Published Date: 05/12/2016
Operating result prediction in 2016
In the third quarter of 2016, net revenue was 286.6 billion dong, increased 2% compared with the same period. The gross profit was 28.76 billion VND, increased 10.3 billion VND compared with the same period last year. Selling expenses increased 3.2 billion VND, administrative cost increased 1.3 billion VND compared to the same period. Profit aftertax was 10.28 billion VND, approximately doubling in comparison with the third quarter of 2015.
Accumulated for the first 9 months of 2016, the company’s revenue is 861.1 billion VND, increases 14% compared to the same period, completing 71.1% plan of the year. The priority revenue comes from tires distribution business aspect (586 billion VND), cables business aspect (242.6 billion VND), and plastic business aspect (32 billion VND). Gross profit: tires business aspect (32 billion VND), cables business aspect (53.5 billion VND). In conclusion, the profit aftertax is 34.1 billion VND, grows 151% compared to the same period, completes 77% plan of the year.
Operating result will continue to be positive: the outlook business of VKC will continue to grow due to:
• The stabie growth of tires distribution business aspect (growth rate > 10%). VKC is the sole distributor of Chengshin’s tires, with a wide range of customer network. The domestic automobiles market continues to have positive growth , with the total revenue of the whole market in the first 10 months of 2016 increases 30% compared to the same period last year. With the positive growth of automobiles market, the demand for tubes and tires is expected to remain a rapid growth in the recent years.
• VKC is the main cable supplier for big companies. VKC is the priority supplier for many telecommunication groups such as VNPT, Viettel, FPT. The biggest clients of VKC are FPT and VNPT with the yearly cables product quantity accounts for 100% and 75%.
• Semi-sensitive product.VKC mainly provides fiber optic cables for the household line segment. As holding a special segment and being the priority distributor for many big groups, VKC has many advantages to expand market share.
• Benefiting from the low maintenance of copper price. Copper is the core input material in the production process of VKC (account for 65% of the products’ cost). VKC keeps up with the long term copper import contracts (related to LME copper price). We expect in the next 5 years, the copper price will slightly increase but remains at a low level. With positive operating result and significant business outlook, we brightly believe that VKC will complete the planwith revenue of 1,210 billion VND and profit aftertax of 45 billion VND (EPS = 2,250 VND/share).
Valuation
We use 2 valuation methods: FCFE and FCFF, the reasonable value of VKC stocks is 26,860 VND/share. Therefore we suggest buying VKC stock at current price with the upside potential of 63% compared to the price 16,500 VND/share in 25/11/2016.
