Recently, SSI Research published an analysis report stating that the auto industry will have a positive outlook in 2022. Accordingly, the report emphasizes that automobile demand may continue its strong upward trend. Unexpectedly, one company involved in movers and agricultural machines has benefited from this trend: Motor and Agricultural Machinery Corporation (VEAM).
Get rich thanks to Honda, Toyota, Ford
VEAM is a state-owned enterprise specializing in the production of agricultural machinery, established on May 12, 1990, under the Ministry of Industry and Trade. Parent company VEAM currently invests capital in 25 units including affiliated units (branches), subsidiaries and associated companies. The main business lines of this company are manufacturing, assembling and trading automobiles, casting machine parts, and trading. In addition, VEA makes long-term financial investments in enterprises in the field of engines and agricultural machines; supporting industry; auto and Moto.
However, the majority of VEAM’s profits come from leading affiliated companies in the field of motorcycle and automobile manufacturing in Vietnam, including Honda Vietnam, Toyota Vietnam and Ford Vietnam..
VEAM currently owns 30% of shares in Honda Vietnam, 25% in Ford Vietnam, and 20% in Toyota Vietnam. These are enterprises operating in the field of automobile and motorbike manufacturing and are occupying the leading market share in Vietnam. According to VnDirect’s assessment, the business situation of these auto giants has grown very well in recent years because they have brought great profits to VEAM.
Specifically, in 2019 the profit shared from the joint ventures and associates of this corporation reached VND 7,126 billion, in 2020 it is VND 5,124 billion. This recognition accounted for more than 90% of VEAM’s pre-tax profit.
In addition, VEAM also has 4 companies specializing in manufacturing mechanical products to supply major partners to produce Honda, Yamaha, and Piaggio motorcycles.
This corporation is also a business with safe financial status. For several years, VEAM always maintains from 4,000-16,000 billion in cash and short-term investments, equivalent to 38-51% of total assets.
Financial revenue from bank deposits also reached more than 900 billion VND in 2019 and 2020 and decreased to more than 700 billion VND in 2022. VEAM also maintains an attractive dividend policy when it always pays cash dividends. high rate 40-50%.
Automotive market potential
Vietnam’s auto market has great growth potential, the car ownership rate per capita is still much lower than other markets in Asia. According to Statista, only 5% of the Vietnamese population owns a car in 2020, while this figure in Thailand is 52%. The rising middle class and the cooling of the Covid-19 epidemic are predicted by VnDirect to boost auto sales in the period 2022-2024.
Accordingly, after the measures to control the Covid-19 epidemic were loosened, in November 2021, the sales of the whole market reached 38,656 vehicles, up 30% compared to October 2021, up 6% compared to the previous month. 11/2020. This improvement strengthens the resilience of auto demand in Vietnam, which has been supported by a growing middle class. With the assumption that the disruption caused by the Covid-19 epidemic will cool down, VnDirect forecasts that car sales will grow strongly at double digits in the next 3 years.
On the other hand, on December 26, 2021, the Government issued Decree No. 103/2021/ND-CP related to reduce the registration tax for cars manufactured and assembled in the country. Accordingly, the car registration tax will be reduced by 50% from December 1, 2021 to the end of May 31, 2022. Previously, on July 20, 2020, the Government also issued Decree 57 on import taxes, including reducing import taxes on raw materials and components that cannot be produced domestically for production, processing (installation and assembly). assembled) to 0%. Supportive policies from the Government have encouraged automakers such as Honda and Ford to plan to assemble many models in Vietnam, including Honda’s CRV and Ford’s Ford Ranger.
Hidden number of VinFast
Because of the potential market, it is inevitable that VEAM’s affiliated companies have recently encountered competition from imported sources and other auto businesses, especially Vinfast.
However, SSI Research also believes that VinFast will stop producing gasoline cars by the end of 2022 to focus on electric cars, creating opportunities for many other car manufacturers. Currently, VinFast’s petrol cars account for nearly 11% of the domestic auto market share, thus creating many opportunities for other car manufacturers to develop and take the leading position. In addition, because Vinfast is one of the companies with high price competitiveness, the departure of this brand from the market can significantly reduce the competitive pressure on other car manufacturers.
However, with the recent increase in gasoline prices, the need to shift to VinFast’s electric cars can also change the market landscape in the long term.
In 2022, SSI estimates that automobile sales of VEAM’s joint venture companies will increase by 16%, while Honda’s motorcycle sales are estimated to increase by 10% after 2 consecutive years of decline.
A prolonged shortage of chips could significantly increase the profits of the joint venture. In 2022, SSI Research estimates joint venture profits (Honda, Toyota, Ford) to increase 13% after a -21% decline in 2020 and a slight 5% increase in 2021. Profit margin per vehicle sold could increase growth in the face of reduced market competition, and the lack of vehicle supply due to chip shortages could be the key driver for VEAM’s automotive joint ventures to be more profitable in this short-term trend.
at Blogtuan.info – Source: autopro.com.vn – Read the original article here
