VIETNAM NATIONAL UNIVERSITY HCMC

INTERNATIONAL UNIVERSITY
SCHOOL OF BUSINESS

COURSE:
COURSE:
INSTRUCTOR:
INSTRUCTOR:

MEMBERS
FINAL REPORT
MEMBERS GROUP
GROUP ::
TOPIC: TRẦN
BINH MINH
TRẦN THỤY
THỤY YẾN
YẾN THU
PLASTIC
THU -- BAFNIU17051
BAFNIU17051
JSC STOCK PRICE
NGUYỄN
NGUYỄN VÕ
VÕ HÀ
HÀ PHƯƠNG
PHƯƠNG -- BAFBIU17032
BAFBIU17032
NGUYỄN
NGUYỄN BẢO
BẢO NGỌC
NGỌC -- BAFNIU17016
BAFNIU17016

1
 Student Research
31/12/2020 PLASTIC INDUSTRY
CÔNG TY CỔ PHẦN NHỰA BÌNH MINH (HSX:BMP)
BINH MINH PLASTIC JOINT STOCK COMPANY (HSX:BMP)
CÔNG TY CỔ PHẦN NHỰA BÌNH MINH (HSX:BMP)
Ticker: BMP Recommendation: BUY

Current Price: 62,700 VND Price Target: 85,456 VND

EXECUTIVE SUMMARY
Binh Minh Plastic Joint Stock Company (BMP) was formerly known as Binh Minh Plastics
Public-Private Partnership Plant established in 1977 as one of the first state-owned industrial
plastic manufacturing companies in Vietnam, BMP has gradually developed and played a
pioneering position in the plastic pipe industry. BMP specializes in manufacturing hard PVC
pipes, PEHD, fittings of pipes, sprayers for pesticide, protection helmets and other plastic
products. Currently, the company holds 43% of the southern plastic market and accounts for
Market Profile (31/12/2020)
approximately 27.5% of the plastic pipe market share in Vietnam. BMP has been listed and
Current price (VND/share) 62,700
traded on Ho Chi Minh Stock Exchange (HOSE) since 2006.
Max price’s 52 weeks (VND/share) 62,700
Min price’s 52 weeks (VND/share) 40,800
INVESTMENT SUMMARY
Number of listed shares (Shares) 81.860.938
Number of circulating shares 81.860.938 We issue a BUY recommendation with a target price of 85,456
(Shares)
30-day average volume 199.463 VND per share; representing 36% upside from its closing price of
(share/session)
% Foreign ownership 81,07%
62,700 VND on 31st December, 2020. Our valuation is based on a
70/30 mix of the Free Cash Flow to Firm Model and Relative
Market capitalization (billion VND) 4.434
Valuation P/E. Our recommendation lays on the pillars below.
EPS for the last 4 quarters 5.274
(VND/share) The leading position in the southern plastic pipe market, the
PE trailing 10,33x long-standing brand name with high scale and quality ensure
Business Overview BMP holds market share.
Name Expected
CTCP Nhựa Bình Minh
construction growth rate BMP is a market leader in South Vietnam's plastic pipe market,
Address 240 Hậu2019 – 2026
Giang, phường 9, quận 6, thành with the highest market share and plastic consumption year after
phố Hồ Chí Minh
year. By the end of 2020, BMP holds a 43% market share in the
Main Plastic beads PVC, PE
shareholder South, 5% in the North, and 27.5% in Vietnam for plastic pipes. It's
Competitive Leading market share, healthy finances because of two main reasons: (1) a large distribution system (1,900
advantage
Main risk Price volatility of input NVL stores) and (2) traditional brands with a wide range of high-quality
products (44 years).

2

(*) Source: World Bank, BMI forecast
In Ho Chi Minh City, the corporation operates four manufacturing
facilities. With a total capacity of 150,000 tons/year, Ho Chi Minh
City, Binh Duong, Long An, and Hung Yen are meeting the
demand for goods supplied for the national market, boosting
research and development, and diversifying product types and
sizes. Despite intense competition in the plastic pipe business, BMP
was able to successfully maintain its market share against
competitors thanks to its market-leading position.
Demand for construction plastic pipes still grows thanks to
construction growth
Despite a slowdown in the first quarter of 2020 owing to the
epidemic, the construction industry grew by 6.76% by the end of
the year and is predicted to grow again in 2021. In the period of
2020 - 2025, the growth rate of Vietnam's urbanization is forecast
to grow at an average rate of 0.7% per year. As the rate of
urbanization rises, so will the need for housing and infrastructure,
providing a boost to civil construction. The expansion of the civil
construction sector will be the primary driver of the plastic pipe
market. The main segment of BMP's revenue structure is the
residential plastic pipe, which accounts for 93% of the company's
income.
Strong financial performance, stable operating cash flow, and
efficient inventory management
Among the listed building plastic companies, BMP has the highest
profit margin and return on investment (ROE). In addition, BMP
also has a safe capital structure with a low debt ratio and stable
cash flow. With over 44 years of expertise, the firm understands
how to successfully manage its finances and assure a reliable
operating cash inflow continuously. BMP also outperforms the
industry norm in inventory control, with a good inventory turnover
ratio.
3
 BMP'S MARKET SHARE IN VIETNAM
(2020) Business
BMP NTP HSG OTHERS Description
COMPANY
BMP HISTORY
28%
OTHERS
37% In 1977, Binh Minh
Platic was established
from the merger between
NTP Vietnam Chemical Plastic
HSG 23%
13%
Pipe Company (Kepivi)
and Kieu Tinh
Technology Company on
the production of domestic plastic products, pipes, and fittings
spare parts of pipes. In 1986, the company was selected by
UNICEF
(*) as data
Source: Our the first and main supplier of PVC-U plastic pipes,
marking the complete transformation of Binh Minh Plastic's
product structure into the production of industrial and technical
plastic products. In 1994, the company changed its name to Binh
BMP'S MARKET SHARE IN THE SOUTH OF Minh Plastic Company, a state unit under the Ministry of Light
VIETNAM (2020) Industry.
BMP OTHERS On July 11, 2006, the Company's shares were officially traded on
the Vietnam stock market with stock code BMP. On January 2,
2004, after equitization, Binh Minh Plastic Joint Stock Company
officially operated under the trading name Binh Minh Plastic Joint-
Stock Company, abbreviated as BMPLASCO. In 2018, the
43%

