SCS Update report – BUY

Saigon Cargo Service Corporation (HSX: SCS): Positive growth continued in Q2/2024, 1H2024 earnings completed 56.1% of full year business plan.

In Q2 2024, SCS maintained strong growth with net sales reaching VND 264.1 bn (+53.4% YoY). This growth was primarily driven by terminal operations, which contributed VND 247.1 bn (+55.5% YoY). Gross profit rose to VND 212.8 bn (+58.5% YoY) with a gross profit margin of 80.5%, up 2.5% from Q2/2023. The profit before-tax and profit after-tax were VND 213.3 bn (+44.5% YoY) and VND 189.5 bn (+46.6% YoY), respectively.

For the first half of 2024, SCS achieved net sales of VND 476.9 bn (+42.6% YoY) and profit before-tax of VND 381.5 bn (+37.9% YoY). These results represent 49.3% and 56.1% of the company’s business plan, and 51.4% and 53.8% of our projections for 2024.

Total cargo volume throughput for SCS in 6M/2024 reached 128,730 tons (+42.6% YoY), with international cargo at 95,637 tons (+23.9% YoY) and domestic cargo at 33,093 tons (+50.5% YoY).

Quick comment: SCS’s strong performance aligns with the import-export recovery trend in the first half of 2024 compared to the low base of 2023. We expect this growth momentum to continue, especially during the peak season in Q3/2024.

In the coming time, SCS’s competitive edge over TCS is the ability in securing new contracts amid trade recovery, along with its capacity expansion potential up to 350,000 tons/year (+75% from the current capacity), are key growth drivers for the second half of 2024 and 2025.

We maintain our forecast for SCS for 2024, projecting net sales of VND 927 bn (+31.5% YoY) and profit after tax of VND 626 bn (+25.7% YoY). The compound annual growth rates for net sales and profit after tax are 18.5% and 16.4%, respectively, for the 2024-2026 period. With these assumptions, fair value for SCS stock at the end of 2024 is estimated at VND 114,300 per share, with a Buy recommendation.