VDSC assesses that the US market is showing positive signals with export prices at the highest level in two years. Analysts expect this to be a factor that helps Vinh Hoan – the largest pangasius exporter in the US to benefit.
Securities Bank for Investment and Development of Vietnam (BSC) has just reported to update the business outlook of Vinh Hoan JSC (Code: VHC).
BSC still maintains a cautious view on Vinh Hoan’s third quarter business outlook due to the social distancing that reduces operating capacity and increases incurred costs as well as freight rates continue to stay at a high level.
In the second quarter alone, the company suffered a 275% increase in freight charges over the same period for the Southeast Asia-US route and a 4-fold increase in freight rates for the Southeast Asia-Europe route.
However, the expert also noted that the us consumer market (accounting for 40% of revenue) is showing positive demand recovery, which will be a supporting factor for Vinh Hoan as soon as the epidemic situation is controlled.
For the whole year of 2021, Vinh Hoan’s net revenue will reach VND 8,732 billion, profit after tax of VND 822 billion, up 24% and 16% respectively compared to last year after increasing selling expenses due to escalating freight charges.
The above forecast is higher than the plan given by Vinh Hoan from the beginning of the year with net revenue of VND 8,600 billion, target profit after tax of VND 700 billion.
2022: The export market recovers, inventories are low and freight rates will cool down
In 2022, the pangasius industry is expected to improve further as demand continues to recover while inventories are low. Along with that, costs can be controlled when the epidemic and ship rates are cooled down.
Firstly, the US market is showing positive signals with export prices at the highest level in two years. Analysts expect this to be a factor that helps Vinh Hoan – the largest pangasius exporter in the US to benefit.
Up to now, the main tra fish export markets of Vinh Hoan (USA, China, EU,…) have had a proportion of people vaccinated over 50% of the population. Some countries even plan to receive additional injections in the near future.
Vaccination will limit infections, thereby creating a driving force for seafood consumption demand to continue to increase when more than 60% of seafood production is consumed through service channels such as restaurants and hotels.
For example, in the two months of the third quarter (July and August), although seafood enterprises only operate at 50-60% of capacity, tra fish exports to the US still show positive growth with export prices increasing by 21% over the same period.
Even if Vietnam controls the epidemic, helping to increase the supply of pangasius, export prices will remain high due to continued increased demand and low pangasius inventories in the US, the report said.
Besides, when export demand is maintained at a high level, BSC predicts that with inventories at the lowest level in two years, pangasius enterprises will be under pressure to increase selling prices.
According to experts, the epidemic situation in Dong Thap province has not been completely controlled so that the lockdown can be eased in the short term, which will affect production activities in the third quarter and the possibility of the fourth quarter of Vietnam. Vinh Hoan if the epidemic is not controlled.
However, in 2022, if the supply of vaccines meets the demand and the vaccination schedule is implemented quickly, Vinh Hoan’s business is expected to gradually return to normal, helping businesses reduce the costs associated with “3 on the spot”.
At the same time, the bankruptcy of small seafood enterprises will create a market gap for businesses to overcome the difficult period.
In addition, BSC expects that the price of input materials and ship freight will not increase dramatically in 2022 as world production gradually returns to normal levels, reducing the supply-demand gap.
At the same time, the price of soybean meal (input material) has decreased by 21% from the level in May, which is a positive factor for pangasius businesses when the cost of feed accounts for 70% of the cost of fish production.
Contrary to the decrease in the price of soybean meal in the past two months, freight rates for the route from Southeast Asia to Europe continued to rise, negatively affecting the profits of pangasius businesses due to a small part of the cost. Goods shipped under CFR (bear the cost of freight).
BSC expects Vinh Hoan to be able to transfer a part of its orders from CFR to FOB (without freight costs) when the US market demand is positive, reducing the negative impact of the sudden increase in freight rates.
In 2022, experts forecast Vinh Hoan’s net revenue and profit after tax will reach VND 10,763 billion and VND 1,087 billion, respectively, up 23% and 32% compared to the forecast in 2021.
Source: vietnambiz.vn – Translated by fintel.vn