T-Rex
19 December 2012
Vinamilk (VNM)
18 March 2011
A safe haven
Anh Nguyen
Senior Analyst anh.nguyen@vcsc.com.vn +84 8 3 914 3588 ext. 194
Initiation
Target price
Upside
VND106,000
25%
Consumer Goods
Market cap
Shares outstanding
12M High
12M Low
VND84,500 – BUY
US$3,439m
834m
VND92,700
VND52,000
Investors appear to recognize the competitive advantages and growth opportunities of Vinamilk. The company has a good brandname, economy of scales, an extensive distribution network, and expanding production capacity to meet growing demand. Given the lack of viable alternatives in the Vietnamese stock market, we believe it will remain a safe haven for investors despite its relatively high PER. We initiate with a Buy recommendation and a target price of VND106,000.
Double digit growth potential
Vietnam still has one of the lowest levels of dairy consumption in the world, and so Vinamilk can still maintain double-digit growth in revenue and net profit.
Growth in demand is being supported by the growing middle class and education on dairy nutrition. Vinamilk can catch the opportunity with its nationwide distribution network and expanding capacity.
Foreign ownership
Foreign limit
49%
49%
Stable profit margin
Vinamilk’s profit margin will remain stable. VNM can pass most of its higher raw material costs to its consumers. Economies of scale and effective inventory and expense management will reduce its unit cost. Hence, Vinamilk’s profit margins,
ROE and ROA will remain high.
Ownership
Shareholder (state)
F&N Dairy Investment
Dragon Capital
Deutsch Bank AG
Others
45.0%
9.5%
7.4%
5.4%
32.6%
Plenty of cash to pay dividends
Vinamilk will make most of its capacity expansion in FY12, and vertical expansion in coming years will cost less. The company has no outstanding debt and strong operating cash flow, so financing future investments and dividends is not an issue. Vinamilk will pay a dividend of
Vinamilk (VNM)
18 March 2011
A safe haven
Anh Nguyen
Senior Analyst anh.nguyen@vcsc.com.vn +84 8 3 914 3588 ext. 194
Initiation
Target price
Upside
VND106,000
25%
Consumer Goods
Market cap
Shares outstanding
12M High
12M Low
VND84,500 – BUY
US$3,439m
834m
VND92,700
VND52,000
Investors appear to recognize the competitive advantages and growth opportunities of Vinamilk. The company has a good brandname, economy of scales, an extensive distribution network, and expanding production capacity to meet growing demand. Given the lack of viable alternatives in the Vietnamese stock market, we believe it will remain a safe haven for investors despite its relatively high PER. We initiate with a Buy recommendation and a target price of VND106,000.
Double digit growth potential
Vietnam still has one of the lowest levels of dairy consumption in the world, and so Vinamilk can still maintain double-digit growth in revenue and net profit.
Growth in demand is being supported by the growing middle class and education on dairy nutrition. Vinamilk can catch the opportunity with its nationwide distribution network and expanding capacity.
Foreign ownership
Foreign limit
49%
49%
Stable profit margin
Vinamilk’s profit margin will remain stable. VNM can pass most of its higher raw material costs to its consumers. Economies of scale and effective inventory and expense management will reduce its unit cost. Hence, Vinamilk’s profit margins,
ROE and ROA will remain high.
Ownership
Shareholder (state)
F&N Dairy Investment
Dragon Capital
Deutsch Bank AG
Others
45.0%
9.5%
7.4%
5.4%
32.6%
Plenty of cash to pay dividends
Vinamilk will make most of its capacity expansion in FY12, and vertical expansion in coming years will cost less. The company has no outstanding debt and strong operating cash flow, so financing future investments and dividends is not an issue. Vinamilk will pay a dividend of