■ Vinamilk (VNM)’s revenue grew 17% in FY16, while net profit rose 20% yoy, driven by a 19% domestic revenue growth.
■ Gross margin expanded by 170bp and reached a record-high last year, owing to a 10% decline in Skim Milk Powder (SMP) input costs to about US$2,000/ton.
■ VNM’s new accounting policy for selling expenses boosted its reported gross margin by nearly 560bp, in addition to the 170bp bump from lower SMP prices.
■ The company aims for a 70% share of Vietnam’s liquid milk market by 2020.
■ We maintain our Hold rating on VNM, but trim our target price, which is still based
on 22x FY17 P/E, a 10% discount to VNM’s regional peers.