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VNM Flash note – BUY
12/02/2025 - 1:13:07 CHVIETNAM DAIRY PRODUCTS JSC (VNM VN)
The company reported a decline of 0.9% YoY in revenue and 8.7% YoY in 4Q2024, lower than our projections. Although a BUY recommendation is maintained, we revise our target price down by 12% to VND72,000/share from the prior update to reflect the slower-than-expected improvements in the company’s business results and signs of potential uptrend in the international milk material prices.
VNM generated weak performance in 4Q2024 with net revenue slipping 0.9% YoY and EAT slipping 8.7% YoY. On a cumulative basis, (unaudited) net revenue and EAT achieved VND61,783bn (+2.3% YoY) and VND9,453bn (+4.8% YoY) in 2024, completing 98% and 96% of our projections, respectively. Sales of finished goods, responsible for 94% of the total, climbed by 2% YoY.
Despite capturing just 19% of sales of finished goods, overseas revenue propped up its growth as domestic revenue wobbled in 2024. Overseas revenue grew by 12.6% YoY in 2024, including 12.9% YoY from overseas subsidiaries (i.e AngkorMilk in Cambodia and Driftwood in the US) and 12.4% YoY from direct export.
Domestic revenue, accounting for 81% of the company’s sales of finished goods, contracted by 0.6% YoY in 4Q and 0.2% YoY in 2024. If excluding Moc Chau, the growth was flat. However, some outperformers include the yoghurt, condensed milk segments and some product lines such as Probi probiotics drink, Green Farm fresh milk, elder milk powder and plant milk, with double-digit revenue growth although the company did not disclose details.
Gross margin reduced to 40.1% in 4Q2024, reaching 41.4% in 2024 (2023: 40.7%). Favorable international milk material prices enabled the company’s gross margin and EAT growth to enhance in most of the time in 2024. Still, the gross margin was just 40.1% in 4Q, much lower than the previous three quarters and the lowest since 2Q2023, explained by weak sales volume, higher costs in 4Q and milk material prices trending upward. The company may increase selling prices in 2025 if the recent uptrend in the international milk material prices is confirmed.
The Vinabeef meat processing plant of Japan Vietnam Livestock Co. Ltd. (JVL), a joint venture between Sojitz and Vilico, commenced operation in Dec 2024. Its products have been present in major supermarket chains such as Aeon, Coopmart, Mega, and Central. We will incorporate contribution of this joint venture into our valuation once VNM releases more details.
Comment: We project VNM’s net revenue and EAT at VND63,847bn (+3.4% YoY) and VND9,718bn (+2.8% YoY) in 2025. Our target price for VNM by the end of 2025 is VND72,000/share, equivalent to a total return of 25.6%.
