We attended PTB’s 2024 AGM in Binh Dinh Province on April 20. Overall, we see that the company’s 2024 outlook is highly optimistic, albeit slightly trailing our previous expectations. For the medium term, we see upside potential to our forecast. Our key takeaways are as follows:

Q1 2024 PBT jumps 42% YoY; conservative 2024 guidance.  Strong Q1 2024 results were driven by wooden furniture exports which grew 22% YoY. 2024G NPAT is VND370bn (USD15mn; +43% YoY; 73% of our 2024F). Relative to our forecast, PTB has a more conservative expectation for wooden furniture, but a more optimistic view for stone and real estate. Management said that its target for wooden furniture is very conservative compared to the current outlook.

We note that PTB recorded sizeable one-off losses of USD2mn in Q4 2023 for exhausted stone mines and a bad debt provision. As such, a recovery in market demand should translate into much higher full-year 2024 YoY earnings growth compared to Q1 2024’s 42% YoY.

PTB updates its business strategy. In 2023, PTB set a strategy of optimizing return on capital after a decade of continuous investment that negatively impacted the company’s efficiency. PTB now also plans to diversify its products and markets with one of the immediate focuses being increasing R&D for quartz and seek niche markets for wood.

PTB’s Q1 2024 results and 2024 guidance

Source: PTB, Vietcap.

Wood: The key driver for PTB’s 2024 growth; developing wood pellets. PTB guides for a 9% YoY increase in wooden furniture revenue, however, management believes that the actual growth can be 20-25% YoY and insists that wooden furniture will be the key growth driver in 2024. This is based on Q1 2024’s positive results, in which the cabinet and vanity products are leading the recovery. In addition, a new wood pellet project is in the research stage. These pellets are used as fuel and can utilize PTB's current wood scraps. When it comes online, per management, wood pellets should have a scale of 150,000 tonnes/year and revenue of USD25mn/year, mainly consisting of exports to the Japanese and South Korean markets.

Noble House has a 30% chance of being able to repay PTB. Per PTB, its Noble House receivable falls into the unsecured category and Gigacloud has not acquired any liabilities to PTB from Noble House. In 2023, PTB made a provision for this default risk, equivalent to VND42bn which is equal to 70% of the total receivable from Noble House and is still awaiting a definitive ruling from the court regarding this matter. 

Stone: Low-end quartz faces fierce competition, higher-end segment revenue growing. Although quartz is facing fierce competition from Indian competitors, management targets to run its quartz plant at 100% capacity in 2024, which they believe is feasible, because as of April 2024, the plants are running at ~87% capacity (vs 67% in 2023). Per management, the competition is strongest in the low-end segment while in the mid- and high-end it is more moderate. Therefore, PTB is promoting R&D of the mid- and high-end products with more stable profit margins.

Long Thanh International Airport (LTA) - Management is optimistic about chances of winning the bid for paving stones. We estimate that LTA needs 500,000 m² of paving stones, which is equivalent to 8% of PTB’s annual capacity. According to management, the selling price to this project is attractive and PTB's competitive edge lies in its ownership of two granite mines, which can deliver both the quality and quantity required for the project. Additionally, PTB has invested in a machinery system capable of producing materials that adhere to airport standards. They are also prepared to make further investments should they be awarded the contract. Revenue from LTA should be in 2026 while that to the third terminal at Tan Son Nhat International Airport should be in 2025. These are the final years of each project.

PTB expands its real estate portfolio. PTB currently has three ongoing real estate projects. Per management, (1) the Phu Tai Central Life project’s construction has progressed to the fifth floor and is expected to start generating revenue by October 2025, (2) Phu Tai Dieu Tri (13ha, investment cost of VND700bn/USD28mn) is undergoing site clearance and compensation and is expected to start generating revenue in 2025, (3) Phu Tai Van Ha (49ha, investment cost of VND3tn/USD120mn) is slated to begin its first and second construction phases in 2025-2026, with an investment cost of VND1.5tn. Currently, PTB has not provided sales guidance up to the year 2025.

Auto dealership revenue dwindling without significant impact on PTB. PTB reiterated their view of not investing further in auto dealerships as the revenue decreased by more than 25% YoY for the second consecutive year in 2023.

FY 2023 dividends: VND2,500/share (4% yield), in which, VND1,500/share was paid in January 2024. 

FY 2024 dividends: VND2,500/share (4% yield) or more.

Powered by Froala Editor