57%
4
 company became a member company of SCG Thailand Group - a
leading industrial group in Southeast Asia.
Binh Minh Plastic now accounts for about 43% market share of
plastic pipes and spare parts in the South, 5% in the North, and
28% in the country (according to Source SCG Research). The
company has 4 factories (Ho Chi Minh, Binh Duong, Long An and
Hung Yen) and nearly 1,900 stores across the country. In addition,
(*) Source: Our data the company is also a supplier of plastic pipe products for water
supply businesses, construction and participation in major national
key projects. In 2020, the company's net revenue reached more
than VND 4,337 billion; profit after tax reached nearly 423 billion
dong.

BUSINESS LINE - Product Portfolio:

UPVC pipes and fittings: Hard PVC-U pipes and fittings with
diameters from 20 mm to 630mm for water sector and underground
cable.

HDPE pipes and fittings: HDPE pipes and fittings with diameters
from 16mm to 1,200mm made from high density polyethylene –
PE100. HDPE double-wall corrugated pipes and fittings with
diameters from 110mm to 500mm made from high density
polyethylene (HDPE).

PP-R pipes and fittings: PP-R pipes and fittings with diameters
from 20mm to 160mm made from Polypropylene Copolymer, PP-
R80.

Other products: Agricultural sprayers with capacity from 1 litre, 5

litres, 10 litres in accordance with for bonsai watering or pesticide
spraying.

DEVELOPMENT STRATEGY FROM 2021-

2025:
Becoming the leading company in terms of market share in
consumption volume in Vietnam and in the TOP 3 leading
companies in terms of market share in Southeast Asia.

5

SHAREHOLDER STRUCTURE
The Nawaplastic Industries
Templeton Frontier Markets Fund
Kwe Beteiligungen AG
Other shareholders
34%
54%
5%
6%
(*) Source: Our data
Succeeding in the perfect operation of the entire supply chain
through the application of the 5S management model, economical
lean production, automation application with modern technology.
Maintaining the position of TOP 50 companies with the happiest
workplace in Vietnam
SHAREHOLDER STRUCTURE
Nawaplastic Industries Co. Ltd. (NPI) holding 54.39% capital is the
largest shareholder of the Company at present. In addition,
institutional investor KWE Beteiligungen AG is holding 5.233%.
In addition, BMP also has another major shareholder, FTIF -
Templeton Frontier Markets Fund currently owns 6.25% of the
capital.
List of Senior Executives on the Board of Directors
The leadership team consists of 5 experienced people with Vice
Chairman of the Board of Directors - General Director, Deputy
General Director of Sales, Deputy General Director of Engineering,
Deputy General Director of Finance - Administration, Chief
Accountant Director of the District People's Committee to ensure
they can deliver the best results and an overview of both internal
and external operations.
CORPORATE GOVERNANCE
The company structure includes the Supervisory Board, Board of
Directors, and Board of Management.
Supervisory Board
The Supervisory Board consists of 3 members: 2 people working at
the company and 1 person working at SCG. BMP Company
appoints a Supervisory Board to supervise the operation of the
business and ensure transparency. The Supervisory Board has
maintained communication and compared information notes to
work on practical approaches to accomplish tasks and improve
operational efficiency.
Board of Directors
The Board of Directors consists of 5 members with 15-30 years of
experience: 2 general directors and 3 non-executive individuals.
Most of the BOD members have been with the company for a long
time, so they have a deep understanding of the plastic industry as
well as BMP. They also have experience in the financial sector,
helping BMP make faster and better decisions.
6
 Board of Management
The Board of management consists of 5 executives with 10-30
years of experience. In addition, the General Director of BMP is
Mr. Nguyen Hoang Ngan who has 30 years of experience at the
company. Mr. Ngan is knowledgeable about Vietnam's plastic
industry, accompanies Binh Minh Plastics throughout the process
of product restructuring, investment in technological equipment,
and expansion of the company's scale. He has brought a lot of value
and profits to the company for many years.

Industry Overview and Competitive

Positioning
INDUSTRY OVERVIEW
Urbanization rate 2019-2025
Vietnam's plastic demand increases steadily
In Vietnam, compared to other long-standing industries (such as
mechanical engineering, electricity - electronics, chemicals,
textiles, etc.), the plastic industry is relatively new. However, in
recent years, Vietnam's plastic industry has had strong
development, with an annual increase of 16% - 18%/year (only
after the telecommunications and textile industries), there is a fast
growth rate is close to 100%. With a fast development speed, the
plastic industry is being considered a dynamic industry in the
Vietnamese economy. That strong growth comes from a large
(*) Source: BMI forecast
market, with great potential for development, because Vietnam's
plastic industry is only at the beginning of development compared
to the world and plastic products are promoted and used in all
areas. areas of life.

Export value of construction plastic segment grew strongly

Among export products in the first 9 months of 2020, the
construction plastic segment is the segment with the largest growth
value. The export value of construction plastic products in the first
9 months of 2020 was estimated at US$954 million, up 18% over
the same period. Among construction plastic products, plastic sheet
and film products accounted for the largest proportion of about
55% and grew by 20% in the first 9 months of the year. The reason
is that the demand for products to build isolation and protection
areas increased when the epidemic broke out in the first half of
7
2020. The export value of the remaining two segments of
packaging plastic and household plastic in the first 9 months of
2020 is estimated to reach USD 852 million and USD 463 million,
down 4% and 7% respectively over the same period in 2019.

Policies to support the plastic industry

The government is promoting the production of construction
plastics and engineering plastics. Vietnam's plastic products can be
divided into 4 main groups: packaging plastics (accounting for 38%
of total output), household plastics (29%), construction plastics
(18%), and high-tech engineering plastics ( 15%). According to the
Government's plan to develop the plastic industry in Vietnam by
2025, the plastic industry will be restructured in the direction of
gradually reducing the proportion of packaging and household
plastic, and at the same time increasing the proportion of
construction and engineering plastics.

COMPETITIVE POSITIONING

The industry leader in revenue and net profit

BMP has always maintained its leading position in the South
Vietnam plastic pipe market. BMP currently owns 4 factories with
a total designed capacity of 150,000 tons/year. Despite having the
same consumption capacity as Tien Phong Plastic (NTP), BMP still
has the highest revenue and profit compared to its competitors.
Operating in a highly competitive industry as a market leader,
BMP's revenue will continue to expand in the future.

The value of a traditional brand with high-quality products

BMP currently owns the largest distribution system in the plastic
pipe enterprises in the southern region. BMP's massive distribution
system, combined with its established brand, allows it to maintain a
dominant market position in the South and throughout the country.
BMP strives to improve product quality, and this is how customers
see the company. As a result, BMP is always a major rival of
companies that enjoy this competitive advantage.

Diversify business lines by conducting regular client

requirements research.

8
 To address a variety of consumer requests for plastic pipes, BMP
expanded its business lines. BMP invests every year in researching
and creating new products based on demand or improving
production technology to ensure that it does not lose market share
to competitors. Plastic pipes and accessories are provided by this
company for a variety of applications, including water supply and
drainage, telecommunications, energy, industrial, and civil
construction. Despite its position as the industry leader, BMP is
always learning about the demands of its clients in order to
preserve its development and leadership.

Financial Analysis
2016 2017 2018 2019 2020
Profitability ratio
Profit Margin (%) 18.96% 12.15% 10.91% 9.75% 11.15%
ROA (%) 26.04% 19.56% 18.04% 17.69% 21.11%
ROE(%) 29.10% 19.79% 17.62% 17.18% 21.15%
Activity ratio
Account Receivable Turnover 8.17 9.43 9.89 11.03 15.66
Inventory Turnover 5.59 6.78 6.40 6.56 8.09
Account Payable Turnover 20.08 19.32 20.12 27.67 26.42
Tangible Fixed Asset Turnover 11.13 7.51 6.14 7.11 8.46
Cash Coversion Cycle 91.79 73.67 75.78 75.56 54.63
Solvency ratio
Debt to Equity 6.13% 3.05% 2.79% 2.58% 2.79%
Debt ratio 0.21 0.15 0.13 0.13 0.18
Liquidity ratio
Current ratio 3.68 4.17 5.04 4.20 4.03
Quick ratio 2.89 3.26 3.46 2.93 3.28

Steady growth in difficult times

Net revenue BMP is considered as the enterprise with the best growth in
5000000000 18.00% revenue and profit in the plastic industry. In addition, despite the
4500000000 16.00%
4000000000 14.00%
impact of the Covid-19 epidemic causing many difficulties, BMP
3500000000 12.00% still experienced outstanding growth.
3000000000
10.00%
2500000000
8.00%
2000000000
6.00% Except for 2018, when there was strong competition from many
1500000000
1000000000 4.00% new entrants and exceptionally high input prices, BMP's net
500000000 2.00%
0 0.00%
2016 2017 2018 2019 2020 9
Net revenue Growth rate
 revenue climbed considerably from 2016 to 2020. The lowest
Percentage change (%) growth rate in the last five years was 2.48%, but there are obvious
40.00 signs of recovery with growth rates of 10.66% in 2019 and 8.03%
30.00 in 2020. The plastic pipe manufacturing industry's typical high
20.00
COGS and SG&A are the causes for a modest decline in net profit
after tax between 2017 and 2019. However, in 2020, the company
10.00
restructured its distribution system to improve operational
0.00
2016 2017 2018 2019 2020 efficiency. The company also reduced the proportion of direct sales
-10.00 and transferred part of the shipping costs to distributors. Along
-20.00 with benefiting from low oil prices for input costs, 2020 was a
successful year beyond expectations with a remarkable increase in
-30.00
profit after tax with a growth rate of 24%.
Net revenue Cost of goods sold
Gross profit Net profit after tax
The company's ROE decomposition is also greater than that of
others in the same operational sectors, allowing it to employ equity
financing to support operations and expand the business effectively.
Especially, in 2020, ROA and ROE both increased compared to
previous years mainly because net profit margin increased by 1.5%.
There has been a sufficient high inventory turnover ratio
during 5 years

A suitable high inventory turnover is critical for a manufacturing

Activity ratio firm like BMP to ensure robust sales and the capacity to meet
30 demand. During the period 2016-2020, BMP's inventory turnover
25
20
ratios were consistently higher than the industry average of 4.1.
15 This is a sign of strong inventory management since it shows that
10 the firm is selling things swiftly and that there is always a demand
5
0 for theirs products. However, there is a significant increase in
2016 2017 2018 2019 2020
inventory turnover to 8.09 in 2020 compared to other years. In
Account Receivable Turnover which, inventory value was at VND 397.9 billion, down 12.7%
Inventory Turnover compared to 2019. This shows that the Company may not have
Account Payable Turnover
Tangible Fixed Asset Turnover actively implemented the policy of increasing inventory during the
period when raw material prices were still low.

