APH - New leader in plastic industry
APH - New leader in plastic industry
For the last few decades, investors only referred to two leading stocks in the plastic industry, that of the Binh Minh Plastic Joint Stock Company (BMP) and the Tien Phong Plastic Joint Stock Company (NTP). The lead positions held for so long by these two giants was quickly shaken with the emergence of the An Phat Holdings Joint Stock Company (APH) in 2002.
In an APH's plastic factory.
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Competitive policy
Currently, BMP is the largest enterprise in the plastic pipe industry in southern Vietnam, with four factories in Ho Chi Minh City, Binh Duong, Long An and Hung Yen provinces, with total production capacity of almost 150,000 tons per year. BMP also leads in with the largest distribution network, owning 1,487 stores and 43% of market share in the south. BMP has a diversified product portfolio, with about 332 types of plastic pipes. At the end of 2017, the BMP Long An factory introduced complete PPR fittings in the market, and thus further diversified their product portfolio.
After an impressive period of steady growth, BMP began to show signs of slowing down when sales began to fall between the years 2017 and 2018 due to fierce competition from new players entering the plastics industry. During the period 2014 until 2016, when the construction and real estate market began to recover, BMP sales also increased steadily with an average increase of 18% per year. However, between 2017 and 2018, the plastic pipe market witnessed strong competition from new business groups such as the Hoa Sen Group Joint Stock Company (HSG) and the Tan A Dai Thanh Joint Stock Company. BMP output during this period decreased significantly to only 15% in 2017 and less than 1% in 2018.
Competition from new entrants in the industry also caused NTP, the leading competitor in the northern market, to fall to only 2.5% per year on average consumption. NTP currently operates three factories in Hai Phong, Nghe An and Binh Duong provinces, with a total capacity of almost 150,000 tons per year. If BMP dominates the southern market, NTP owns the northern market with 53% market share and more than 3,000 product distributing agents. NTP has the most diversified products portfolio amongst all plastic pipe companies, with 748 different types of pipe products, much higher than BMP with 332 products, or Hoa Sen with 275. NTP pipe fittings are also diverse in models with almost 1,000 product codes with all kinds of accessories.
NTP sales grew rapidly between 2014 and 2016, benefiting from the recovery of the real estate and construction markets. However, the growth rate of NTP has slowed down since 2017, and the reason has been the emergence of new competitors. The effect was visible in the consumption growth of NTP in the period between 2014 and 2016 when it was about 20%, but by 2017 sales were down to 86,346 tons, equivalent to a growth rate of a mere 0.4 %.
HSG high sales volume strongly inhibits the growth of BMP and NTP. HSG competitive strategy is mainly based on high discount rates for distributors. Specifically, for uPVC plastic pipes, HSG applies a discount rate for agents of upto 40%, while BMP and NTP offer only 14% to 18%. For PPR high-quality plastic pipes, HSG discount rate for agents is upto 69% compared to NTP and BMP offering upto 55%. In addition, HSG also maintains an easy debt policy for agents. This is the reason that HSG sales volume has been growing strongly in the 2017 to 2018 period, with market share also increasing from 10% in 2017 to 15%. Now HSG ranks 3rd among all plastic pipe enterprises. However, the downside of this scheme is that HSG profits will be affected by higher selling costs.
Fierce competitor
While the bigger plastic companies such as BMP, NTP or HSG are struggling to find ways to maintain their market share, the stock market has been introduced to a new emerging giant, the An Phat Holdings Joint Stock Company (APH). At the end of July, APH officially put 123.6 mn shares to list on HOSE, at a reference price of VND 41,500 per share. According to analysts, this is an attractive price, because the group previously offered shares upto VND 50,000 per share.
The fact that APH increased at maximum amplitude of 20% in the stock market in the adjustment period is not too surprising. At this price, APH market capitalization reached USD 6,600 bn, equivalent to USD 281 mn and officially became the largest market-cap plastic joint stock company on the stock market, equivalent to BMP and NTP combined capital. After a successful listing session, APH continued to make a mark with a rise in prices and is currently trading at VND 75,000 per share. At this price, the market capitalization of APH is approximately VND 10,000 bn, while the capitalization of BMP and NTP is VND 4,898 bn and 3,993 bn, respectively.
APH was established in 2017 as a parent company of a group of subsidiaries operating in the core plastic industry, with main activities being manufacturing and trading and high-tech plastic components. APH position is due to its subsidiaries listed on HOSE as An Phat Plastic JSC (AAA) and Hanoi Plastic JSC (NHH). In addition, APH also indirectly owns about ten listed companies on HOSE and HNX. According to Mr. Dinh Xuan Cuong, Vice Chairman of the Board of Directors and General Director of APH, the listing of shares on HOSE will create conditions for the group to expand and attract investors to raise capital to build the AnBio material factory. This project will contribute to enhancing APH position on list of fully biodegradable companies in the world, along with world leading corporations such as BASF, Novamont, NatureWorks or Total Corbion.
Mr. Dinh Xuan Cuong believes that AnBio will help APH reduce product costs, expand the market, and save about 30% of production costs for subsidiaries, while the parent company will keep gross profit margin from 25% to 30%. APH goal by 2023 is that these fully biodegradable raw material products will contribute 40% to 50% towards packaging revenue. According to the 2019 financial report, APH recorded revenue and profit of VND 9,513 bn and VND 712 bn, equivalent to 19% and 305% of growth, respectively. Total assets have reached VND 10,000 bn, and earnings per share (EPS) at the end of Q2 reached VND 3,076 per share. In 2020, APH wants to target revenue and net profit of VND 12,000 bn and VND 650 bn, respectively.
