[Update] MSN – Mixed Impact from Trade War; Better-than-expected Beverages Growth

Rating: BUY

Current Price: VND81,000

Target price: VND102,700

Upside: 27%

Key event catalysts:

• US-China trade war could be a net win for MSN: positive for MNS but negative for MSR.
• Better-than-expected growth in the beverages segment.
• Fresh meat segment launched in 4Q18 to pick up steam in 2019.

Trade war impact could enhance performance of MNS further, while dampening MSR’s income. We expect MNS to benefit from the US-China trade war with lower input prices for animal feed and a favorable supply-demand environment due to increased pork demand from China. However, we also expect headwinds for MSR if the trade war exacerbates the recent soft pricing for commodities including tungsten and copper. Overall, we expect the net impact could be favorable for the group, but we nevertheless conservatively switch to higher discount rates for MNS and MSR in our model to account for higher than expected uncertainties in their operations.

3Q results were slightly below expectations, but our long-term positive view remains intact. We lower our net income forecast for FY18E/19E by 2%/3% after considering MSN’s 3Q results, which were by a delayed recovery of the animal feed market and soft tungsten and copper prices. However, this was largely offset by the better-than-expected growth from the beverages business. Our FY18-20E net profit estimates are now 14-20% higher than the Street.

Please access the link for our complete report: MSN_Result Updates

Consumer Analyst: Quang Vo, quang.vo@yuanta.com.vn