HAI is a small-cap company with a market cap of USD22mn; it is a leading distributor of foreign branded plant protection products including herbicides, fungicides and insecticides.
- HAI is expecting strong growth in FY15: revenue +56% and NPAT +103% mainly driven by its corn-processing business.
- At the current of VND13,200, HAI is trading at PER 5.9x at company guidance FY15E EPS of VND2,241 (+103% vs. FY14 not reflected the ongoing right issue and strategic issuance yet).

Agrochemical industry outlook: Vietnam imports nearly 100% active elements, 90% chemical addictives and 50% finished agrochemical products. As an agricultural country, Vietnam domestic demand for agrochemicals has been rising drastically proven by total value of imported plant protection products in 7M14 reached USD475mn (avg. of USD67.9mn/mth) vs. USD704mn in full year 2012 (avg. of USD58.7mn/mth). Domestic players’ roles remain merely importing, mixing (as supplier guidance), packaging and distributing.

Branded-products and extensive selling network withstands fierce competition: Currently, there are around 307 agrochemical companies nationwide, classified into two segments (1) branded-product segment including local players being distributors of international agrochemical companies (Dow AgroSciences, Dupont, Syngenta, etc) and (2) generic segment whereby players distribute goods of unknown producers mostly from China. HAI positions itself in the first segment with exclusively distribution contracts signed with suppliers on 32 franchised products, and continuously expand its selling network with 15 distribution branches and 414 agents.

FY14 earnings squeezed. HAI finished the financial year of 2014 (FY14) revenue of VND896.8bn (-2.4% vs FY13, 105.5% target) and NPAT of VND38.5 (-16.8% vs. FY13, 118.9% target). Such deteriorated earnings traced back to the fact that HAI had increased discounts to agents in the 4th quarter of FY13 (Jul/Sep-13) in order to meet management’s targets. Agents hence stocked more to enjoy better pricing leading to Jul/Sep-13 sales surged +47.8% vs. Jul/Sep-12, so demand was weak for the 1st quarter of 2014 and affected the whole year performance.

Agricultural-related diversification. HAI plans to expand its business to corn processing whose output is sold to cattle feed producers. Capex for three processing plants is at VND100bn, financed by the fund raising below. This model is expected to benefit HAI by increasing corn seed sales (FY15 target +8.4% vs. FY14), increasing agrochemicals sales (FY15 target +16.4% vs. FY14), and overall incremental revenue is expected at VND300bn FY15. In capital raising, HAI is executing the issuance of (1) 52.2mn shares via right issue at VND12,500, ex-right date 16 Jan 2015, and (2) 15mn shares for strategic partners.

Positive outlook FY15: As FY14 was a low-base year, we expect HAI to have a robust FY15. Results showed revenue and NPAT rose +96.6% and 12x respectively in the 1Q15 (Oct14-Dec14) vs. Oct13-Dec13; HAI’s fiscal year is Oct-Sep. With a solid strategy to reinforce its sales network, push R&D activities and take on new ventures, HAI set an ambitious FY15 target with VND1,400bn revenue (+56.1% vs. FY14) and VND78bn NPAT (+102.6% vs. FY14).