20160816_BSC_Vietnam Company Research_EN_BFC

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Title	20160816_BSC_Vietnam Company Research_EN_BFC_ICB1350
Report Type	Phân tích công ty
Source	BSC
Industry	Industrials
Bussiness	DGC
Detail	Date : 20/09/2016 Total pages : 13 Language : English File Type : .PDF FileSize : 1264 Kb Download: 179 Download
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Short Content	We recommend BUYING BFC in the next 12 months at the target price of VND 48,000 per share (upsie 17%) under FCFF and P/E method. On 30th August, 2016, BFC was traded at VND 41,000 per share, equivalent to a P/E FW and P/B of 8.13x and 1.85x, respectively, which is relatively attractive compared to other fertilizer firms. BFC is the leader in NPK manufacturing and distributing in Vietnam. The firms directly benefit from the decline in input prices. Dividend payout is high. The investors can refer to BFC update reports. Forecasted 2016 business results. We estimate that the 2016 output will be 647 thousand tonnes of NPK fertilizers, revenues and net profit for parent shareholders will be VND 6,050 billion and VND 267 billion (+17% yoy) respectively, equivalent to 2016 EPS of VND 5,046. A first class NPK manufacturing firm in Vietnam. BFC has the largest productive capacity of 927 thousand tons / year which is expected to increase by 250 thousand tons / year after the completion of Phase 2 of the 2 factories in Tay Ninh and Ninh Binh. BFC accounts for about 28% of market share in the South, 10% in the North and 10% in Central Vietnam. BFC’s outstanding features are its distribution system, efficient utilization of local dealers and a good brand recognition. Penetration into the North and expansion to the export market will promote revenue growth for BFC in the context of saturated domestic demand. Sharp decline in input prices improved BFC’s profit margin. Raw materials accounted for 86%-90% of operating expense from 2012 to 2015. From 2014, the prices of the main inputs including urea, DAP and potassium decreased on average by 24%, 8% and 14% respectively while output price decreased by 1.3%. Gross margin rose from 10.67% in 2014 to 13.93% in 6M2016. Price of NPK often decreases slower than the input prices, therefore, the firm tends to maintain or improve its margin. Binh Dien Ninh Binh Jsc saves costs for BFC. After comparing saved transportation costs and saved income tax expenses with interest and depreciation expense of Ninh Binh factory, we estimate that the factory will save about VND 33 billion for BFC’s parent shareholders in 2016 (equal to 12% net profit). High dividends. 28% cash dividend in 2015. Shareholders approved a plan of 30% cash dividend in 2016. BFC plans to issue 20% bonus shares in September, 2016.