CERAMIC TILES INDUSTRY REPORT 2020 - VCBs
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CERAMIC TILES INDUSTRY
REPORT 2020CERAMIC TILES INDUSTRY REPORT
2020
CERAMIC TILES INDUSTRY REPORT
VIET NAM CERAMIC GROWTH FROM URBAN DEVELOPMENT AND HOUSING DEMAND
TILES INDUSTRY
WORLD CERAMIC TILES INDUSTRY
POSITIVE According to Ceramic World Review (CWR) data, based on the growth rate of output of the tiles
TABLE OF CONTENTS industry in the past 40 years, along with the growth prospect of the world construction industry, we
evaluate the world ceramic tiles industry is in the neutral phase.Despite that the level of growth in
Ceramic Tiles Industry
each region of the world varies significantly. Africa and Asia remained the main growth engines in
Life cycle of world ceramic 2 global demand. The regions of North America and Australia seem to have gradually entered a period
tiles industry of neutrality. Meanwhile, the European region has shown signs of entering a downturn in demand for
World supply and demand of 3 ceramic tiles with a slowdown in 2008-2018 CAGR was -0.4%/year.
ceramic tiles industry in recent
years & Forecast 2020 In the short and medium term, we forecast the growth of the world ceramic tiles industry is likely to
maintain CAGR growth of 2020-2022 at less than 4% from slowdown of the world economic growth.
Vietnam Ceramic Tiles
Especially the number one manufacturer - China is still facing the risk of declining production when
Industry
running into difficulties: (1) forecasting of a slowdown in domestic growth, (2) tightening activities
History of establishment and 7 on environmental issues from the Government and (3) tougher exports by trade war (Chinese tiles are
development of stages of
taxed at a rate 100-222% by US customs and increasing in anti-devaluation tariff by the Middle East
Vietnam ceramic tiles industry
countries (July 2016), the Philippines (July 2016) and Argentina (July 2016). According to CWR, in
Life cycle of Vietnam ceramic 8
2018, more than 137 Chinese ceramics manufacturer stopped operating.
tiles industry
Value chain of Vietnam 10 In this context, Africa and North America are expected to remain the main drivers of the world
ceramic tiles industry ceramic tiles industry growth when developing countries in Africa will continue to develop
Supply and demand of 18
commercial construction projects and grow housing demand. Besides, increasing demand from
Vietnamese ceramic tiles & construction reinvestment in North America and Europe in the last three years.
Forcast 2020
VIETNAM CERAMIC TILES INDUSTRY
Stock Recommendations
The growth rate of Vietnam ceramic tiles industry is still at 8%/year CAGR 2015-2019 although it is
CVT BUY 22 higher than the world ceramic tiles industry growth rate of 2%/ year, which was supposed to be gone
VGC POSITIVE 24 into saturation phase. However, the growth rate in the past 5 years has been no longer growing fast
compared to the previous periods CAGR 2000-2005: 17%/year and CAGR 2005-2010: 22%/year.
We forecast the ceramic tile industry will reduce competitive pressure in 2020. Demand growth in
2020: Based on CBRE estimate of the supply of 2H/2019 apartments in Hanoi and Ho Chi Minh City
is expected to grow better. Besides, the construction industry's expectation in 2020 will maintain the
Analyst average growth rate of 6-8%/year, equal to the growth rate in 2019. While the supply of the whole
Trần Kỳ Anh
industry is estimated to increase by 15.1 million m2 as of the increased capacity of factories starting
tkanh@vcbs.com.vn operation between 2019 and in 2020 (Nam Dinh Granite Tiles: 1 production line, 3 million m2/year;
+84-28 3820.8116 ext 642 Sao Do Ceramic Tiles: 1 production line, 4 million m2/year). Therefore, we expect that the demand
for ceramic tiles in the whole industry in 2020 will improve better than in 2019. At the same time,
VCBS Report System thanks to the improvement from the construction demand of H2/2019 will help the price of products
www.vcbs.com.vn/vn/Services/Analysi maintain the current selling price or only reduce slightly below 3%.
sResearch
It is forecasted that in the long-term, the ceramic tile industry will continue to grow thanks to
urbanization and housing demand growth.
