VNDIRECT RESEARCH
Figure 70: Commodity prices outlook in FY22F and their impact on related industries/stocks (continued) Commodity
FY22F outlook
Impact on related industry/stocks
Stock picks
We believe global sugar price will keep increasing in 2022F as global demand recovers strongly after the pandemic, while the world sugar market in the 20212022 crop year is forecasted to be undersupplied with a shortage of 3-4m tons. In addition, compared to the domestic market sugar price in the region (including ASEAN countries and China), Vietnam's sugar price is still at a lower level. Thus, we expect domestic sugar price will increase following the global uptrend in 2022F. Besides, from Sep 2021, the Ministry of Industry and Trade officially investigated the sudden increase in sugar imports from ASEAN countries after Thai sugar was subject to an anti-dumping tax. In our view, anti-dumping tax and investigations of smuggled sugar will keep supporting domestic sugar prices in the coming year.
In our view, sugar producers like QNS can take advantage QNS of the sugar price upward trend and expand GPM of its sugar business as QNS has the second largest scale in sugarcane materials for sugar production. Besides, QNS is also well-positioned to capture the increasing demand domestic sugar. In Jul 2021, QNS has put the refined extra sugar (RE sugar) production line into operation which has a higher selling price than Refined Sugar (RS). In addition, QNS also expects sugarcane input to reach 1.2m tons in 2022F (+40%, per our estimate) as the increase in sugar prices in 2021 will create an impetus for farmers to restore planting sugarcane area. Thus, we forecast sugar revenue to grow 35% yoy in 2022F, contributing 25.6% to QNS’s total revenue. Leading rubber companies will benefit, especially those with high rubber export sales like GVR, PHR.
Rubber
Rubber prices in Asia continued to rise sharphy in 3Q21 owing to a supply deficit. We estimate a 329,000 tons global rubber shortfall in 2021. Rubber's ascent was further supported by the rapid rise in oil prices, as well as the expectation of economic recovery after the Covid-19 pandemic was under control. The averagre export price of natural rubber in 3Q21 increased by 23% yoy. Overall, the average export price of natural rubber in 9M21 increased by 29% yoy. When the energy crisis is under control in China and production activities are restored, we forecast that China will import 2-2.2 million tons of natural rubber to make up the gap between January and April 2022. This is also a factor that helps Vietnam's rubber export prices maintain a high level until the end of 1Q22. Besides, rubber prices will be boosted by oil prices which are forecasted to remain high in 2022.
Companies exporting rice to China will benefit after the pandemic with the expectation that supply chains will recover, freight rates will decrease and demand recovers.
Rice
From January- August, Chinese rice imports volume have doubled from 1.52m tons in 2020 to 3.2m tons in 2021. The reason is that Chinese importers want to make a profit on the basis that the price of China domestic rice is US$585/tons, much higher than the price of high-quality rice is US$445/tons and US$465/tons in Vietnam and Thailand, respectively (data in August 2021). In 2022, USDA forecasts China’s rice import volume will increase 12.5% yoy to 4.5m tons. Meanwhile, Vietnam is the second largest exported to the Chinese market, up to 22% of total China rice imports volume in 2021. We expect Vietnam's 5% broken rice export price in 2022 to decrease slightly but remain high compared to 2015-2019. As the result, Vietnamese rice exporting companies through the Chinese market will benefit in 2022. We expect average selling price (ASP) of fishery products will keep stepping up until 1Q22F thanks to both favourable external and internal environment. In external side, demand is expected to strengthen in 4Q21 and FY21F due to service channel (restaurant, hotel…) which accounts for a large proportion in seafood and fishery product distribution will keep recovering to pre-Covid level. On the other hand, supply is being tightened due to supply chain disruption following some negative impact in short-term such as shortage in raw material and under-full capacity production.
In 2022, when the Covid-19 situation will be under control, VHC the recovery of export markets, the efforts of businesses and farmers should boost the export output and turnover of fishery sector. Moreover, transportation costs are on a downward trend after hiking in 9M21, leading to seafood exporters saving on SG&A cost. These factors will help seafood exporters increase their revenue together with net profit margin, promising a bright time ahead for this sector, especially for the market leaders like VHC.
Sugar
Fishery
GVR, PHR
TAR
Source: VNDIRECT RESEARCH
#2. Infrastructure development will be back to center stage Industrial infrastructure to ride on the new investment wave We see Vietnam speeds up increasing supply to fulfill the growing demand. In 5M21, Vietnam established 25 new industrial parks (IPs), added 7,300ha industrial land area, the highest increase in land area since 2015. As of May 2021, Vietnam has 394 IPs established, with a total industrial land area of 80,900ha (+9.9% vs. end-20). Of which, 286 IPs with 57,300ha industrial land area are in operation, 108 IPs with 23,600ha are under construction, ensuring future supply. We see both large domestic and international developers plan to enter the industrial park market such as Vingroup with two IPs in Hai Phong and www.vndirect.com.vn
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