Shares of rice exporters (LTG) in focus on higher demand, prices
Shares of rice exporters (LTG) in focus on higher demand, prices
Rising demand for rice and higher prices are benefiting the country’s export as well as export enterprises in the industry.
This makes stocks of rice exporters appealing investments.
In the first half of 2023, Viet Nam posted a trade surplus of more than US$12.26 billion, with a significant contribution from the agricultural sector, especially rice, according to the General Department of Vietnam Customs.
It is estimated that the country’s rice export turnover reached $2.3 billion, an increase of 34.7 per cent year-on-year. Rice ranks third in export value in the group of agricultural products.
Rice exports are estimated to climb 22.2 per cent over last year to 4.27 million tonnes.
The positive performance was thanks to high demand in the global markets, especially from traditional importers such as the Philippines, China, and Indonesia.
Moreover, rice production in India and Thailand is low as the effects of El Nino caused a reduction in yield.
As a result, the abundant supply from the winter-spring season and high yield has met the market's demand.
Notably, Vietnamese rice prices are higher than that of Thailand and India.
In June, the country’s 5 per cent broken rice was quoted at about $498 per tonne, while that of Thailand and India were $492 and $453 a tonne, respectively. Viet Nam’s 25 per cent broken rice prices were $478, about $10 higher than Thailand’s rice and about $50 higher than India’s rice.
The bullish trend continued in early July. Last week, Vietnamese 5 per cent broken rice was offered at $500 - $510 per tonne, according to statistics from Reuters.
While many rice exporters have continuously received large orders, inventories of the winter-spring crop have depleted and traders are currently waiting for supplies from the summer-autumn crop.
The recent report from the US Department of Agriculture (USDA) expects that Viet Nam will continue to be the world’s largest rice exporter this year, with a volume of 7.2 million tonnes, up from 7.05 million tonnes in 2022.
Better return expectations
Rice enterprises have seen an improvement in profit margins on higher selling prices and declining input costs of fertilisers.
The global fertiliser supplies increased as European countries opened their doors to Russian fertiliser exporters while China eased fertiliser export quotas.
The World Bank forecasts that urea prices will decrease by 10 per cent in 2023 and fall further by 8 per cent in 2024.
Despite the bright developments in the first quarter, profits of rice enterprises declined over the last year due to high interest expenses.
However, business results in the second quarter of 2023 are expected to be positive thanks to higher orders and selling prices, while banks have lowered interest rates.
In fact, most listed rice exporters on the market see growth for their businesses this year.
An Giang Agriculture and Foods Import - Export JSC (AFX) planned revenue of nearly VND2.6 trillion in 2023, up 52.9 per cent on-year, with a profit of VND36.9 billion, up 29 per cent.
Similarly, Loc Troi Group (LTG) targeted gains of 20 per cent and 13 per cent, respectively, in revenue and profit after tax.
The two main export markets of Loc Troi are both positive, according to experts.
The EU-Viet Nam Free Trade Agreement (EVFTA) has opened more opportunities for the company to expand in the EU markets, while the reopening of China helps to increase demand for rice imports.
Given the stronger demand in China, analysts expect Trung An Hi-Tech Farming JSC (TAR) to report positive results this year. VietFirst Securities Company said that the company’s rice exports account for 15 per cent of its total revenue, with China remaining the biggest importer.
Pan Group (PAN) has set a target of nearly VND15.2 trillion in revenue, up 11 per cent year-on-year, and VND402 billion in profit after tax, up 10.7 per cent.
For the agricultural segment, PAN Group expects revenue and profit to increase by 10-15 per cent thanks to the high demand for essential food.
On the stock market, stocks of some leading rice companies, including PAN, LTG, and TAR, have soared from the beginning of 2023, up 29.3 per cent, 31.8 per cent and 46.5 per cent, respectively.
