Some stocks to watch on August 6th.

VCSC expects the profit outlook for the second half of 2024 to be more positive than the first half, thanks to a clear recovery in STK's order volume in Q2 2024, new capacity when the Unitex factory comes into operation from Q3 2024, and VCSC's expectation that the USD/VND exchange rate will remain more stable in the second half of 2024.

VCSC has revised down its 2025/26 net profit after minority interests forecasts by 16%/9% due to slower price differential growth. VCSC believes STK needs to attract orders during the recovery phase and capitalize on new capacity from Unitex, while we expect PET chip prices to rise from current lows as demand recovers. However, our new forecasts for 2025/26 net profit after minority interests reflect strong year-on-year profit growth of 421%/67% respectively from a low 2024 base.

Positive recommendation for DGC stock.

According to MB Securities (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 (a 3.7% increase compared to the same period last year). Agricultural phosphate fertilizer and other segments increased by 11.2% as the WPA plant resumed operations after a 3-month maintenance period in the first quarter of 2024, while revenue from phosphorus (P4) and its derivatives decreased by 2.5%, mainly due to lower P4 prices (a 16.7% decrease).

Gross profit margin in Q2 2024 increased by 0.3 percentage points, reaching 39.3%, thanks to lower apatite ore prices (Khai Truong 19 operated at full capacity in Q2 2024), contributing to a 4.6% increase in gross profit. However, lower financial income (down 8.8%) due to lower deposit interest rates resulted in a flat net profit in Q2 2024 (a slight decrease of 0.1%).

DGC's net profit in Q2 2024 increased by 19.6% compared to the previous quarter, mainly due to agricultural phosphate fertilizer and other segments, showing signs of DGC's recovery. Net profit for the first six months of 2024 reached VND 1,515 billion (down 7.1% year-on-year), completing 42% and in line with our 2024 forecast.

MBS expects P4 prices to recover more strongly in the second half of 2024 as the semiconductor industry fully recovers. MBS forecasts DGC's P4 price to reach US$4,400/ton in the second half of 2024 (up 4.6% compared to the first six months of 2024) and P4 production to reach 25,000 tons in the second half of 2024 (up 25% compared to the first six 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 six months of 2024), bringing the net profit for 2024 to VND 3,504 billion. Thanks to the expanding semiconductor industry capacity, MBS forecasts that DGC's P4 price and production volume in 2025 will increase by 4.5% and 12.7%, reaching US$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 has also delayed the construction plan for Phase 2. Therefore, MBS expects the Nghi Son project to become operational in Q1/2026 and contribute 12% of DGC's revenue in 2026 (VND 1,500 billion).

MBS has lowered its 2024/25 EPS forecast due to lower financial income and the cancellation of the Nghi Son project in 2025. Therefore, our one-year target price has been revised down to VND 128,100 per share. Upside potential stems from stronger expectations of rising yellow phosphorus prices in 2024/2025 and the approval of the Aluminum-Bauxite project and the potential operation of the Dai Viet ethanol plant in 2024. Downside risks include a sharper-than-expected adjustment in phosphorus selling prices and risks related to the upcoming Nghi Son project implementation.

Stock market outlook 6/8: Market may soon experience a rebound.