ACG – Guiding for modest growth in 2025; US tariff impact mitigation possible

We attended ACG’s 2025 AGM. Below are the key highlights:

1. 2025 guidance:

Net revenue: VND4,047bn (USD158.7mn; +1.7% YoY; 94% of our 2025F forecast).
NPAT: VND450bn (USD17.6mn; +7.2% YoY; 70% of our 2025F forecast).
We currently see downside risk to our forecasts, given weaker-than-expected Q1 results.

ACG’s 2025 guidance

Source: ACG, Vietcap. *Excluding bad debt provision expenses. **Assumed equal to NPAT as we do not have details on 2025G expected provision expenses.

2. Dividend:

FY2024: 15% cash dividend on par value, equivalent to VND1,500/share. The first tranche of VND800/share was paid in Q4 2024. The second tranche of VND700/share is expected to be paid in Q2 2025.
FY2025: Minimum 15% payout on par, via cash and/or share dividend.

3. US reciprocal tariff:

The US represents ~12% of ACG’s total sales.
Q2 US orders are rising due to front-loading.
Tariffs of 15–20% are acceptable to US clients, though not as good as before; 25%+ would be challenging for exports to this market.
ACG anticipates a high probability of another 60-day pause for Vietnam for continued negotiations with the US.
The company remains optimistic that tariffs on wood products would not be excessive, given limited US interest in doing such labor-intensive work. We think another reason could be high dependence from the US on Vietnamese supply and high labor costs in the US.

Mitigation strategy if tariffs rise sharply:

Market diversification (e.g., Canada, Australia, UAE, Japan, Southeast Asia, Laos, Cambodia, etc.). ACG believes these markets can offset at least 70% of US volume loss.
Establish overseas manufacturing partnerships in low-tariff countries. It can take 3-4 months to set up a new factory.
The company is confident in its risk mitigation strategy, resulting in no changes to its 2025 guidance.

4. Export GPM decline was driven by higher discounts for US buyers amid high freight rates and competition.

5. ACG expects strong 2026-2027 domestic sales, driven by strong real estate recovery in 2025:

So far in 2025, ACG has observed a strong rebound in domestic order inquiries, driven by the real estate market recovery — with inquiries increasing 4x YoY.
However, the revenue impact will materialize in 2026–2027, as ACG’s products are typically installed during the final stage of project development.

6. Bad debt provisions:

ACG does not anticipate significant provision expenses in 2025, as the largest outstanding debt — related to Novareal (a subsidiary of Novaland) — has shown encouraging progress.
In May, ACG will exchange 13 shophouses located in prime areas of the Novaworld Phan Thiet project (legally sound projects), for reducing the principal loan balance by ~VND150–200bn (USD5.9mn-USD7.8mn) from the outstanding VND257bn (USD10.1mn). This VND257bn figure has already included VND117bn (USD4.6mn) of provision booked for this loan so far.
The transfer price of the shophouses to ACG are ~35% below their initial price, but 15% above current market value. This means ACG acquired them at a premium vs the market price. However, ACG still expects to report a gain once the properties are sold, compared to the loan book value. This means that ACG likely can book a provision expense reversal for this loan.
For Hung Thinh — ACG’s second-largest debtor — the company also reported good progress in debt recovery efforts.

7. Thang Loi project (i.e., Binh An Duc Hoa project):

ACG recently received an offer of VND800bn (USD31.4mn) to acquire its entire stake in the Binh An Duc Hoa project — representing a substantial gain over the original investment of VND525bn (USD20.6mn) — but declined the full offer. The company has only divested 5% of its stake, with a gain of ~VND40bn (USD1.6mn), expected to be booked in Q2 2025. This project locates in Duc Hoa, Long An (adjacent to HCMC).
The project has recently received investment approval from the Long An Provincial People’s Committee and is nearing receiving the construction license.
Total projected earnings from the project are estimated at VND2,000bn (USD78.4mn), with ACG’s expected share being VND750bn (USD29.4mn) — implying an effective ownership of 37.5%.
With a target selling price of VND30mn/sqm, ACG expects the project to be fully sold within two months.
Further details on the project’s development timeline have not yet been disclosed. This upside potential has not been included in our current projections.

8. Approval of the merger plan of An Cuong Wood – Working Manufacturing Co., Ltd. (ACG Manufacturing) into An Cuong Wood – Working JSC (ACG)

ACG Manufacturing is currently a 100%-owned subsidiary of ACG, with a charter capital of VND796.6bn (USD31.2mn).
Main business: Manufacturing and trading of industrial wood.
Purpose of merger: Optimize business activities & resources, thereby boosting operational and managerial efficiency.
Implementation timeline: In the period of 2025-2026.
We expect this move to not materially impact ACG’s ongoing operations as this is an organizational restructuring move to enhance operational efficiency.

9. Funds allocation: