SUGAR INDUSTRY Positive outlook thanks to Government's defense policy - PHS
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SUGAR INDUSTRY Positive outlook thanks to Government's defense policy
OVERVIEW OF GLOBAL SUGAR MARKET
For the period 2019/2020, global sugar production and consumption volume
decreased by 7.7% YoY and 1.2% YoY, respectively. The supply deficit was 9.3 Forecast of Supply surplus in the period
million tons due to the decline in sugar production in Brazil and Thailand. of 2020/2021F
Thousand tons Source: USDA, PHFM collect Thousand tons
Sugar prices have also recovered from bottoming out two years ago.
250,000 175,000
174,000
US Department of Agriculture (USDA) forecasts that world sugar production 200,000 173,000
150,000 172,000
in 2020/2021 will increase 10% YoY to more than 181 million tons, mainly 171,000
because Brazil increases the proportion of sugarcane used to produce sugar 100,000 170,000
instead of producing ethanol. Global sugar consumption will recover slightly by 50,000 169,000
168,000
2% to 173 million tons. Global sugar exports are also forecasted to soar 23% 0 167,000
YoY to 65.3 million tons.
According to Reuters, the average sugar price in 2021 will decrease due to Ending stocks
oversupply (forecast increase of 7 million tons). Accordingly, the price of raw Global sugar production (thousand tons)
sugar will decrease by about 7% while the price of white sugar will decline by Global sugar consumption (thousand tons)
3.5% by the end of 2021.
Forecast for the global sugar price in the
Forecast for export volume in the period 2020/2021 period 2020/2021 tends to decrease slightly
Source: USDA, PHFM collect USD/pound Source: Bloomberg, Reuter, PHFM collect
Thousand tons
30
35,000
25
30,000
20
25,000
20,000 15
15,000 10
10,000 5
5,000
0
-
2019/2020 2020/2021F
OVERVIEW OF VIETNAM SUGAR MARKET
Domestic production of sugar and Thai
The gloom of Vietnam Sugar industry in the period Sugar imported to Vietnam
2019/2020: Thousand tonsSource: VSSA, Ministry of Commerce of
Thailand, PHFM collect
Sugarcane production in the period 2019/2020 reached about 7.4 2,000
million tons (-39% YoY) and produce nearly 770 thousand tons of 1,500
sugar (-35% YoY). Moreover, the estimated area of raw sugarcane
material declined 18% compared to the previous period, and 1,000
retreated to 156 hectares. 500
0
1/3 of the sugar factories in the Association had to be closed. 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
Sugar imported from Thailand Domestic production of sugar
Import volume soared after ATIGA took effect 01/01/2020:
Sugar imported into Vietnam soared
Import volume from Thailand to Vietnam soared after quota was after joining ATIGA
eliminated and import duties for ASEAN countries were reduced to Tons
Source: VSSA, PHFM collect
5%. 300,000
250,000
The average price of Thai sugar exported to Vietnam (including raw 200,000
sugar and refined sugar) is 327.7 USD/ton, lower than the cost of
150,000
sugarcane to make domestic sugar (about 410 USD/ton).
100,000
50,000
-
Thái Lan Campuchia Malaysia Indonesia 3
GOVERNMENT OF VIETNAM RAMPART FOR DOMESTIC PRODUCTS
DEFENCE POLICY FOR THAILAND SUGAR PRODUCTS: Results after the decision to investigate and
apply anti-dumping and anti-subsidy measures
Decision 2466 / QD-BTC dated September 21, 2020 decided to announce for sugarcane products from Thailand
the anti-dumping and subsidy investigation for sugar products from Tons Source: VSSA, PHFM collect
Thailand. 1,200,000
1,000,000
Domestic sugar producers estimated that the dumping margin of Thai 800,000
sugar was up to 37.9%. 600,000
400,000
In 9M2020, before the investigation decision, the imported sugar volume 200,000
from Thailand was 952,812 tons, accounting for 91% of the total import 0
Thailand Five countries Asean (Campuchia,
volume. Thailand has only 378,760 tons, only accounting for 70% of the Laos, Malaysia, Myanmar, Indonesia)
total import volume. Average import volume of 9 months before the decision on investigation
Import volume in the last 3 months of 2020 after the investigation decision
On February 9, 2021, the Ministry of Industry and Trade issued Decision Name Type HS code Anti- Anti-
No. 477/QD-BCT on the application of provisional anti-dumping and anti- dumping subsidy
subsidy measures for cane sugar products from Thailand. tax rate tax rate
Refined sugar and 1701.99.10; 44.23% 4.65%
other cane sugars 1701.99.90;
The temporary anti-dumping tax rate for cane sugar products imported are not raw sugar 1701.91.00;
from Thailand is 48.88% and for raw sugar originating in Thailand at Production and export 1702.90.91.
33.88%. companies of Thailand Raw sugar 1701.13.00; 29.23% 4.65%
1701.14.00.
4POSITIVE PROSPECTS OF SUGAR MARKET 2020/2021
Government strives to protect domestic sugarcane market: China's sugar production and exports
Decision 2466/QD-BTC on the investigation of anti-dumping and anti- Source: USDA, PHFM collect
Thousand tons
subsidy for sugarcane from Thailand and Decision No. 477/QD-BCT on 12,000
the application of anti-dumping and anti-subsidy measures for cane sugar
10,000
products originating from Thailand: Sugar prices are expected to reach
16,000 VND/kg, up 19%. 8,000
6,000
Favorable weather in the first 6 months of 2021: 4,000
La Nina phenomenon, which could maintain in the dry season of 2021 2,000
(until March 2021) is expected to cause more rain, reducing the impact 0
of drought in the Central, Central Highlands and saline intrusion in the 2017/2016 2018/2017 2019/2018 2020/2019 2021/2020F
Southern region compared to 2020. Production volume Export volume
Export prospect: Forecast of La Nina phenomenon in 2021
Exports to China: Under the impact of the Covid-19 pandemic and the Source: World Meteorological Organization - Asia
floods that occurred in 2020Q3, China has increased its sugar imports to (WMO), PHFM collect
store essential food items from many countries including Vietnam. 120%
100% Dry season Rainy season
Export to EU: The entry into force of EVFTA has opened up opportunities 80%
to export high-quality sugar to the EU. The tariff rate quota with 10,000 60%
tons of white sugar and 10,000 tons of products containing more than 40%
80% sugar and the tax rate of 339 EUR / ton on raw sugar and 419 EUR 20%
/ ton on refined sugar will gradually decrease according to the schedule. 0%
According to the USDA forecast, EU sugar import volume in the crop year T12-1-2 T1-2-3 T2-3-4 T3-4-5 T4-5-6 T5-6-7 T6-7-8 T7-8-9 T8-9-10
2020/2021 is estimated at 3 million tons (up 43% YoY). Trung tính La Nina EI Nino
5DOMESTIC ENTERPRISES
DOMESTIC ENTERPRISES
SBT QNS LSS SLS KTS
Number of sugar Factors
9 2 3 1 1
factors
Sugarcane crushing Tons /
day 37,500 20,200 10,500 5,000 1,732
capacity
Raw material area Hectare
64,000 27,650 10,000 7,771 1,341
Average productivity Tons/he
ctare
71 70 69 65 61
Volume of Sugarcane Tons
2,760,000 1,500,000 686,840 506,376 139,947
crushing
Sugar output Tons
1,060,000 146,000 110,000 64,646 14,473
Industry leader with market
Company has the largest Enterprises
share up to 46%. The production cost
production scale of RE have small
With a large portfolio of B2B of SLS is low thanks
Quang Ngai Sugar (QNS) refined sugar in the North. production
customers, SBT is under less to favorable soil
ranks second in terms of More than 80% of the scale, it is
fierce competition pressure conditions for
sugarcane material areas. company's products are difficult to gain
when Thai sugar enters the sugarcane with high
Competing capability Leading soy milk market consumed by industrial advantages in
Vietnamese market. sugar content and
share customers, less scale,
SBT's product segment is enhanced
RE Sugar The company competition with other sugarcane
mid-range and high-end, so production efficiency
has 11% market share. businesses and cheap material areas
there are many export after upgrading the
imported sugar. are small and
opportunities to the EU and production line..
unstable
China
6VALUATION, RECOMMENDED SUGAR STOCKS
Current
Market Revenue Net profit
Y-o-Y Fair price prices Recommend
No. Stock SE Cap (VND 2021 (billion Y-o-Y after tax 2021 P/E P/B
(VND) (March 15, ation
billion) VND) (billion VND)
2021)
1 SBT HOSE 14,245 15,790 23% 744 100% 25.6 2.2 30,000 23,800 MUA
2 QNS UPCOM 14,492 6,879 6% 1,043 -1% 32.2 2.3 48,000 42,500 MUA
3 LSS HOSE 864 4,000 126% 176 5175% 42.9 0.6 N/A 14,300 N/A
7THANH THANH CONG - BIEN HOA JOINT STOCK COMPANY - SBT
Fair price: 30,000 VND/share
Company profile
SBT owns a raw material area of about 64,000 ha, accounting for
25% of the country's total material area Price movement compare with Index
SBT is currently the largest sugar cane producer with 46% market
60%
share in Vietnam and owns 9 factories. SBT VN-Index
The Company owns 24 potential export markets, in which TTC Bien 40%
Hoa is the only Sugar Company in Vietnam to export Sugar to US. 20%
Key Catalysts
Gross profit margin soared: SBT increased its organic sugar 0%
production with a high gross profit margin of 30-40%. Moreover, SBT -20%
has well controlled input materials through signing contracts with
farmers from 6 months to 1 year and importing cheap sugar from -40%
03/2020
04/2020
05/2020
06/2020
07/2020
08/2020
09/2020
10/2020
11/2020
12/2020
01/2021
02/2021
03/2021
overseas markets through its subsidiary GMC in Singapore.