VCBS Research Department Page | 1CERAMIC TILES INDUSTRY REPORT
2020
WORLD CERAMIC TILES INDUSTRY
I. Life cycle of world ceramic tiles industry
FIGURE 1: World production of ceramic tiles in the period 1980-2018
Million m2
16.000 CAGR 1980-1995: 10.3%
14.000
CAGR 1995-2000: 7.1%
12.000
CAGR 2000-2005: 6.9%
10.000
CAGR 2005-2010: 6.4%
8.000
CAGR 2010-2015: 5.3%
6.000
4.000 CAGR 2015-2018: 1.6%
2.000
0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Ceramic World Review, VCBS research
According to Ceramic World Review (CWR) data, based on the growth rate of output of the tiles
industry in the past 40 years, along with the growth prospect of the world construction industry, we
evaluate the world ceramic tiles industry is in the neutral phase.
In the period 1980-1995, thanks to the development of science and technology, the annual
compound growth rate (CAGR) of world ceramic tile production grew strongly, reached about
10.3%/year. Still, in the following periods, the average growth rate of annual ceramic tile production
tends to decrease over the years. According to Ceramic World Review, the CAGR growth rate in the
recent period 2015-2018, it was only 1.6%/year, a rapid decrease compared to the average growth
rate of the previous 5-year periods: CAGR 2000-2005: 6.9%/year; CAGR 2005-2010: 6.4%/year;
CAGR 2010-2015: 5.3%/year.
Despite that the level of growth in each region of the world varies significantly. In the period of
2008-2018, Africa and Asia remained the main growth engines in global demand for ceramic tiles
with remarkable growth rates of 6.1%/year and 4.7%/year, respectively, compared with the global
growth rate of only 2.1%/year. Nevertheless, after a long period of growth, in the past 5 years from
2013 to 2018, the growth rate of Asia has decreased rapidly to only 2%/year, approximately the rate
of growth of the world ceramic tiles industry at present.
In addition, the regions of North America and Australia seem to have gradually entered a period of
neutrality, with the CAGR compound growth rate of 2008-2018 only maintained at 2-4%/year.
Meanwhile, the European region has shown signs of entering a downturn in demand for ceramic tiles
with a slowdown in 2008-2018 CAGR was -0.4%/year.
VCBS Research Department Page | 2CERAMIC TILES INDUSTRY REPORT
2020
FIGURE 2: Consumption of ceramic tiles by region in the period of 2008-2018
Triệu m2
9.000 7%
8.000 6,1% 6%
7.000 5%
4,7%
4%
6.000
2,4% 3%
5.000 2,3%
2,0% 2%
4.000
1%
3.000
0%
2.000 -1%
1.000 -1,7%
-2%
0 -3%
Asia Euro South America NAFTA Africa Oceania
2008 2013 2018 CAGR 2013-2018
Source: Ceramic World Review, VCBS research
II. World supply and demand of ceramic tiles industry in recent years & Forecast 2020
1. World supply and demand of ceramic tiles industry in recent years
According to CRW statistics, in the period of 200-2018 the world of ceramic tiles industry was still
in oversupply situation. Even though the disparity between supply and demand had narrowed down
in a positive direction. At the time of 2000, the disproportion between supply and demand was 484
million m2, exceeding 10.6% of the demand. In 2010, the gap would have narrowed down to 3.3%.
In 2018, the production volume was 13,099 million m2 and the demand was 12,818 million m2, the
disparity was 281 million m2, only exceeding 2.2% of the demand. Because developed countries in
Europe and North America gradually tightened production control and environmental issues of
ceramic factories in the 21st century. As the world's number one producer of ceramic tiles in 2014,
China output has started to cut when competition in the industry is quite fierce, along with the
tightening of environmental policies from its government.
FIGURE 3: Supply and demand of the world ceramic tile industry 2000-2018
Triệu m2
16.000 12%
14.000 10,6%
10%
12.000
8%
10.000
8.000 6%
5,1%
6.000
4%
2,4% 3,3%
4.000 3,1% 2,2%
2,5% 2,1% 2,1%
2%
2.000 1,5%
1,5%
0 0%
2000 2005 2010 2011 2012 2013 2014 2015 2016 2017 2018
Supply Demand % gap/demand
Source: Ceramic World Review, VCBS research
VCBS Research Department Page | 3CERAMIC TILES INDUSTRY REPORT
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In 2018, China's output and demand decreased by 11.2% yoy and 12.0% yoy, respectively, due to
the country's real estate freezing starting in 2017, besides the slowdown of Chinese economic
growth rate has also affected the demand for reinvestment, thereby affecting the demand for
construction. In addition, tighter environmental control policies and fierce competition have caused
many difficulties to the Chinese ceramic tiles factories. According to CWR data, in 2018, more than
137 tiles manufacturers in China stopped operating.
FIGURE 4: Supply and demand by regions
100% 3% 3% 4%
2% 6% 3% 6% 5% 5% 7% 5% 7%
4% 4% 3% 4% 3% 3%
90% 10% 10% 8% 8% 4% 8% 4%
11% 11% 9% 9% 9%
80% 14% 14%
14% 12% 15% 15%
12% 12% 12% 12%
70%
60%
50%
40%
70% 68% 70% 67% 71% 69% 70% 68% 69% 66%
30%
20%
10%
0%
Supply Demand Supply Demand Supply Demand Supply Demand Supply Demand
2014 2015 2016 2017 2018
Asia Euro South Ameria NAFTA Africa Oceania
Source: Ceramic World Review, VCBS research
In terms of supply and demand by region, Asia is the the largest supplier in the world, with a share
of about 65-70% of the total world output, due to the advantage of large resources and
environmental policies are not really well controlled. At the same time, Asia is also the second
largest oversupply compared to demand in absolute terms. In 2018, according to CRW data, the
disparity between supply and demand in the area was about 469 million m2.
Ranked at second place in terms of production output, Europe accounts for 15% of world production
share, recorded an oversupply of 560 million m2 in absolute terms, ranked at first place in net export
output.
In the opposite direction, North America, South America, Africa and Australia are shortage of
supply and have to import from Asia and Europe.
VCBS Research Department Page | 4CERAMIC TILES INDUSTRY REPORT
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FIGURE 4: Supply and demand by regions (million m2)
Source: Ceramic World Review, VCBS research
In terms of supply and demand between countries: According to CRW data in 2018, tile production
in the top 10 countries accounted for nearly 81% of the total world supply. In particular, China is
currently the dominant country in production output with over 5,683 million m2, accounting for
43.4% of world production. The following positions are India 8.7% and Brazil 6.1%. Vietnam is
currently the fourth largest country in the world in production output, in 2018 Vietnam's output
reached 602 million m2, accounting for 4.6% of world production.
TABLE 1: World production and consumption by countries 2016-2018 (million m2)
% on % on
2018 +/- 2018 +/-
Stt Production 2016 2017 2018 world 2018/ Stt Tiêu thụ 2016 2017 2018 world 2018/
productio 2017 comsum 2017
n ption
1 China 6.495 6.400 5.683 43,4% -11,2% 1 China 5475 5498 4840 36,9% -12,0%
2 India 955 1.080 1.145 8,7% 6,0% 2 India 785 760 750 5,7% -1,3%
3 Brazil 792 790 793 6,1% 0,4% 3 Brazil 706 708 702 5,4% -0,8%
4 Viet nam 485 560 602 4,6% 7,5% 4 Viet Nam 412 580 542 4,1% -6,6%
5 Spain 492 530 530 4,0% 0,0% 5 Indonesia 369 336 450 3,4% 33,9%
6 Italia 416 422 416 3,2% -1,4% 6 US 274 284 289 2,2% 1,8%
7 Indonesia 360 307 383 2,9% 24,8% 7 Egypt 215 252 254 1,9% 0,8%
8 Iran 340 373 383 2,9% 2,7% 8 Turkey 241 254 239 1,8% -5,9%
9 Turkey 330 355 335 2,6% -5,6% 9 Mexico 235 242 236 1,8% -2,5%
10 Egypt 250 300 300 2,3% 0,0% 10 Iran 169 170 230 1,8% 35,3%
TOTAL 11.117 10.570 80,7% 6,9% TOTAL 8.881 9.084 8.532 65,1% -6,1%
TOTAL WORLD 13.587 13.099 100,0% 5,7% TOTAL WORLD 13.056 13.587 13.099 100,0% -3,6%
Source: Ceramic World Review, VCBS research
VCBS Research Department Page | 5CERAMIC TILES INDUSTRY REPORT
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Also according to figures from this journal, the list of the top 10 consuming countries accounts for
more than 65% of world consumption, which includes: China (density: 36.9%), India (5.7%), Brazil
(5.4%), Vietnam (4.1%) have led the way in producing and consuming. In addition to the four
countries mentioned above, the other countries in the top list of consumption volume are Indonesia,
Turkey, and Egypt, which also have good production capacity and are capable of meeting large
domestic demand.
TABLE 2: World export-import by countries 2016-2018 (miliion m2)
% on % on
+/-
2018 +/- 2018/ 2018
No Export 2016 2017 2018 No Import 2016 2017 2018 2018/
world 2017 world
2017
export import
1 China 1.025 908 854 31,1% -5,9% 1 US 194 202 209 7,6% 3,5%
2 Spain 395 407 414 15,1% 1,7% 2 Iraq 112 129 124 4,5% -3,9%
3 Italia 332 338 328 11,9% -3,0% 3 Saudi Arabia 167 131 113 4,1% -13,7%
4 India 186 228 274 10,0% 20,2% 4 France 104 112 108 3,9% -3,6%
5 Iran 126 148 151 5,5% 2,0% 5 Germany 115 109 106 3,9% -2,8%
6 Brazil 94 90 100 3,6% 11,1% 6 Philippines 75 82 91 3,3% 11,0%
7 Turkey 81 93 100 3,6% 7,5% 7 Indonesia 57 64 77 2,8% 20,3%
8 Mexico 56 53 46 1,7% -13,2% 8 Korea 75 78 77 2,8% -1,3%
9 Poland 46 45 43 1,6% -4,4% 9 Israel 57 58 61 2,2% 5,2%
10 UAE 48 46 42 1,5% -8,7% 10 Thailand 54 55 57 2,1% 3,6%
TOTAL 2.389 2.356 2.352 85,6% -0,2% TOTAL 1.010 1.020 1.023 37,3% 0,3%
TOTAL WORLD 2.788 2.752 2.749 100,0% -0,1% TOTAL WORLD 2.788 2.752 2.745 100,0% -0,3%
Source: Ceramic World Review, VCBS research
Even though China is on top in terms of export volume, with export volume reaching 854 million m2
in 2018, accounting for 31.1% of the world export. Italy is the leader with over 4.9 billion euros and
ranked third in the world export output, in terms of export value. The same group of high-value
products, Spain is ranked second in terms of export volume with 414 million m2 and the third in
export value with 2.7 billion euros. According to statistics from CWR, the total export output of the
top 10 countries accounts for nearly 86% of the world export.
In the top list of importing countries, the US ranked first in terms of import volume with 209 million
m2 in 2018, accounting for 7.6% of world import volume. In the following positions, Iraq (4.5%),
Arabs (4.1%), France (3.9%) are the countries that play an important role in import activities.
2. Forcast 2020
FIGURE 5: Forecast of world ceramic tile production growth
Million m2
16.000
14.000
12.000
10.000
8.000
6.000
4.000
2.000
0
2018 2023
Supply Demand
Source: VCBS research
VCBS Research Department Page | 6CERAMIC TILES INDUSTRY REPORT
2020
In the short and medium term, we forecast the growth of the world ceramic tile industry is likely to
maintain CAGR growth of 2020-2022 at less than 4% from slowdown of the world economic
growth. Especially the number one manufacturer - China is still facing the risk of declining
production when running into difficulties: (1) forecasting of a slowdown in domestic growth, (2)
tightening activities on environmental issues from the Government and (3) tougher exports by trade
war (Chinese tiles are taxed at a rate 100-222% by US customs and increasing in anti-devaluation
tariff by the Middle East countries (July 2016), the Philippines (July 2016) and Argentina (July
2016). According to CWR, in 2018, more than 137 Chinese ceramics manufacturer stopped
operating.
In this context, Africa and North America are expected to remain the main drivers of the world
ceramic tiles industry growth when developing countries in Africa will continue to develop
commercial construction projects and grow housing demand. Besides, increasing demand from
construction reinvestment in North America and Europe in the last three years.
VIETNAM CERAMIC TILES INDUSTRY
I. History of establishment and development stages of Vietnam ceramic tiles industry
The period 1961- 1986: formation
Vietnam ceramic tile industry has established and developed for 60 years, the milestone of the
Vietnamese ceramic tile industry marked by the establishment of Thanh Tri factory in 1961- the
precursor of Viglacera Thanh Trì Joint Stock Company. In 1962, Vietnam's first glazed tiles
decorated at Ba Dinh Hall recorded a new advance in Vietnam's construction materials industry.
In the following years, the establishment of Long Hau Tile and Tile Factory (precursor of Long Hau
Ceramic Joint Stock Company) in Thai Binh (1968), Thanh Thanh Ceramic Factory in Dong Nai
(1969), improved national productivity is about 200,000 m2/year. At that time, while, the production
equipment was just taking advantage of the equipment after the war. Therefore, before 1994, all
production facilities in our country could not produce floor tiles, they only produced wall tiles with
small size of 100x100. At the same time, the production cost of ceramic tiles was very high, but the
quality was quite low.
The period 1986-2000: development
In 1986, Vietnam began renovation process, changing from a centrally planned economy to a market
economy. Through the Law on Foreign Investment (1987) and the Law on Enterprises (1990), the
Government has facilitated attracting FDI to invest in the domestic ceramic tile industry. In 1994,
Taicera was the first foreign enterprise to invest in a ceramic factory in Vietnam, along with a series
of private ceramic company were established during this period. According to data from the
Vietnam Ceramics Association (VIBCA), by 2000, there were 26 enterprises in the country, with a
total design capacity of 68.5 million m2/year. We estimate production volume to increase about
92%/year in the period of 1986-2000.
Along with the growth of output, the technology has also developed significantly. Thanks to the
expanded import-export market, domestic enterprises have accessed to advanced production lines
from Italy and Spain. In 1994, Huu Hung Company is the first company applying the modern
production line, Welko Italia. Then, the world leading brands in the field of ceramic equipment are
Siti Nasatti and Sacmi exported to Vietnam. At that time, the quality of domestic ceramic tiles has
reached the global standard. In particular, a number of prominent companies in terms of quality such
as Taicera, Hoang Gia and Dong Tam have focused on exporting to international markets.
VCBS Research Department Page | 7CERAMIC TILES INDUSTRY REPORT
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The period 2000-2010: competition with China
In this period, the average capacity of factories in Vietnam is about 1-5 million m2/ year, increasing
by about 1.5-2 times compared to the previous period. Nevertheless, compared with the factories in
China or India, the capacity of domestic factories is quite low. At the same time, domestic
enterprises have not focused on R&D activities, hence goods are less diverse in form and design.
They were always endured from wildly blows from imported products from Europe (Italy, Germany,
and Egypt) and especially from cheap Chinese products.
With the advantage of huge scale production, Chinese products was 30% lower price than domestic
products, with a variety of designs that can meet all segments, Chinese tiles have dominated the
Vietnamese market. According to data from the General Department of Customs, in 2010 the
imported value of Vietnam's ceramic tiles was 95.5 million USD, of which up to 76 million USD
was imported from China, estimated to account for more than 50% of market share in Vietnam.
According to CRW data, the total production output of the whole country in 2010 reached 370
million m2, the CAGR compound growth rate of production output in the 2000-2010 period is about
21%/year.
The period 2010- present: affirmation
In 2010, encountering the massive movement of Chinese imports, the Ministry of Industry and
Trade imposed a tariff of 20-40% on Chinese tile products. Nevertheless, through the unofficial
routes and incorrect declaration of values and quantities, by 2012, Chinese tiles still dominate the
Vietnamese market.
In this period, domestic manufacturers have to take strong steps through the construction and
expansion of the factory much larger than the existing capacity. Along with the expansion of the
factory, modern and advanced technology lines are always updated by manufacturers in order to
increase competitive abilities such as: Prime 80 million m2, Vitto 36 million m2, Nice Ceramic 30
million m2, Viglacera with 25 million m2 ... This not only helps Vietnamese businesses improve
their competitiveness and retake the domestic market from Chinese manufacturers, furthermore,
Vietnam has become the top 5 of the world' ceramics manufacturing countries in 2012 and moved to
the top 4 position in 2017.
Since 2014, Vietnam has always maintained its position on the world map of ceramic tiles. In 2018,
the total production of Vietnam ceramic tiles reached 602 million m2, accounting for 4.6% of the
world output, CAGR 2010-2018 is estimated at 6.1%/year.
II. Life cycle of Vietnam ceramic tiles industry
We identify that Vietnam ceramic tiles industry went through a period of rapid growth and
has came to a period of steady growth with the following characteristics:
The growth rate of Vietnam ceramic tiles industry is still at 8%/year CAGR 2015-
2019 although it is higher than the world ceramic tiles industry growth rate of 2%/ year,
which was supposed to be gone into saturation phase. However, the growth rate in the past
5 years has been no longer growing fast compared to the previous periods CAGR 2000-
2005: 17%/year and CAGR 2005-2010: 22%/year.
VCBS Research Department Page | 8CERAMIC TILES INDUSTRY REPORT
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FIGURE 5: Vietnam consumption of ceramic tiles 1995-2019
Million m2
600 CAGR 1995-2000: 92%
500
CAGR 2005-2010: 22%
CAGR 2000-2005: 17%
400
300
200 CAGR 2015-2019: 8%
100
CAGR 2010-2015: 4%
0
Source: Ceramic World Review, VCBS research
Although the double-digit growth rate does not maintain any more, it is forecasted
that in the medium-term 3-5 years, the demand for ceramic tiles can still sustain the
CAGR compound growth rate of 2020-2025 at 6 %/year. As the expectation that the
growth rate of construction industry in the whole country will continue to play an important
role, in parallel with the GDP growth rate of the whole country is forecasted at a feasible
level of 7-7.5%/year (National Community Investment Fund _NCIF).
FIGURE 6: Tốc độ tăng trưởng xây dựng Việt Nam
10,8%
10,0% 9,2%
8,7%
8,3% 2020-2025F: 7-8%
2015 2016 2017 2018 9T/2019E 2020F 2021F 2022F 2023F 2024F 2025F
Source: Bộ Xây Dựng, VCBS research
Number of new participants entering the industry gradually to zero: From 2013-2019,
only 03 new enterprises were established: Tasa (Phu Tho-2013), TTC Joint Stock Company
(Hung Yen-2014), A My Joint Stock Company (Vinh Phuc-2015). It is noteworthy that in
the past four years, there are no new enterprise's entry into the industry, while the industry
growth shrink to a one-figure level and the average rate of return on average investment is
not attractive anymore, at 10-15%/year.
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III. Value chain of Vietnam ceramic tiles industry
1. Input
According to COGS of listed ceramic tiles companies in 2018 (VGC, TTC, VIT, CVT, VIH, TTL),
energy cost is the highest input cost in manufacturing activities of Vietnamese ceramic tiles
enterprises account for 35-40% of cost, 5-10% higher than the average in some European countries,
the reason is attributed to the shortage of thermal coal and domestic CNG and LPG gases which
forces manufacturers to use imported sources. The remaining costs are: raw materials account for
about 25-30% of cost structure, labor costs about 20-25%, other production costs account for 10-
15% of cost structure.
FIGURE 7:COGS structure of ceramic tile manufacturing in Vietnam
Other
production
costs
10-15% Raw material
25-30%
Labour
20-25%
Energy
35-40%
Source: Số liệu các công ty niêm yết, VCBS research
VCBS Research Department Page | 10CERAMIC TILES INDUSTRY REPORT
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1.1. Materials
At present, it is considered that the input sources of clay, kaolin and quartz are the biggest strength
of Vietnam's ceramic tiles industry in value chain when it can almost meet the entire long-term
production demand of domestic.
Clay
Clay and kaolin are components that account for a major proportion of volume in ceramic tiles,
classified as flexible materials, shaping tile products. In the production of porcelain and granite tiles,
kaolin are mostly used than clay in ceramic tile production. The using of large amounts of kaolin
makes the tile body white after firing. It is higher aesthetic than the red colour of clay, thus
increasing the value of tiles.
TABLE 3: Ceramic & granite tile fomulation
Tỷ trọng NVL xương gạch Ceramic Granite
Kaolin & clay 60-70% 30-50%
Feldspar 35-45% 50-60%
Quarzt < 10% < 10%
The others < 2% < 2%
Source:VCBS research
According to VIBCA data, our country's red clay reserves are enormous with 184 mines, total
reserves of up to 1.1 billion tons are distributed evenly throughout the country. In the contrast to red
clay, the total number of white clay mines in the country is quite limited, only about 27 mines, with
reserves of 38.2 million tons. Therefore, the source of red clay is being taken advantage by
manufacturers to produce ceramic products with low prices and types of tiles, which do not require
high strength.
Kaolin
Vietnam is a country with abundant reserves of kaolin resources, ranked 4th in the world among the
top kaolin mining countries in the world. According to Decision 45/2012/QĐ-TT on “Approving the
planning of exploration, mining, processing and use of minerals in construction until 2025”,
Vietnam currently has a total of 378 kaolin mines, with a total reserve of up to 850 million tons, are
mostly located in the Northeast and Red River Delta. With a production capacity of about 2 million
tons of kaolin per year (Ministry of Construction, 2017), it is expeted that the domestic kaolin source
can meet the long-term production needs in Vietnam.
