Tien Phong Plastic and its $1 bln revenue ambition

From producing children's toys, Tien Phong Plastic JSC, one of the long-standing and largest plastic manufacturers in Vietnam, made the bold switch to plastic pipes to meet the development needs of the country during its renewal period, which started in 1986.

Bold decision

Hai Phong-based Tien Phong Plastic JSC, listed on the Hanoi Stock Exchange (HNX) as NTP, is famous for its plastic pipe products. Tien Phong Plastic has become a popular brand with a market share of up to 37% nationwide. However, few people know that to achieve these results, the company made drastic changes more than 30 years ago.

Established in 1960, Thieu Nien Tien Phong Plastic Factory primarily produced plastic toys for children and teenagers. After 30 years of operations, the business had created a brand and a certain foothold in the domestic market, but faced difficulties sourcing raw input materials as well as product sales. The situation lasted for nearly a decade.

In that context, in 1990, the factory's management board made a bold decision to switch from the once famous traditional products to PVC pipes to anticipate a series of infrastructure construction, water supply and drainage projects nationwide. After more than three decades, the enterprise has produced more than 10,000 types of plastic pipes and parts, not only serving infrastructure development and civil engineering but also the fisheries, transportation, electricity and water sectors.

From the North, Tien Phong Plastic has developed two new factories in the central and southern regions with a total capacity of nearly 200,000 tons per year - the largest in the industry. Its distribution network also covers the entire country with 12 centers, nearly 400 distributors, and more than 26,000 sales points.

Regarding business results, Tien Phong Plastic has posted a stable performance in the past four years, with revenues and profits continuously growing. The company has maintained a cash dividend payment of 20-25% each year. However, the growth rate has decreased significantly and consumption has slowed due to competition from newcomers in the industry. On the other hand, after a period of rapid growth from 2014 to 2016, the real estate and construction markets have stagnated, affecting plastic pipe producers.

The company’s main input material - PVC - is imported so it depends on world prices. Its profit depends heavily on raw material purchasing policies while selling prices do not increase much due to fierce competition.

In 2022, it set a revenue record of VND5,685 billion ($233.42 million). Its net profit hit VND480 billion ($19.7 million), an increase of 2.6% compared to 2021, only lower than the figure of VND493 billion recorded in 2017. In the first nine months of this year, the company reported revenue of VND3,825 billion ($157 million), and a net profit of VND395 billion ($16.2 million), down 7% and 4% over the same period last year, respectively.

In the nine-month period, Tien Phong Plastic benefited from falling prices of PVC and as a result, its gross profit margin improved. However, joint venture activities saw reduced profits and increased sales costs, causing the company’s net profit to decrease slightly compared to the same period last year.

$1 billion revenue ambition

The plastic industry giant has set a goal of improving its financial indicators by at least 10% compared to current levels to reach annual revenue of VND10 trillion ($410.6 million) by 2025 and $1 billion by 2040. This has been viewed as an ambitious target because its revenue has yet to reach VND6 trillion ($246.34 million) per year.

Tien Phong Plastic said despite the recent slowdown, the growth potential of construction plastic products is still large because Vietnam's urbanization rate remains low. At the same time, legal issues facing real estate projects are expected to be removed soon, creating a launch pad for growth from 2024 onwards.

Meanwhile, the company is looking for other growth drivers. Tien Phong Plastic's current goal is not only to dominate the domestic market but also to reach out to the world. To do this, it will cooperate with large domestic and foreign corporations to explore new markets as well as expand internationally.

Specifically, it plans to shake hands with Minh Phu Seafood Corp to approach the aquaculture industry and develop new products to serve this field; and partner with PC1 Group JSC on its projects.

At the same time, the company will team up with Japan’s Sekisu Chemical - a major shareholder in technology - to develop the plastic industry serving water supply and drainage in Vietnam in particular and Southeast Asia in general while providing products for Japanese ODA-funded projects in the field of water infrastructure.

Towards sustainable development, Tien Phong Plastic will improve product quality with superior features such as corrugated uPVC pipes, drainage pipes and accessories meeting ISO 3633 standards. The company will pay attention to environmental protection issues to provide green materials to projects and contribute to improving living spaces.

To enjoy incentives from free trade agreements (FTAs) and stand firmly in the global supply chain, it must comply with rules of origin, and commit to sustainable and environmentally friendly products, the company said.

On the stock market, NTP closed Thursday at VND36,000 ($1.48) per share.