Launching VF6 And VF7 Models And Expanding To Indonesia Will Strengthen Future EV Presence

Key Takeaways

• VinFast's strategic expansion into markets like Vietnam, North America, Indonesia, and the Philippines could drive revenue growth by capturing demand for affordable EVs.
  
• Efforts in cost optimization and expanding production capabilities are likely to enhance net margins and improve competitiveness through reduced manufacturing costs.
  
• The company's dependence on the Vietnamese market, cash burn, and international expansion challenges could threaten its financial stability and growth prospects.

Catalysts

Engages in the design and manufacture of electric vehicles (EV), e-scooters, and e-buses in Vietnam, Canada, and the United States.

• VinFast's expansion in Vietnam, with a goal of capturing a significant market share by leveraging increasing demand for affordable models like the VF3 and VF5, is likely to boost future revenue as domestic EV adoption accelerates.
  
• The introduction of VinFast's VF9 model in North American markets and plans for further expansion with models VF6 and VF7 indicate potential revenue growth from diversifying product offerings and addressing gaps in the market for affordable EVs.
  
• Strategic moves into Indonesia and the Philippines, including the implementation of a battery leasing model and GSM service, position VinFast to tap into emerging markets with large growth potential, potentially improving net margins and earnings through increased unit sales and brand presence.
  
• Continuous cost optimization efforts, including reducing bill of material costs and streamlining production processes, are expected to enhance net margins by decreasing operational expenses and improving gross margins.
  
• The planned opening of new CKD facilities in Vietnam, Indonesia, and India aims to enhance VinFast's production capabilities and competitiveness, potentially bolstering earnings by reducing manufacturing costs and increasing output capacity.

VinFast Auto Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming VinFast Auto's revenue will grow by 72.7% annually over the next 3 years.
• Analysts are not forecasting that VinFast Auto will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate VinFast Auto's profit margin will increase from -9.4% to the average US Auto industry of 6.0% in 3 years.
• If VinFast Auto's profit margin were to converge on the industry average, you could exepct earnigns to reach ₫11455.0 billion (and earnings per share of ₫4893.21) by about January 2028, down from ₫-3515.8 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 53.6x on those 2028 earnings, up from -65.7x today. This future PE is greater than the current PE for the US Auto industry at 17.3x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 18.2%, as per the Simply Wall St company report.

VinFast Auto Future Earnings Per Share Growth

Risks

• The company relies heavily on its home market of Vietnam, which contributed around 90% of its total deliveries in the first nine months of 2024. Over-reliance on a single market may impact revenue if demand fluctuates.
  
• VinFast's significant cash burn and reliance on capital injection from Vingroup and its founder indicate potential liquidity issues, which could affect its long-term financial stability and earnings.
  
• The gross loss margin, while improving, remains negative at -24%, suggesting ongoing struggles with profitability that might affect future net margins.
  
• Although the company achieved delivery milestones, it still faced a backlog, highlighting potential production capacity constraints that could hinder revenue growth.
  
• The company's expansion into international markets like North America and Indonesia involves risks, including local competition, regulatory challenges, and production scale-up, potentially impacting future revenue and profit margins.

Valuation

• The analysts have a consensus price target of $6.33 for VinFast Auto based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $8.0, and the most bearish reporting a price target of just $5.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₫191984.4 billion, earnings will come to ₫11455.0 billion, and it would be trading on a PE ratio of 53.6x, assuming you use a discount rate of 18.2%.
• Given the current share price of $3.94, the analyst's price target of $6.33 is 37.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.