Although our kaolin resources are quite large and widely distributed, only a few provinces are
suitable for developing production and processing zones of focused and high-volume Kaolin, which
meet up ceramic tile factories in terms of reserves, quality, and geographical location, including: Phu
Tho, Quang Ninh, Quang Nam, Lam Dong, Binh Duong, Lao Cai, Yen Bai, Thai Nguyen, Hai
Duong, Quang Binh and Thua Thien Hue. In particular, according to the development orientation of
the Ministry of Construction for 5 provinces of Phu Tho, Quang Ninh, Quang Nam, Lam Dong and
Binh Duong is prioritized to develop into key kaolin processing areas with a capacity of between
100,000 and 500,000 tons/year.
Feldspar
Feldspare plays a particularly important role in increasing the water resistance and solidity of
porcelain and granite tiles. These are also the remarkable features of porcelain and granite tiles
VCBS Research Department Page | 11CERAMIC TILES INDUSTRY REPORT
2020
compared to ceramic tiles, bringing higher value to these two product lines.
According to Decision 45/2012/QĐ-TT, the total reserve of the mines in Vietnam has explored
about 84 million tons, of which: Northern Midland and Mountain region reserves about 46.3 million
tons, accounting for the largest proportion in the country (about 55.1% of the total national
resources). Thanks to good quality, it is being exploited, processed and provided for many facilities
in the surrounding regions and Red River Delta region.
FIGURE 8: Distribution of material soucres of ceramics production
Source: Decision 45/2012/QĐ-TT, VCBS research
Frit
Frit is the raw material for engobe coating and enamel coating for ceramic tiles. Before 2000, frit
raw materials for ceramic tile production in Vietnam had to be imported from abroad. By 2000
Vietnam had the first frit manufacturing company in operation, Hue Frit Joint Stock Company, but
the original design capacity was only 3,000 tons/year, which only met about 15% of the market
demand (estimated from the Ministry of Construction) and mainly produce basic frit types.
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After nearly 20 years of development, according to our statistics, Vietnam currently has 06
companies specializing in frit production with a total capacity of about 392,000 tons/year with a
variety of quality and types. There are no official statistics of the use in nation as well as imports of
domestic ceramic enterprises. Nevertheless, according to the discussion with a small group of
enterprises in the industry, the rate of imported frit is still relatively high at nearly 40%, mainly from
China, Spain, Thailand and Germany for the production of special tiles body and quality granite
products.
TABLE 4: List of frit manufacturing enterprises in Vietnam
Capacity
No Enterprise location
tonne/year
1 Frit Huế JSC Thừa Thiên Huế 130.000
2 Fritta Việt Nam LLC Bà Rịa Vũng Tàu 100.000
3 Vinafrit JSC Thái Bình 40.000
4 Frit Phú Xuân JSC Thừa Thiên Huế 22.000
5 Prime Phong Điền JSC Thừa Thiên Huế 40.000
6 Vitto LLC Thừa Thiên Huế 60.000
Source: VCBS research
1.2. Energy
Energy cost plays an important role in the production of ceramic tiles in Vietnamese when it is
estimated to account for 35-40% of the production cost. Currently, the main fuel sources providing
heat for ceramic tiles production include anthracite coal or CNG, LPG depending on the region of
production. In Vietnam, most of the old production lines use coal to provide heat and are tending to
switch to using gas to improve product quality and reduce costs and maintenance time. In addition,
Northern enterprises using gas often use LPG, compared to some Southern enterprises that can use
CNG directly supplied by pipelines to the factory.
FIGURE 9: Fluctuation of thermal coal and LPG prices in the period of 2018-2019
USD/tonne USD/tonne
140 90
120 80
70
100
60
80 50
60 40
30
40
20
20 10
0 0
Coal (L) LPG (R)
Source: Bloomberg, VCBS research
Currently, domestic coal and CNG-LPG production can only meet a part of domestic demand
(according to TKV's data, in 2018 Vietnam only met 91% of domestic coal demand. According to
data of the Ministry of Industry and Trade 2017, domestic gas production can only meet 40% of
domestic demand). Hence, the production of Vietnamese ceramic tiles is partly affected by
fluctuations in world coal and gas prices.
VCBS Research Department Page | 13CERAMIC TILES INDUSTRY REPORT
2020
According to Bloomberg data, the average price of thermal coal 6,500 cal/kg and LPG in 2019 is
respectively 79 USD/ton and 56 USD/ton, decreased 26% and 17% compared to 2018.
2. Manufacturing process
2.1. Manufacturing process
Due to the relatively simple nature of the manufacturing process of ceramic tiles, the machines are
relatively similar is used among companies. Therefore, companies in the tiles industry have little
difference in technology so that they create a competitive advantage compared to competitors.
