Initiation DHC – BUY

Dong Hai Ben Tre JSC (HOSE: DHC)

DHC is the foremost publicly traded enterprise among Paper industry.  The Company’s primary products are Packaging Paper: Testliner and Medium; and Cardboard Box.  The company currently has two production lines including one for producing Packaging Paper (capacity of 260,000 tons/year) and another for producing Cardboard Box (capacity of more than 100 million products/year).  We give DHC a Buy recommendation, with a target price of VND 56,745, representing a total expected return of 27.8%.

Within six to twelve months, DHC will be benefited from the following factors:

1. Profit in Q3/2023 will improve thanks to the price of the main input materials – OCC which was stored at low price level 2-3 months ago, while selling prices are expected to get higher due to increasing demand.
2. The majority of DHC’s Carton Packaging customers is located in the Mekong Delta, especially in the aquaculture industry.  Therefore, the decline in demand from this consumer segment has had a strong impact on DHC’s consumption output recently.  Nevertheless, since July 2023, we have observed signs of recovery from this consumer group, which will result in positive influence on DHC’s business prospects.
3. In case demand for Carton Packaging increases again, DHC has the potential to increase capacity from a new assembly line, with a capacity of 48 mil products.  This began commercial operation in April 2022, but has not yet reached its maximum capacity due to a downturn in market demand. 

Regarding financial background, DHC showed a healthy financial condition when it has paid off its long-term debt, as well as maintained compelling and regular dividend payments.

For the period 2023-2025, we forecast DHC’s net earnings in 2023 will decrease by 9% YoY, reaching 345 bn VND. Nonetheless, 2024 and 2025 would witness annual increases of +10% and +23%, respectively.