VNM – Bottom line accelerated as margins improved [In-Line] – Earnings flash

• 2Q24 net profit jumped 21.5% YoY to VND2.6tn (USD104.9mn), recording a third consecutive quarter of double-digit earnings growth.
• 1H24 results were in-line with our forecast as net profit completed 51.6% of our full-year projection.
• We see minimal pressure on our target price of VND81,000, which we will update after further review.

Revenue growth drivers came from both domestic and off-shore segments

2Q24 net revenue increased 9.6% YoY to VND16.6tn (USD654mn), setting the all-time highest quarterly revenue in the company’s history. This quarter also marked the highest revenue growth since early 2022, in which both segments recorded positive growth:

• Parent domestic revenue (excluding MCM) increased 6.0% YoY, outperforming a 1.8% YoY decline of Vietnam’s dairy sector according to Nielsen. Better results came from the double-digit growth of drinking yogurt, condensed milk, plant milk segments. The formula milk segment recovered after consecutive quarters of declines.
• Export markets recorded strong revenue growth of 37.1% YoY as VNM maintains its supply chain to Middle East markets despite the volatile global landscape.
• Overseas subsidiaries recorded 21.9% YoY revenue growth because marketing activities were more effective in the Cambodian market and the packaging supply disruption at Driftwood has been improved.

Gross margins on recovery mode

2Q24 gross margin expanded by 2.0% pts YoY thanks to lower cost for whole milk powder. As a result, gross profit soared 14.9% YoY to VND7.1tn (USD277.7mn) in 2Q24.

The company has fixed 90% material for production through December 2024. Management expect the gross margin maintain the 2Q24 level.

Bottom line enjoyed double-digit growth despite marketing costs

SG&A expenses increased 11% YoY mainly due to a 14.8% YoY rise in promotion cost as the result of many marketing activities in 2Q24. SG&A/revenue increased 0.3% YoY but declined 0.5% QoQ in 2Q24, showing management’s efforts to control costs. As a result, 2Q24 net profit jumped 21.5% YoY to VND2.6tn (USD104.9mn), the third consecutive quarter of double-digit earnings growth.

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