DGC – Phosphorus demand continues to improve; Chlor-Alkali on track, Bauxite gains momentum

We attended DGC’s FY2025 AGM held on March 31, 2025. Our key takeaways as follows:

1. 2025 guidance

- Revenue: VND10.4tn (+5.2% YoY; 85% of our 2025F)

- NPAT: VND3tn (-3.5% YoY; 76% of our 2025F)

- Capex: VND1.3tn, including VND1.2tn for the Chlor-Alkali project, VND50bn for the Ethanol plant and VND40bn for the Tia Sang Battery plant expansion. Additionally, in 2025, DGC plans to upgrade and expand mine No.25, and secure construction permit for the Duc Giang real estate project.

- We note that DGC has a track record of setting conservative guidance.

Figure: DGC’s 2025G

	2024A	2025F	2025G	2025G YoY	2025G as % of 2025F
Sales volume (thousand tonnes of P content)	131,236	138,893	118,133	-10%	85%
Industrial phosphorus chemicals (IPC)	60,515	65,166	59,444	-2%	91%
Agricultural phosphates (AP)	70,720	73,727	58,689	-17%	80%
ASP (VND mn/tonne of P content)	73	72	79	8%	109%
Industrial phosphorus chemicals	96	100	99	4%	99%
Agricultural phosphates	53	48	59	9%	123%
Revenue (VND bn)	9,865	12,273	10,385	5%	85%
Industrial phosphorus chemicals	5,795	6,526	5,905	2%	90%
Agricultural phosphates	3,782	3,521	3,437	-9%	98%
NPAT (VND bn)	3,110	3,930	3,000	-4%	76%

Source: DGC, Vietcap

2. Q1 2025 preliminary result

- Revenue: VND2.7tn (+13% YoY; 22% of our 2025F)

- NPAT: VND800bn+ (vs Q1 2024 of VND704bn; ~21%+ of our 2025F)

- This result fell slightly short of our forecast. We see downside risks to our forecast, pending a fuller review.

3. Industrial phosphorus chemical

- IPC demand from East Asian markets (e.g., Japan, Taiwan) is rising, driven by increasing chip demand and the U.S.-China trade war creating favorable conditions for Vietnam's exports. DGC is shifting its exports to these markets instead of India to capitalize on higher selling prices.

- IPC ASP: Prices in the East Asia market (e.g., Japan, Taiwan) stand at USD4,300/tonne, up from USD4,200 in Q4 2024, while India’s ASP is USD4,000/tonne, compared to USD3,900 in Q4 2024.

- Management highlights rising electricity costs as a key downside risk for this segment. The Vietnamese government plans to raise electricity prices by 5%, which could pressure DGC’s IPC segment, as electricity accounts for 30% of its total production costs—potentially increasing costs by an estimated USD50/tonne. However, despite cost pressures from both electricity and ore, we believe DGC can pass these increases onto customers, given its dominant position as one of the largest P4 exporters with the highest purity—a quality that remains difficult to substitute.

4. Phosphate rock

- The Vietnamese apatite ore market price ranges from VND2.0–2.7mn/tonne.

- DGC self-supplies 60–70% of its total apatite ore needs. Regarding mine No.25, management expects expansion to be completed in Q3-Q4 2025. Management also indicated that Mine No.19 could be further expanded if additional reserves are discovered, similar to Mine No.25.

- We note that Mines No.19 and No.25 will secure input for DGC in the next five years. Thus, to ensure long-term self-supply, DGC has proposed to the Ministry of Natural Resources and Environment to bid for new mines with an estimated 30 million tonnes of reserves, primarily grade 2 ore – which can be exploited in 30 years. We anticipate DGC to accelerate mine bidding in the next 2–3 years to mitigate the risk of depletion at its existing mines.

5. Agricultural phosphate

- DGC is importing apatite ore from Egypt at USD70–80/tonne, comparable to domestic prices. Notably, Egyptian ore is primarily used for fertilizer production. We estimate DGC could import 10–15% of its total ore needs, which would help mitigate domestic’s ore shortage and ensure sufficient ore to capitalize on the rising fertilizer demand, driven by China’s export restrictions.

