Vinamilk

February 04, 2014

COMPANY RESEARCH | Initiation

Vinamilk

Share Price: VND141,000

(VNM VN) Mcap (USD): 5.6B Vietnam Consumer Staples Key Data

52w high/low (VND) Free float (%): Issued shares (m) Market capitalization Major shareholders: -State Capital & Inve -Fraser And Neave Ltd -Deutsche Bank AG 45% 10% 6% 148,135/93,434 23.4 833.5 USD5,609M

Target Price: VND185,700 (+32%) ADTV (USDm): 1.0M

BUY

(New)

Solid business in a growing industry

  

Initiate at BUY with Street-high TP of VND185,700. The stock currently trades at 15x forward P/E versus a regional average of 31x. As the largest dairy company in Vietnam, VNM is ideally placed to capture the huge potential of the local dairy industry. FY13 revenue grew 16% YoY and profit rose 12% YoY. We expect growth to accelerate from this level, with earnings CAGR of 18% for the next three years.

Share Price Performance

What’s New

VNM continues to strengthen its leadership position in the domestic market. In 2013, the dairy company increased capacity production, by opening two new factories, the Dielac II and Mega Liquid factory, built with the world’s most modern technology. The increase in capacity production will not only allow VNM to meet growing demand for dairy products in Vietnam, but also boost its exports sales. In 2013, VNM also received a license to build a factory in Cambodia (one of its main exports markets) and acquire 70% in Drifwood, a company based in California, US.

1 Mth Absolute(%) Relative to country (%) 4.4 (6.0)

3 Mth 12 Mth 0.6 (10.1) 48.1 19.6

What’s Our View

We are optimistic about VNM’s growth: (1) the company has a very aggressive strategy and an excellent management, which has resulted in a remarkable performance (high earnings and gain in market share), even in the most difficult economic times; (2) the dairy market in Vietnam is still growing strongly, offering multiple opportunities for dairy players. We think VNM is ideally positioned to capture...