VNM Update – BUY

VIETNAM DAIRY PRODUCTS JSC (VNM VN)

The company generated a strong QoQ rebound in 2Q2025 following the restructuring of its distribution system, although YoY performance did not replicate the same momentum, in line with our expectations. We maintain a BUY recommendation and move target price for the stock to 1H2026, at VND70,300/share, equivalent to a total return of 24.3%.

Net revenue climbed by 0.4% YoY while the decline in EAT narrowed to 7.7% YoY in 2Q2025, bringing VNM’s 1H2025 figures to VND29,659bn (-3.6% YoY) and VND4,076bn (-16.9% YoY), respectively. Sales of finished goods, responsible for 95% of the total, slid by 3% YoY.

Domestic revenue bounced back to record a QoQ leap following the restructuring of its distribution system, despite a slight YoY upturn in 2Q (+38.7% QoQ and +1.9% YoY) on the high base in the same period last year. In addition, the expansion and renovation of Vinamilk store network, as parts of its re-branding strategy, have created positive effects in fostering the company’s product visibility and direct engagement with consumers, contributing to boost other sales channels.

The company views the closure of some mom-and-pop shops stemming from changes in tax policies for household businesses as temporary and did not see a severe hit on its sales, as these shops are likely to find solutions to adapt to the new conditions in the long run.

Overseas revenue was flat in 2Q as a result of sustained YoY growth in direct exports revenue and a contraction in overseas subsidiaries. Premiumization of product portfolio and continued expansion of exports markets (e.g. recently getting licenses to export “Ngoi Sao Phuong Nam” condensed milk to China) have been highlights in the company’s strategies to extend exports growth.

Better profitability, fueled by a widened gross margin and lower SG&A to net revenue ratios on the back of improved sales volume in 2Q, helped shrink the dip in EAT compared to Q1. However, YoY growth has yet returned on a cumulative basis 1H2025 because of increased material prices and expenses for promotion, product display, sale support and introduction new products.

We project VNM’s net revenue and EAT at VND61,690bn (-0.1% YoY) and VND9,103bn (-3.7% YoY), respectively, in 2025. Our target price for VNM by 1H2026 is VND70,300/share.