GMD Initiation report – NEUTRAL

GEMADEPT CORPORATION (HSX: GMD)- Restructuring operations for embracing trading recovery.

GEMADEPT Corporation (GMD VN), established in 1990, has continuously expanded investments across various sectors to create an integrated value chain including seaports, inland container depots (ICDs), airport cargo terminals, distribution centers, shipping, out-of-gauge cargo (OOG) transport, cold chain and automotive logistics spanning from the North to the South of Vietnam.

A significant shift in GMD’s strategy occurred in 2018 when the company divested its logistics segment to focus more on port operations, which led to the operational improvement. As a result, the gross margin increased from 35.8% in 2019 to 46.2% in 2023, and financial status also improved, evidenced by lower leverage ratios and a cash-to-equity ratio of nearly 20%. Currently, GMD holds 17% and 21% of the container transport market share in the North and the South, respectively.

By the end of 2023, GMD was operating six seaports with a total container handling capacity of 3 million TEUs per year and bulk handling of 2 million tons per year, positioned at key points in Vietnam’s international maritime routes (Hai Phong, Quang Ngai, Ho Chi Minh City, Ba Ria Vung Tau).

In the coming time, GMD plans to continue focusing and expanding its role in the port sector’s value chain. Investments are directed towards the expansion of Nam Dinh Vu Port Phase 3 in Hai Phong and Gemalink Phase 2 in Cai Mep Thi Vai (Ba Ria Vung Tau), aiming to increase the total designed capacity by an additional 2.1 million TEUs per year, which represents a 60% increase over the current capacity.

Additionally, the port sector, including GMD, will benefit from the implementation of the Circular 39/2023/TT-BGTVT effecting from February 15, 2024, which replaces Circular 54 and adjusts the floor pricing framework for port services in Vietnam.

Rating and valuation

We recommend a NEUTRAL rating for GMD with a fair valuation of 84,860 VND per share using DCF method. This valuation is close to GMD’s closing price on May 7, 2024, which was 84,700 VND per share, with a P/E ratio for 2024 of 18.8x and a P/B ratio of 17.4x.