10
 Cash Flow Financial leverage and liquidity profile are both strong.
1,200,000,000
1,000,000,000 BMP is one of the companies with the lowest debt-to-debt ratio.
800,000,000 BMP's debt-to-equity ratio was stable and decreased slightly over
600,000,000 the years. In 2020, BMP has a strong financial structure with debt
400,000,000 accounting for only 2.8% of the capital structure. BMP hardly uses
200,000,000 debt and the company's long-term debt is only about 23.5 billion
-
2016 2017 2018 2019 2020 over the course of 5 years.
(200,000,000)
(400,000,000)
The cash conversion cycle (CCC) of BMP is 54.63, lower than
(600,000,000)
127.19 of the industry due to lower days receivable outstanding,
(800,000,000)
days inventory outstanding, and days payable outstanding than the
CFO CFI CFF industry’s average. A low CCC suggests that BMP is doing a good
job of turning inventory to cash and shows that the business is
operating very efficiently.

BMP's liquidity ratio is high and stable over the years, with the
current ratio is 4.03 and the quick ratio is 3.28 in 2020, the liquidity
ratio helps BMP easily meet its short-term obligations.

Operating operations provide solid cash flow.

Activity ratio
100.00 BMP has a positive operational cash flow not just in the preceding
80.00 5 years, but also in the preceding 12 years. This was fueled by
60.00 astronomically high revenue in a manufacturing business where
40.00 expenses are vulnerable to fluctuations. BMP also pays close
20.00 attention to its working capital management, ensuring a healthy
0.00 operational cash flow by maintaining regular day payables with
2016 2017 2018 2019 2020
average collection timeframes. In addition, the firm invested in
Days Receivable Outstanding CAPEX that was supported by an equity raising, proving a
Days Payables Outstanding
Cash Coversion Cycle
consistent and sustainable cash flow. BMP is predicted to have a
strong operational cash flow and sufficient cash on hand for any
unexpected events thanks to a conservative approach in the plastic
manufacturing business.

Valuation:
VALUATION PRICE TARGET
Expected Target price: 85,456 VND, presenting 36% upside compared to
  price Percentage closing price at 62,700 VND at
FCFF
valuation
model 96,704 70% 11
Relative
valuation 59,208 30%
Expected
price 85,456 100%
 31/12/2020.
We evaluate BMP based on two methods including Discounted
Free Cash Flow to Firm and
Relative Valuation P/E. Due to the market fluctuation and
underestimation of BMP, different weight of 70 percent in DCF
and 30 percent relative assessment was adopted. In order to
recognize the full potential for BMP in the plastics industry, higher
weighing in DCF is more dependable.

Discounted Free Cash Flow to Firm:

We apply the DCF three-stage growth model. The first stage is

from 2021 to 2025, our revenue forecast is based on the company’s
strategy. The second stage is 10 years since 2026 when growth in
BMP is declining progressively to a terminal. After that, as the
world GDP growth rate, we expect the terminal growth rate to be
1.5 percent.

Discount rate:
We use CAMP to arrive at the risk Cost of Equity. Vietnamese equity risk premium is 9.57% and
VARIABLE VALUE
the risk-free rate for 10-year government bonds is 2.451%. By running five-year regression from
D/E 1.08% Beta was calculated around 0.919 between MBP’s stock return and
01/01/2016 to 31/12/2020,
Debt Value VN-Index return. Also, the risk Cost of Equity and the risk Cost of Debt are estimated at about
55,310,000
5,132,680,81
11.25% and 0.09%, respectively. The tax for BMP company is 20% as tax on government-
Equity Value 3
Debt Value +regulated
Equity manufacturing
5,187,990,81 companies in 2014. Finally, we had WACC at 11.14% for our
Value valuation. 3
Revenue projection:
Debt/(Debt+Equity) 1.07%
Equity/(Debt+Equity) 98.93%
We forecast revenue based on each year's consumer capacity and
Cost of Debt 0.09%
the average sales price. The revenue of BMP consists in the sale of
Cost of Equity 11.25%
finished plastic products, raw materials, and services. We
Beta 0.919910936 concentrated on forecasting the total volume of plastic used for the
Risk-free Rate (VN
10y Bond) 2.45%
production of finished goods and materials sold, as the service
delivery constitutes the insignificant weight in a total sale.
Market Risk Premium 9.57%
Tax rate 20%
WACC 11.14%

12
 In 2021: BMP's plastic
Revenue Forecast(*) Source: Our data pipe products mainly
8,000,000,000 10% serve the civil
9%
7,000,000,000
8%
construction market, so
6,000,000,000
7% the consumption
5,000,000,000 6% demand for this product
4,000,000,000 5%
4% depends on the growth
3,000,000,000
3% of residential and non-
2,000,000,000
2% residential construction
1,000,000,000 1%
0 0% values. In the second
2021F 2022F 2023F 2024F 2025F
quarter of 2021, due to
Revenue Revenue Growth the impact of the
epidemic and the
negative impact of restrictions and distancing measures, delaying
construction projects. Furthermore, Oversupply in the region will
continue due to consumer demand affected by the epidemic in
major consumer markets such as China and India.
BMP's revenues are quite reserved in the 2nd quarter as opposed to
the 2021 plan by the temporary fluctuations in real estate and
construction due to the crisis. The increase of capacity consumption
in 2021, which is over 7000 tons compared to 2020, is forecasted to
increase about just 6 percent. The 6% growth rate is caused by
increasing demand focused at the year-end, same as previous years
when construction demand tends to grow more at the final quarter.
From 2022 to 2025,
(*) Source: Our dataConsumption capacity forecast BMP's medium-term
180,000 9% plan is to safeguard its
160,000 8%
market share from other
140,000 7%
120,000 6%
competitors and seeks
100,000 5% to use its production
80,000 4% capacity to improve the
60,000 3%
capacity of the Long An
40,000 2%
20,000 1% branch by 7,000-11,000
0 0% tons annually. In the
2021F 2022F 2023F 2024F 2025F
meantime, Vietnam will
Consumption capacity (ton) control the corona
% Growth rate
crisis, with BMP
expected to recover in sell growth by 2022. Due to distinct
competitive benefits like long-term brand equity, excellent product
quality, and system There is a well-restructured distribution system
across the country. We anticipate that the BMP sales will increase
13
 consumption capacity in a more stable growth period by an average
of 7 percent per year. This is corresponding to construction growth,
and as a market leader, a 7% in consumption growth is not too high
but enough to fulfill the demand for plastic pipes.
(*) Source: Our data The company began to reduce revenue from 2018 due to the harsh
competitive environment, but the following years have begun to
soften. BMP is on the way to regaining market share, actively
investing in the public in the coming years, and long-term
efficiency improvement initiatives such as product quality
improvement, automation, etc. Therefore, we believe that BMP is
improving.

Capital expenses and depreciation forecast.

The factory began operation in 2017 in the second phase, with a
planned capacity of 20,000 tonnes/year. In 2020, they have
invested 195 billion VND in production equipment. We expect
BMP to be able to produce four available factories between 2021
and 2025. Moreover, CAPEX investments are made principally
through investment in plastic manufacturing equipment that uses
new technology. We are therefore planning to increase CAPEX in
accordance with the previous latest years. Depreciation is in
proportion to fixed-asset investment.

Loan projection:
In 2018 and 2019, BMP has almost no long-term debt and a very
small amount of short-term debt. Based on the company’ strategy,
there will be no huge investment in the future. We expect BMP to
remain such a low weight of loan in its capital structure.

Relative valuation:

We take an average P/E of several domestic companies in the same sector as BMP to make
relative assessments because it can account for the average P/E of the plastic industry in
Vietnam.

Relative value:
COMPANY PE Our BMP target price assessment is VND 59 208 based on this
BMP 9.81 methodology.
NTP 9.48
HSG 8.54 14

Average PE 9.27

(*) Source: Our data
Exchange rate (USD/VND)
(*) Source: Investing.com
Risk to Target Price:
We did not include dramatic declines in the plastics industry regard
to the production of tubes in our valuation assumptions. In addition,
in the event any unexpected crisis has a negative impact or changes
occur in the selling structure of BMP on the plastic pipe market,
our BUY recommendation must be carefully reconsidered.
We believe the effect of Terminal growth and WACC on our target
price assessment should be demonstrated by sensitivity analysis at
each 0.5-point adjustment. We find that the target BMP price is still
higher than the current one in the worst-case analysis.
Investment Risks
Market risks: High
The demand for plastic pipes is determined by the building
industry's growth rate, which leads to a reliance on real estate. The
company's growth will be influenced by signs of a real estate
slump. Furthermore, the plastics sector is quite competitive. To stay
on top of the market, BMP continues to employ efficient strategies
and management.
Exchange rate risks: Medium
Because the majority of raw materials are acquired from a domestic
provider, TPC-Vina, BMP is unaffected. However, due to the
importation of some raw materials and machinery, the corporation
is nevertheless vulnerable to exchange rate changes.
Risks of input cost fluctuations: High
Input plastic materials account for a large proportion of about 74%
of BMP's cost structure, so fluctuations in plastic raw material
prices will affect BMP's profit margin. Because of the large
variations in oil prices, the price of plastic materials may fluctuate a
lot in the long run, therefore it needs to be regularly monitored.
Dependence on suppliers risks: High
Both BMP and TPC Vina, which supplies 50 percent of BMP's
PVC materials, are currently members of the Thai SCG group.
Reliance on a related party supplier such as TPC Vina can
15
 potentially hidden risks. But this also gives BMP the great
advantage of having less volatile input costs than other competitors.

Risks of counterfeit goods: Low

BMP still faces the threat of counterfeit goods, which has an impact
on sales and customer loyalty to BMP's products. To mitigate the
problem, the company places anti-counterfeiting stamps on each
product and informs customers on how to tell the difference
between authentic and phony stamps.

APPEDIX 1: Porter’s 5 forces

Industry competitors: High.
BMP's plastic pipe products are mostly used in civil construction, therefore the demand is driven
by increases in the value of the residential and non-residential buildings. In the first quarter of
2020, due to the impact of the epidemic and the negative impact of restrictive and distancing
measures, construction projects were delayed. The two main competitors of BMP mentioned
include Tien Phong Plastic Joint Stock Company (NTP) and Hoa Sen Group (HSG). In 2020,
BMP currently accounts for a 27.5% market share of Vietnam's plastic industry. Meanwhile,
NTP accounts for 22.5% of our country's market share, and HSG holds nearly 13.1%. In
particular, HSG is considered a big competitor when offering extremely discounted products.

Bargaining power of buyers: Medium.

For plastic products, buyers can choose the appropriate price of the products through the price
list listed on the companies' websites. However, after 44 years of operation, Binh Minh Plastics
has built a brand of traditional plastic pipes, especially in the field of PVC civil pipes. Therefore,
BMP can take advantage of negotiation to offer a suitable price for both parties.

Bargaining power of suppliers: High.

Plastic firms' input costs are frequently volatile, as they are affected by other commodities like
oil, natural gas, and coal. TPC-Vina, one of the leading PVC manufacturers, currently supplies
roughly half of BMP's PVC material. As a result, TPC-Vina has considerable bargaining power
over the rates they charge.

The threat of substitution: Low.

Plastic pipe products are the most cost-effective when compared to equivalent functional
products. It means that the risk of being replaced is low. Furthermore, due to their convenience,
Vietnamese customers are accustomed to plastic pipes in construction. BMP is also a provider of

16
 plastic pipes to the water supply and construction industries and a participant in large national
projects. It will take a long time or maybe even no products can replace.

The threat of entry: Low.

By the end of 2020, BMP has approximately 1,900 outlets across the country, ensuring quick and
prompt delivery of items in response to consumer requests. In addition, the company is a supplier
of plastic pipes to businesses in the water supply and construction industries, and it participates
in large national projects. To break into this business and achieve a significant market share,
you'll need a lot of money to spend on production technologies, notably raw materials. To enter
into this business and achieve a significant market share, enterprises need a lot of money to
spend on production technologies, notably raw materials. Domestic plastic manufacturers must
import more than 70% of their raw materials, and raw material prices around the world are
frequently volatile. As a result, a sharp rise or fall in the selling price of imported input materials
will have a detrimental impact on the operation of plastic businesses.

