively. Our target price for VNM by the end of 2025 is VND68,300/share, 6% lower than the prior update, equivalent to a total return of 24.2%.