Agricultural value chain development: SBT offers high-tech
agricultural products (such as organic fertilizer) and beverage
products (organic sugarcane juice),
Historical valuation
Financial indicator 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Net revenue (bn VND) 4,498 10,285 10,856 12,850 15,790 P/E
100.0
Profit after tax (bn VND) 339 560 260 372 744 80.0
EPS (VND) 1,341 1,005 442 611 1,165 60.0
40.0
EPS Growth (%) -16% -25% -56% 38% 91% 20.0
0.0
Book value (VND/per share) 12,250 10,852 9,492 12,299 13,578
10/2020
01/2021
03/2020
04/2020
05/2020
06/2020
07/2020
08/2020
09/2020
11/2020
12/2020
02/2021
03/2021
P/E 19.48 34.22 28.95 27.90 25.76
P/B 1.16 1.48 1.18 1.39 2.21
Cash dividend (VND) 0% 0% 8% 6% 5% 8QUANG NGAI SUGAR JOINT STOCK COMPANY - QNS
Fair price: 48,000 VNĐ
Company profile
QNS owns major food and beverage brands such as soybean milk
and Biscafun confectionery. In addition, QNS owns two sugar Price movement compare with Index
factories (thermal power plants) An Khe (Gia Lai) and Pho Phong
(Quang Ngai) with a total capacity of 20,200 tons sugarcane pressing, 100% QNS VN-Index
supplying about 200,000 tons of sugar/year (13% of sugar production, 80%
ranking 2nd in the country). 60%
Key Catalysts 40%
Efforts to develop core products - Vinasoy soybean milk: Quang 20%
Ngai Sugar has approved the plan to convert Quang Ngai 0%
Sugarcane Seed Center to Vinasoy Soybean Research and
-20%
Development Center, the expected conversion time in April / 2021.
-40%
We expect the dairy segment to continue growing at 6% in 2021
03/2020
04/2020
05/2020
06/2020
07/2020
08/2020
09/2020
10/2020
11/2020
12/2020
01/2021
02/2021
03/2021
thanks to the recovery of purchasing power after Covid-19.
The road segment is expected to recover thanks to the defense
policy of Government
Financial indicator 2017A 2018A 2019A 2020A 2021F Historical valuation
Net revenue (bn VND) 7,633 8,031 7,681 6,490 6,879
P/E
Profit after tax (bn VND) 1,027 1,240 1,292 1,053 1,043 15.0
EPS (VND) 4,985 5,020 4,313 3,463 1,491 10.0
EPS Growth (%) -44% 1% -14% -20% -57% 5.0
Book value (VND/per share) 21,758 21,664 21,603 21,723 20,653 0.0
04/2020
11/2020
03/2020
05/2020
06/2020
07/2020
08/2020
09/2020
10/2020
12/2020
01/2021
02/2021
03/2021
P/E 3.36 2.33 4.13 5.96 32.21
P/B 0.77 0.54 0.82 0.95 2.32
Cash dividend (VND) 15% 15% 30% 30% N/A
9Analyst certification The report was prepared by Ton Nu Nhat Minh – Analyst – Phu Hung Fund Management Joint Stock Company. Each research analyst(s), strategist(s) or research associate(s) responsible for the preparation and content of all or any identified portion of this research report hereby certifies that, with respect to each issuer or security or any identified portion of the report with respect to each issuer or security that the research analyst, strategist or research associate covers in this research report, all of the views expressed by that research analyst, strategist or research associate in this research report accurately reflect their personal views about those issuer(s) or securities. Each research analyst(s), strategist(s) or research associate(s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation(s) or view(s) expressed by that research analyst, strategist or research associate in this research report. Disclaimer Phu Hung Fund Management Joint Stock Company/Phu Hung Securities Corporation do not hold ourselves responsible for completeness or accuracy of the report. It is not an offer to sell or solicitation of an offer to buy any securities. Phu Hung Securities/ Phu Hung Fund Management and its affiliates, officers, employees may or may not have a position in or with respect to the securities mentioned herein. Phu Hung Securities/Phu Hung Fund Management (or one of its affiliates) may from time to time perform investment banking or other services or solicit investment banking or other business for any company mentioned in this report. All opinions and estimates included in this report constitute are based on the assessments of Phu Hung Fund Management as of this date and are subject to change without notice.
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