Vinh Hoan's profit to soar on rising pangasius export prices

Vinh Hoan Corporation, a major player in Vietnam's pangasius (tra fish) industry, has seen a significant rebound in the selling price of its product since the end of last year, pushing its net profit expectations to above VND1 trillion ($39.3 million).

The country's pangasius industry has seen a solid recovery in the first four months of this year, with export volume increasing by 14.2% from the same period last year to 270,000 tonnes. Export value also grew by 2.4% to $587 million.

As a leading pangasius exporter in Vietnam, Vinh Hoan has reported positive business results. The company's net revenue in the first four months surged by 25% to over VND3.9 trillion ($153.3 million).

As a result, the company now accounts for 15% of the country's total pangasius export value, significantly outpacing the second-largest player.

However, the gross profit margins of Vinh Hoan and other pangasius exporters remain under pressure.

In the first quarter, the average selling price of pangasius dropped by 10% year-on-year to around $2.2 per kg, even as raw pangasius material costs edged up slightly due to the rebound in export activities and rising transportation costs from the second half of 2023.

Vinh Hoan's gross profit margin in the first three months dropped sharply to 9.3%, down 800 basis points from the same period in 2023. This led to a 16% decline in the company's net profit to VND189 billion ($7.43 million).

Nevertheless, some financial institutions believe the company's business results have now hit the bottom and expect a stronger recovery in the second half of the year. This optimism is driven in part by positive signs emerging in the U.S. market, which is a major export market for the company.

Indeed, the U.S., the EU and China remain Vinh Hoan's top three export markets, accounting for 29%, 19% and 10% of its revenue, respectively, in the first four months of 2024.

Its export revenue to the U.S. market has been on a positive trajectory, with three straight monthly gains. While the pangasius export price to the U.S. is still lower than the same period last year, it has shown signs of recovery, reaching around $3 per kg - a 20% increase from late 2023.

The advantage is gradually shifting in favor of Vietnamese pangasius exporters. This is due to the U.S. ban on imports of Russian seafood, as well as the EU's decision to apply a 13.7% tariff on all Russian pollock products, compared to the previous zero per cent rate.

Looking ahead, Phu Hung Securities Corporation forecasts that Vinh Hoan's average pangasius selling price in the U.S. market will recover to around $3.3 per kg this year, representing a 4% gain from 2023 levels.

While its export revenue to the US market has been on a bullish trend, the company is facing increased competition in the Chinese market from Russian pollock.

The pangasius selling price in China is projected to continue declining to an average of around $1.9 per kg - a 13% decrease from 2023 levels.

However, the company's domestic business is showing bright spots. In the first four months of 2024, its domestic revenue grew by 43% to nearly VND1.1 trillion ($43.24 million). This was driven by increased warehouse rental activities, contributions from its subsidiary Sa Giang, as well as revenue from the recent expansion of its fish feed production capacity.

Given the current market dynamics, the securities firm expects Vinh Hoan's full-year net revenue to increase by 13.8% to VND11.4 trillion ($448.1 million) in 2024, while net profit is expected to grow by 17.6% to more than VND1.1 trillion.