DGC Update – BUY

DUC GIANG CHEMICALS GROUP JSC (DGC VN)

According to the information from the AGM, DGC estimates Q1/2025 NPAT reached VND800 billion (+13.6% YoY), slightly below our expectations. With that, DGC has completed 27% of the annual plan and 24% of our latest forecast. For 2025, we project NPAT may grow by 7.8% YoY and give a target price of VND108,400/share by the end of 2025, equivalent to a total return of 28.1%. BUY.

DGC recorded revenue of VND9,865 billion (+1.2% YoY) and NPAT of VND3,109 billion (-4.1% YoY) in 2024. Revenue growth was supported by a 27% YoY increase in yellow phosphorus (P4) sales volume, despite the continued decline in average P4 prices (-9.5% YoY). Besides, DGC significantly reduced WPA sales volume to boost the production of DAP, MAP and other phosphate fertilizers amid an estimated 9% YoY increase in phosphate fertilizer prices. Despite a slightly improved gross margin, the decline in NPAT was mainly due to (1) a 12.2% YoY drop in financial income and (2) a 12% YoY increase in selling and administrative expenses.

For 2025, DGC set revenue target at VND10,385 billion (+5.2% YoY) and NPAT at VND3,000 billion (-3.4% YoY). The company will maintain its production strategy similar to 2024’s — boosting P4 and fertilizer output, in light of China’s temporary suspension of DAP/MAP exports starting from December 1, 2024.

The Nghi Son Caustic Soda Plant project officially began construction on February 17, 2025, and is expected to commence operation in Q2/2026. DGC management estimates the project will contribute VND2,000 billion in revenue and VND 200 billion in NPAT when operating at full capacity.

China’s P4 prices are not expected to rise significantly in 2025 due to lower input costs. In particular, electricity input costs for P4 production in China are benefiting from La Niña condition in the first four months of the year and neutral weather for the remainder of 2025, in contrast to the previous El Nino condition. Furthermore, coking coal prices continued to decline in Q1/2025 due to the country’s sluggish economic recovery and plans to cut steel production in 2025.

In addition, the semiconductor sector has not yet been subjected to reciprocal tariffs by President Donald Trump, though it may face a separate tariff scheme. This could hinder the expansion of data centers, production of tech devices and the training of AI models beyond the U.S., potentially slowing the semiconductor sector’s growth and thus demand for P4.

For 2025, we forecast DGC may achieve revenue of VND11,388 billion (+15.4% YoY) and NPAT of VND3,353 billion (+7.8% YoY), underpinned by a recovery in P4 prices, high DAP/MAP prices, and VAT deduction on fertilizers helping offset rising electricity costs.