Positive recommendation for STK stock

Vietcap Securities Company (VCSC) has revised down our target price for Century Fiber Corporation (stock code STK) by 15% to VND32,200/share and downgraded our recommendation from buy to outperform. Our lower target price is due to a 14% reduction in VCSC’s 2024-2028 net profit after tax (NPAT) forecast for STK.

VCSC revised down its 2024 NPAT after minority interest forecast by 65% ​​due to lower-than-expected 1H24 results. In 1H24, STK recorded a loss of VND55 billion, affected by price cuts to attract orders amid rising input PET resin prices, temporary shutdown of some production machinery due to lower-than-expected demand, and a total accumulated exchange rate loss of VND66 billion when the USD/VND exchange rate increased by 5% in 1H24.

VCSC expects the profit outlook in the second half of 2024 to be more positive than in the first half of the year thanks to STK's order volume in the second quarter of 2024 showing clear signs of recovery, new capacity when the Unitex factory comes into operation from the third quarter of 2024, and VCSC expects the USD/VND exchange rate to remain more stable in the second half of 2024.

VCSC revises down our FY25/26 NPATMI forecasts by 16%/9% on slower price spread growth. VCSC believes STK needs to attract orders during the recovery phase and anticipate new capacity from Unitex, while we expect PET chip prices to rise from current lows as demand recovers. However, our new FY25/26 NPATMI forecasts imply strong profit growth recovery of 421%/67% YoY from a low FY24 base.

Positive recommendation for DGC stock

MB Securities Company (MBS), in the second quarter of 2024, Duc Giang Chemical Group Joint Stock Company (stock code DGC) recorded total revenue of VND 2,504 billion (up 3.7% over the same period), of which agricultural phosphate fertilizer and other segments increased by 11.2% when the WPA factory resumed operations after 3 months of maintenance in the first quarter of 2024 while revenue from phosphorus (P4) and derivatives decreased by 2.5% mainly due to lower P4 prices (down 16.7%).

Gross profit margin in 2Q24 increased by 0.3 percentage points to 39.3% thanks to lower apatite prices (Khai Truong 19 operated at full capacity in 2Q24), helping gross profit increase by 4.6%. However, lower financial income (-8.8%) due to lower deposit interest rates kept net profit in 2Q24 flat (-0.1%).

DGC's Q2/2024 net profit increased by 19.6% QoQ mainly due to agricultural phosphate fertilizers and other segments, showing signs of recovery for DGC. Net profit for the first 6 months of 2024 reached VND1,515 billion (down 7.1% YoY), completing 42% and in line with our 2024 forecast.

MBS expects P4 prices to recover more strongly in the second half of 2024 when the semiconductor industry fully recovers. MBS forecasts DGC's P4 price to reach USD 4,400/ton in the second half of 2024 (up 4.6% compared to the first 6 months of 2024) and P4 output to reach 25,000 tons in the second half of 2024 (up 25% compared to the first 6 months of 2024). Therefore, MBS forecasts DGC's net profit in the second half of 2024 to reach VND 1,985 billion (up 31.0% compared to the first 6 months of 2024), bringing net profit in 2024 to VND 3,504 billion. Thanks to the expansion of semiconductor industry capacity, MBS forecasts that DGC's P4 price and output in 2025 will increase by 4.5% and 12.7%, reaching USD 4,600/ton and 51,000 tons, respectively, helping net profit in 2025 grow by 22.3% to VND 4,284 billion.

DGC has postponed the construction of Phase 1 of the Nghi Son project to Q4/2024 from Q2/2024 due to legal procedures and postponed the construction plan of Phase 2. Therefore, MBS expects the Nghi Son project to come into operation in Q1/2026 and contribute 12% of DGC's revenue in 2026 (VND 1,500 billion).

MBS lowers 2024/25 EPS forecast due to lower financial income and the removal of Nghi Son project in 2025. As a result, our 1-year target price is revised down to VND128,100/share. Upside potential comes from stronger expectations of higher yellow phosphorus prices in 2024/25 and the investment license for the Aluminum - Bauxite project and the Dai Viet ethanol plant project that could be operational in 2024. Downside risks include a stronger-than-expected adjustment in phosphorus selling prices and the risk of the upcoming Nghi Son project.

Stock market review 8/6: The market may soon see a recovery