APPEDIX 2: Income Statement (in million)

INCOME STATEMENT 2016 2017 2018 2019 2020 2021F 2022F 2023F 2024F 2025F
1. Revenue 3,678,351,053 4,056,607,554 4,129,972,734 4,342,954,954 4,700,439,809 5,124,667,146 5,534,632,942 5,922,050,618 6,336,587,532 6,780,142,030
2. Deduction from revenue 369,607,443 231,948,887 210,335,296 5,615,543 14,799,482 16,135,175 17,425,965 18,645,762 19,950,944 21,347,490
3. Net revenue 3,308,743,610 3,824,658,667 3,919,637,438 4,337,339,411 4,685,640,326 5,108,531,971 5,517,206,976 5,903,404,856 6,316,636,587 6,758,794,540
Revenue Growth 15.59% 2.48% 10.66% 8.03% 9.0% 8% 7% 7% 7%
4. Cost of goods sold 2,248,176,460 2,901,883,582 3,047,590,783 3,349,334,639 3,438,658,560 3,846,931,798 4,154,680,654 4,445,503,324 4,756,683,580 5,089,646,454
% of Revenue 67.95% 75.87% 77.75% 77.22% 73.39% 75% 75% 75% 75% 75%
5. Gross profit 1,060,567,151 922,775,085 872,046,655 988,004,771 1,246,981,766 1,261,600,173 1,362,526,322 1,457,901,532 1,559,953,008 1,669,148,086
6. Financial income 48,978,173 24,481,735 25,106,601 37,121,320 78,259,661 78,259,661 78,259,661 78,259,661 78,259,661 78,259,661
7. Financial expenses 41,507,236 97,838,322 105,484,986 110,971,230 123,875,152 118,776,776 128,197,896 137,097,537 146,620,153 156,809,352
Of which: Interest expenses 3,396,590 1,262,424 292,428 125,174 50,844 678,853 652,314 623,917 593,533 561,021
Other expense 38,110,646 96,575,898 105,192,558 110,846,056 123,824,308 118,097,923 127,545,582 136,473,620 146,026,620 156,248,331
8.Share of associates and joint ventures' result 494,078 453,163 1,071,407 1,497,364 1,672,608 1,672,608 1,672,608 1,672,608 1,672,608 1,672,608
9. Selling expenses 166,921,965 135,639,590 165,853,774 270,352,327 485,053,580 423,626,395 457,515,880 489,541,444 523,808,797 560,474,865
S/Revenue 5.04% 3.55% 4.23% 6.23% 10.35% 8.29% 8.29% 8.29% 8.29% 8.29%
10. General and administrative expenses 115,282,372 124,418,207 97,832,604 116,704,323 63,737,865 103,472,548 111,750,199 119,572,579 127,942,526 136,898,369
G&A/Revenue 3.48% 3.25% 2.50% 2.69% 1.36% 2.03% 2.03% 2.03% 2.03% 2.03%
11. Operating profit 786,327,829 589,813,865 529,053,299 528,595,576 654,247,438 695,656,724 744,994,616 791,622,242 841,513,801 894,897,769
12. Other income 384,684 565,798 1,132,541 973,387 2,407,628 2,407,628 2,407,628 2,407,628 2,407,628 2,407,628
13.Other expenses 2,727,583 7,422,963 265,182 291,490 115,030 115,030 115,030 115,030 115,030 115,030
14. Other profit (2,342,898) (6,857,165) 867,359 681,897 2,292,597 2,292,597 2,292,597 2,292,597 2,292,597 2,292,597
Share of associates and joint ventures' result 0 0 0 0 0
15. Profit before tax 783,984,931 582,956,701 529,920,658 529,277,473 656,540,035 697,949,322 747,287,214 793,914,840 843,806,399 897,190,367
16. Current corporate income tax expenses 133,538,243 144,928,431 89,704,488 109,648,608 127,770,009 139,589,864 149,457,443 158,782,968 168,761,280 179,438,073
Tax Rate 17.03% 24.86% 16.93% 20.72% 19.46% 20.00% 20.00% 20.00% 20.00% 20.00%
17. Deferred income tax expenses 23,042,205 (26,666,716) 12,605,983 (3,137,432) 6,184,454 6,184,454 6,184,454 6,184,454 6,184,454 6,184,454
18. Net profit after tax 627,404,483 464,694,986 427,610,188 422,766,297 522,585,572 552,175,003 591,645,317 628,947,418 668,860,665 711,567,840
19. Earnings per share (VND) 13,796 5,677 5,224 5,164 6,384 6.75 7.23 7.68 8.17 8.69
Book value per share 50,516 29,918 29,973 30,164 30,192
Price per share 191 85.6 52.6 45.2 62.6 368,374,221 368,374,221 368,374,221 368,374,221 368,374,221
D&A 87,290,025 98,883,259 172,420,049 187,572,489 208,499,822
EBITDA 874,671,546 683,102,384 702,633,135 716,975,136 865,090,701
Number of shares outstanding 45,478,480 81,860,938 81,860,938 81,860,938 81,860,938
Dividend 368,374,221 368,374,221 368,374,221 368,374,221 368,374,221 368,374,221
EBIT 780,588,341 581,694,277 529,628,230 529,152,299 656,489,191 698,628,174 747,939,528 794,538,757 844,399,931 897,751,389

17
BALANCE SHEET 2016 2017 2018 2019 2020 2021F 2022F 2023F 2024F 2025F
ASSETS

18
APPEDIX 3: Balance sheet (in million)

19
 APPEDIX 4: Statement of Cash Flows (in million)
STATEMENT OF CASH FLOW 2016 2017 2018 2019 2020 2021F 2022F 2023F 2024F 2025F