- VAT policy (effective July 1, 2025): DGC expects to reclaim VND100bn/year from this policy. As a result, in 2025F, management expects to reclaim around VND50bn.

6. Ethanol

- 2025 guidance

+ Utilization: 50% (vs our forecast of 100% in 2025F).

+ Revenue: VND425bn (28% of our 2025F).

- Per management, the plant currently sells ~1,000 tonnes/month. Moving forward, DGC expects to ramp up sales to 3,000 tonnes/month next quarter.

- The company is also upgrading its plant to produce 99% ethanol, which is used in E5 gasoline production.

7. Chlor-Alkali

- Estimated financial performance for phase 1

+ Revenue: VND2tn

+ NPAT: VND200bn

+ GPM: ~ 20%

- Phase 1 construction is on track, with management expecting operations to commence in Q2/2026. The company plans to initiate Phase 2 after assessing sales performance and market demand (initially planned for 2027).

- Vietnam's NaOH demand remains strong, with 50% of consumption dependent on imports, supporting DGC's confidence in selling its output. According to management, PVChems has secured offtake agreements for 30% of the plant’s capacity, while other customers have committed to an additional 20%, bringing total pre-committed sales to 50% of capacity. However, the market faces a surplus of Cl-, posing challenges in securing buyers for this byproduct.

- Major competitors' capacities:

+ Viet Tri Chemical: 40k tonnes p.a

+ Dong A: 38k tonnes p.a.

+ Vedan: 80k tonnes p.a. (primarily for internal use)

+ Southern Basic Chemicals: 40k tonnes p.a.

+ Once operational, DGC Phase 1 will be the largest commercial NaOH producer in Vietnam. According to management, competitors are not expanding their capacity due to difficulties in selling Cl- byproducts. However, DGC can mitigate this challenge by converting Cl- into PCl₃, leveraging phosphorus (P) from its existing business.

8. Bauxite

- DGC has been shortlisted to develop Phase 1's factory of its bauxite project before bidding for ore supply. Management expects to secure an investment permit for the Phase 1 plant in 2025, with construction commencing in 2026. We anticipate revenue contribution starting in 2029.

- Estimated financial performance for phase 1

+ Revenue: VND12tn (122% of DGC’s 2024 revenue)

+ NPAT: VND3-4tn (equivalent to DGC’s 2024 NPAT). Management estimates Phase 1 & Phase 2 combined could generate VND 6-7tn in NPAT.

- Notably, DGC has proposed establishing a subsidiary dedicated to the bauxite project, with charter capital equivalent to 35% of total assets (~VND 5.5tn).

9. Real estate

- Management expects construction in 2025, developing 1,000 apartments and 60 townhouses, with an estimated revenue of VND 5tn and NPAT of VND 1tn, per management.

- Additionally, DGC intends to relocate the Tia Sang battery plant to Nam Dinh Vu, repurposing its existing land in Hai Phong for a social housing project with ~1,000 apartments and townhouses. The estimated profit from this development is VND 300-500bn, per management.

10. Proposed dividends:

- 2024: 30% on par value in cash (paid)

- 2025: 30% on par value (in cash and/or in stock)

11. Management changes

- Appointing Mr. Dao Huu Duy Anh to be the company’s vice chairman from current position of CEO.

- Appointing Mr. Luu Bach Dat to be the CEO from the current position of Deputy CEO, replacing Mr. Dao Huu Duy Anh prior to the appointment.

- Increasing the number of legal representatives from two to three, adding the Vice Chairman alongside the Chairman and CEO.

- We believe this move is an internal restructuring to comply with the 2020 Enterprise Law which states that the CEO of a public company cannot be a relative of the Chairman. In DGC’s case, Mr. Dao Huu Duy Anh is the son of Mr. Dao Huu Huyen - the company’s Chairman. We expect this move to have an insignificant impact on DGC’s business operation and outlook.