Chemical firms (CSV) see growth potential thanks to rising selling prices
Thanks to their good growth potential and attractive valuation, chemical stocks are being included in the portfolios of investors.
The stock market last week recorded four out of five declining sessions, of which the first session of the week recorded the strongest decline with the VN-Index losing more than 57 points. Some investors see this as an opportunity to hunt for cheap stocks.
Pham Dinh Cong from Ha Noi told tinnhanhchungkhoan.vn that he had taken the opportunity to buy some stocks in the past week, prioritising the enterprises with good financial status and growth potential, such as the chemical group.
According to ACB Securities Company (ACBS), in May 2022, the industrial production index of the chemical group continued to grow by 5 per cent. Rising selling prices from the beginning of the year until now are the main growth driver of this group.
In the first quarter of this year, a series of chemical enterprises reported sudden increases in profits. Duc Giang Chemical Group Joint Stock Company (DGC) reported a profit of VND1.51 trillion (US$67.7 billion), the highest since its inception, up 418 per cent over the same period last year. South Basic Chemicals JSC (CSV) reported a 3-time higher profit than the same period last year thanks to a sharp increase in output and selling prices, completing 56 per cent of the yearly plan. Viet Tri Chemical JSC (HVT) achieved a profit of VND36 billion ($1.55 million), four times higher than last year.
Experts forecast that this growth momentum will continue in the future. Mirae Asset Vietnam Securities Company said that the gradual reduction of heavy industrial products by China, as well as partial closure of the country under the influence of the COVID-19 pandemic, has reduced the long-term supply of many chemical products. World prices of phosphorus continued to rise, the company said.
In fact, the price of phosphorus has increased by nearly 40 per cent in the first two months of this year and has not stopped. The price of nitric acid, a chemical used in fertiliser production, increased continuously since March, up by 26 per cent.
In 2022, Duc Giang Chemical Group Joint Stock Company (DGC) sets a target of VND12.1 trillion in revenue and VND3.5 trillion in profit after tax.
Meanwhile, the South Basic Chemical Joint Stock Company (CSV) aims to achieve revenue of VND1.74 trillion and profit after tax of more than VND251 billion this year. Thus, at the end of the first quarter, the company has completed 28 per cent of its revenue target and nearly 56 per cent of its profit target for the whole year. Viet Tri Chemical (HVT) also fulfilled 56 per cent of its annual profit target in the first three months of this year. This year, HVT sets a pre-tax profit target of only VND80 billion.
Analysts forecast that the business results of the second quarter of chemical businesses will continue to flourish.
Chemical enterprises are planning to expand growth. In early June, Duc Giang Chemical Group Joint Stock Company (DGC) invested in two projects in Dak Nong Province, including the Duc Giang- Dak Nong fertiliser factory and Dak Nong aluminium complex project with total investment capital of VND300 billion.
Duc Giang- Dak Nong fertiliser factory is expected to be built in 12 months. The plant will produce NPK fertiliser with a capacity of 200,000 tonnes per year and will produce potassium sulfate with a capacity of 4,800 tonnes per year.
For the Dak Nong aluminium complex project, the exploitation scale is expected to be about 14.4 million tonnes of bauxite ore per year. The complex will have three ore sorting plants with a capacity of 5.8 million tonnes of refined ore per year. The total investment of the two phases is VND57 trillion.
According to the Ministry of Industry and Trade, many companies have focused on investing in technology to promote growth. For example, Lam Thao Fertilisers and Chemicals Joint Stock Company has implemented its project to convert sulfuric acid production technology from single absorption to double absorption. The South Basic Chemical Joint Stock Company and the Viet Tri Chemical Joint Stock Company have applied the electrolysis technology of sodium hydroxide ion exchange membrane.
In the draft of the Viet Nam Chemical Industry Development Strategy to 2030 that the Ministry of Industry and Trade is submitting to the Government, the chemical industry is developed in both width and depth.
Not only meeting domestic demand, businesses in the industry will boost exports, forming a value chain to deeply participate in the industrial production network of the region, aiming for green economic growth.
Currently, the market price of chemical stocks is seeing corrections which are considered to be cheap compared to the intrinsic potential of the businesses. In the long term, this is an industry group with stable and sustainable growth, bringing benefits to investors, said Nguyen The Minh, research director of Yuanta Securities Vietnam.
He said that chemical stocks are one of the groups benefiting from the recovery of the economy.