I. CASH FLOWS FROM OPERATING ACTIVITIES

1. Profit before tax 783,984,931 582,956,701 529,920,658 529,277,473 656,540,035 697,949,322 747,287,214 793,914,840 843,806,399 897,190,367
2. Adjustments for:
Depreciation of fixed assets and properties investment 87,290,025 98,883,259 172,420,049 187,572,489 208,499,822 200,919,770 217,672,545 235,689,790 254,962,137 275,586,782
(Reversal of provisions)/provisions 1,828,607 25,195,679 14,508,205 36,221,452 (24,344,146) (23,492,876) 0 0 0 0
Foreign exchange (gain)/loss from revaluation of monetary
(92,015) 10,467 (158,282) 10,704 (106,553) 0 0 0 0 0
items denominated in foreign currencies
Loss/(profit) from investment activities (48,300,967) (24,610,483) (23,845,520) (37,868,577) (80,017,186) 0 0 0 0 0
Interest expense 3,396,590 1,262,424 292,428 125,174 50,844 678,853 652,314 623,917 593,533 561,021
Interest income and dividends - - - - -
Allocation of goodwill - - - - -
Adjustments for - - - - -
3. Operating profit before changes in working capital 828,107,171 683,698,047 693,137,539 715,338,715 760,622,818 876,055,069 965,612,073 1,030,228,547 1,099,362,068 1,173,338,171
(Increase)/decrease in receivables (132,804,412) 213,619,238 (144,260,944) 284,887,410 108,167,505 (10,646,075) (35,280,621) (19,999,291) (29,169,358) (27,054,205)
(Increase)/decrease in inventories (142,364,511) 79,279,381 (210,951,274) 127,253,822 69,432,569 (128,805,335) (42,022,047) (39,710,834) (42,490,592) (45,464,934)
Increase/(decrease) in payables (other than interest,
32,260,640 27,506,320 (67,651,915) 8,170,190 175,120,963 (166,753,270) 20,422,488 22,826,344 22,369,909 25,034,841
corporate income tax)

(Increase)/decrease in prepaid expenses (69,150) (24,221) (12,121,296) (17,028,788) (20,196,707) 4,063,884 0 0 0 0

Changes in available for sale securities - - - - -
Interest paid (3,625,875) (4,716,298) (574,653) (388,776) (171,665) (678,853) (652,314) (623,917) (593,533) (561,021)
Corporate income tax paid (127,206,015) (179,979,226) (89,846,097) (105,917,988) (121,475,125) (145,774,318) (155,641,897) (164,967,422) (174,945,734) (185,622,527)
Other receipts from operating activities - - - - -
Other payments for operating activities (47,523,072) (77,788,721) (44,803,467) (48,550,617) (52,922,112) (4,063,884) 0 0 0 0

NET CASH FLOWS FROM OPERATING ACTIVITIES 406,774,776 741,594,519 122,927,891 963,763,970 918,578,246 423,397,218 752,437,683 827,753,427 874,532,761 939,670,325

II. CASH FLOWS FROM INVESTING ACTIVITIES

1. Payment for fixed assets, constructions and other long-

(315,030,879) (416,011,183) (97,991,754) (208,549,627) (96,053,115) (162,898,309) (175,005,216) (187,750,095) (200,627,715) (214,813,047)
term assets

2. Receipts from disposal of fixed assets and other long-

170,363 9,091 336,818 375,036 668,095 0 0 0 0 0
term assets
3. Loans, purchases of other entities' debt instruments - - - (506,000,000) (514,000,000) 0 0 0 0 0
4. Receipts from loan repayments, sale of other entities'
180,000,000 40,000,000 250,000,000 - - 0 0 0 0 0
debt instruments

5. Payments for investment in other entities (53,040,000) - - - - 0 0 0 0 0

6. Collections on investment in other entities - - 437,500 - - 0 0 0 0 0
7. Dividends, interest and profit received 43,265,880 24,144,618 22,799,473 22,857,074 51,456,576 0 0 0 0 0
8. Increase/(Decrease) in term deposit - - - - - 0 0 0 0 0
9. Purchases of minority shares of subsidiaries - - - - - 0 0 0 0 0
10. Other receipts from investing activities - - - - - 0 0 0 0 0
11. Other payments for investing activities - - - - - 0 0 0 0 0

NET CASH FLOWS FROM INVESTING ACTIVITIES (144,634,636) (351,857,474) 175,582,036 (691,317,517) (557,928,443) (162,898,309) (175,005,216) (187,750,095) (200,627,715) (214,813,047)

III. CASH FLOWS FROM FINANCING ACTIVITIES

1. Receipts from equity issue and owner's capital

- - - - - 0 0 0 0 0
contribution
2. Payment for share repurchases - - - - - 0 0 0 0 0
3. Proceeds from borrowings 67,562,000 2,565,000 270,187 980,000 220,000 (1,932,182) (2,086,754) (2,232,824) (2,389,119) (2,556,355)
4. Principal repayments (22,670,000) (47,245,000) (4,517,187) (3,835,187) (680,000) 0 0 0 0 0
5. Repayment of financial leases - - - - - 0 0 0 0 0
6. Dividends paid, profits distributed to owners (272,870,880) (304,705,327) (327,443,752) (368,374,221) (478,067,878) (368,374,221) (368,374,221) (368,374,221) (368,374,221) (368,374,221)
7. Other receipts from financing activities - - - - - 0 0 0 0 0
8. Other payments for financing activities - - - - - 0 0 0 0 0

NET CASH FLOWS FROM FINANCING ACTIVITIES (227,978,880) (349,385,327) (331,690,752) (371,229,408) (478,527,878) (370,306,403) (370,460,975) (370,607,045) (370,763,340) (370,930,576)

