VNM — Company note — 4Q24 AM

Key points from the Feb 10-11 results calls (we participated in both):

4Q24 margins fell sequentially on higher imported milk powder prices. Whole milk powder and skim milk powder average prices increased by +13.5% and +0.9%, respectively, from late 3Q24. Thus, blended gross margin decreased by -1.1ppt QoQ and YoY to 40.1% in 4Q24, and after-tax 4Q24 profits fell to VND 2.1tn (-10.7% QoQ / -8.7% YoY).

But full-year margins still increased YoY. 2024 consolidated net profit reached VND 9.5tn (+4.8% YoY). This positive result was partly supported by effective operating cost management as SG&A / revenue was 24.6%, nearly unchanged from last year’s 24.5%.

What are investors’ concerns? Attendees expressed concern about the rising trend of imported milk powder price and its impact on VNM’s profitability. They also asked about the progress of VNM’s “super dairy factory” project in Hung Yen, which has been delayed since 2022. Management notes that its 2025E guidance will be announced at the company’s AGM on Apr 25.

We raised questions about the shut-down of the company’s JV in the Philippines with Del Monte in early-2025. VNM explained that the while the JV approach proved to be ineffective, management still considers the Philippines to offer solid potential and will maintain a presence there under a different approach.

Valuation. We don’t cover VNM and have no investment view on the stock. Some might argue that its TTM PER of 15.0x is optically cheap given that it is 1) 2 standard deviations below the 10-year average level and 2) below the regional peer median of 17.5x. But the sales growth outlook for VNM and the industry has softened over the past decade.

Risks: (1) prolonged weak consumption, (2) rising whole milk powder price, and (3) increased competition

Please see the link for more details: VNM — Company note — 4Q24 AM