Net cash flows during the period 34,161,260 40,351,719 (33,180,825) (98,782,955) (117,878,075) (109,807,494) 206,971,492 269,396,287 303,141,706 353,926,701
Cash and cash equivalents at beginning of the period 370,744,808 404,984,303 445,325,555 412,303,012 313,509,353 195,737,830 85,930,336 292,901,827 562,298,114 865,439,820
Exchange difference due to re-valuation of ending balances 78,234 (10,467) 158,282 (10,704) 106,553

Cash and cash equivalents at end of the period 404,984,303 445,325,555 412,303,012 313,509,353 195,737,830 85,930,336 292,901,827 562,298,114 865,439,820 1,219,366,522

20
 APPEDIX 5: Free Cash Flow to the Firm calculation and Three-
stage FCFF Valuation Model (in thousand)
VARIABLE VALUE
D/E 1.08%
Debt Value 55,310,000
Equity Value 5,132,680,813
Debt Value + Equity Value 5,187,990,813
Debt/(Debt+Equity) 1.07%
Equity/(Debt+Equity) 98.93%
Cost of Debt 0.09%
Cost of Equity 11.25%
Beta 0.919910936
Risk-free Rate (VN 10y Bond) 2.45%
Market Risk Premium 9.57%
Tax rate 20%
WACC 11.14%

VALUATION PRICE TARGET

Expected price Percentage
FCFF valuation model 96,704 70%
Relative valuation 59,208 30%
Expected price 85,456 100%
Current price 62,700
Upside 36%

2021E 2022F 2023F 2024F 2025F 2026F - 2036F

EBIT*(1-Tax rate) 558,902,540 598,351,622 635,631,005 675,519,945 718,201,111
Depreciation 200,919,770 217,672,545 235,689,790 254,962,137 275,586,782
Changes in WC (302,140,795) (56,880,179) (36,883,780) (49,290,041) (47,484,298)
CAPEX (162,898,309) (175,005,216) (187,750,095) (200,627,715) (214,813,047)
FCFF 294,783,205 584,138,772 646,686,920 680,564,326 731,490,549
Terminal value 7,705,620,767 2,271,047,738 10,708,159,053
Present value of FCFF 265,247,041 472,946,105 471,126,472 446,128,965 6,316,170,772

21
 APPEDIX 6: Revenue Forecast
2016 2017 2018 2019 2020 2021F 2022F 2023F 2024F 2025F
Total sales from finished goods and materials 3,678,273,228 4,056,458,969 4,129,914,277 4,342,860,994 4,700,439,808 5,124,572,440 5,534,538,235 5,921,955,911 6,336,492,825 6,780,047,323
Consumption capacity (ton) 82,052 94,110 94,582 98,500 110,834 117,484 126,883 135,765 145,268 155,437
% Growth rate 14.70% 0.50% 4.14% 5.9% 6% 8% 7% 7% 7%
Selling price (VND) per kg 44,829 43,103 43,665 44,090 42,410 43,619 43,619 43,619 43,619 43,619

2016 2017 2018 2019 2020 2021F 2022F 2023F 2024F 2025F
Revenue 3,678,351,053 4,056,607,554 4,129,972,734 4,342,954,954 4,700,439,809 5,124,667,146 5,534,632,942 5,922,050,618 6,336,587,532 6,780,142,030
Deduction from revenue 369,607,443 231,948,887 210,335,296 5,615,543 14,799,482 16,186,138 17,481,005 18,704,654 20,013,959 21,414,915
Net revenue 3,308,743,610 3,824,658,667 3,919,637,438 4,337,339,411 4,685,640,326 5,108,481,009 5,517,151,937 5,903,345,964 6,316,573,573 6,758,727,114
Revenue Growth 15.59% 2.48% 10.66% 8.03% 9% 8% 7% 7% 7%

Revenue from sale of goods+ materials and rendering of services:

1. Sales of finished goods and materials 3,678,273,228 4,056,458,969 4,129,914,277 4,342,860,994 4,700,439,808 5,124,572,440 5,534,538,235 5,921,955,911 6,336,492,825 6,780,047,323
% sales 99.998% 99.996% 99.999% 99.998% 100.000% 99.998% 99.998% 99.998% 99.999% 99.999%

2. Sales of services 77,825 148,585 58,457 93,960 94,707 94,707 94,707 94,707 94,707 94,707
% sales 0.002% 0.004% 0.001% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002%

22
 APPEDIX 7: Loan
2016 2017 2018 2019 2020 2021F 2022F 2023F 2024F 2025F
Interest Rate 4.05% 1.51% 0.49% 0.22% 0.09% 1.27% 1.27% 1.27% 1.27% 1.27%
Interest Expense 3,396,590 1,262,424 292,428 125,174 50,844 678,853 652,314 623,917 593,533 561,021
Total Debt 106,159,916 61,312,187 58,625,187 55,770,000 55,310,000 53,377,818 51,291,064 49,058,240 46,669,120 44,112,765

Short term loans 2016 2017 2018 2019 2020 2021F 2022F 2023F 2024F 2025F
Begin 105,992,187 61,312,187 58,625,187 55,770,000 55,310,000 53,377,818 51,291,064 49,058,240 46,669,120
Net Borrowing (44,680,000) (2,687,000) (2,855,187) (460,000) (1,932,182) (2,086,754) (2,232,824) (2,389,119) (2,556,355)
% of Net Sales -1.17% -0.07% -0.07% -0.01% -0.038% -0.038% -0.038% -0.038% -0.038%
End 105,992,187 61,312,187 58,625,187 55,770,000 55,310,000 53,377,818 51,291,064 49,058,240 46,669,120 44,112,765
% change

Long term Loan 2016 2017 2018 2019 2020 2021F 2022F 2023F 2024F 2025F
Begin - 167,729 - - - - - - - -
Net Borrowing 167,729 (167,729) - - - - - - - -
% of Net Sales 0.01% 0.00% 0.00% - - - - - - -
End 167,729 - - - - - - - - -
% change

23