Step 1: Raw material processing
Material preparation is a process of synergized mixtures of materials in both chemical and physic, in
order to increase solidity and reduce the possibility of cracking and error in the next steps.
Initially, clay and minerals will be dried mixed according to a certain formula, depending on the
production of ceramic and porcelain tiles, the proportion of particles will be different and this is also
the most different factor in the process of manufacturing ceramic and porcelain tiles.
The mixture will then be processed with water and
electrolytes in a ball mill to form a liquid slurry, then
incubated and stirred for 24 hours in tanks to increase the
homogeneous process. The slurry from the tanks will be
transferred to the spray-drying system to form a fine
powder mixture through the spray-drying system at 110-
13000 C. The mixture continues to be screened through a
sieve system before being transferred to silos for the
forming stage.
Step 2: Forming
The fine powder mixture with moisture content of 5-15% will then be transferred from silos to
plastic molds to shape the tiles through the hydraulic
system. Tiles formed at this stage are called “biscuit”.
Currently, the sizes of these are quite diverse, the most
popular ones are sizes of 40x40, 50x50, 60x60, 80x80,
25x40, and 30x60. Also, in the past 05 years, with the
support of technology and increasing of taste, Vietnamese
enterprises have started to produce large sizes of 80x80
and 60x120 (60x120: Vitto Company).
Step 3: Drying
Drying aims to avoid the sudden loss of moisture content of the products during the firing process
that resulting in shrinkage in size, warping or cracking of the tiles.
The average drying time is about 45-75 minutes with the maximum temperature of 2500 C, tiles
temperatures after drying range from 90 to 1100 C will be reduced and surface cleaning through the
misting system before glazing and decorating
Step 4: Glazing & decorating
Biscuits after misting will continue to go through rotary disc (or bell) to glaze. Glazes, which
resemble glass in structure and texture, provide a smooth, shiny surface that seals the ceramic body
that increases the mechanical and chemical durability of the product and protect the product from
being penetrated by liquid and gas. The glazing makes the surface of tiles smooth and beautiful,
VCBS Research Department Page | 14CERAMIC TILES INDUSTRY REPORT
2020
improving the quality of the product. Then the glazed tiles will go through the decorative printer to
enhance the aesthetics of the glaze surface.
However, not all ceramic tiles are glazed, some of which are designed to look like natural stone are
often unglazed to retain the rough surface.
Step 5: Firing
The firing of the product under the melting temperature aims to release gases and transform the
crystal structure. Tiles are fired at high temperatures of 1050 - 1200 ºC in the kiln.
The kilns can be classified by periodic or continuous process. With current production technology,
manufacturers of the world and Vietnam only adopt continuous process instead of periodic process,
with the advantage of improving the quality of products.
Currently, Continuous kiln technologies are often used
such as: roller kilns, shuttle furnaces, tunnel kilns. Yet,
with a dedicated design for tiles manufacturing, roller
kilns are currently the most widely used kiln in tiles
factories.
2.2. Manufacturing operations in Vietnam
According to VIBCA statistics in 2019, our country has
54 enterprises operating in the field of tiles manufacturing with a total capacity of 703.5 million m2.
In which, the Red River Delta are the leading in the number of factories and the capacity because of
the advantage of being close to the raw material area as well as the highest construction value in
Northern. In 2019, the total designed capacity will reach 362.5 million m2 / year. This includes
292.5 million m2 of ceramic tiles and 70 million m2 of porcelain and granite tiles. Accounting for
52% of the whole industry's capacity.
The Southeast is the region with the second largest design capacity in Vietnam, with the capacity up
to 167.5 million m2/year, including 113.5 million m2 of ceramic tiles; 54 million m2 of porcelain and
granite tiles, accounting for 24% of the whole industry's capacity. Although the Southeast is not
close to source of raw materials, this area always leads the country in annual construction value.
Northern Midland and Mountain Region have design capacity of up to 65 million m2/year, including
53 million m2 of ceramic tiles and 12 million m2 of porcelain and granite tiles. Northern Midland
and Mountain Region are the third largest tile production areas in the country with great advantages
of reserves and the qualities of kaolin, clay and feldspar mines.
The remaining areas including North Central, South Central and Mekong River Delta currently have
a total design capacity of less than 50 million m2/year. Especially, the Mekong Delta has only 2
enterprises with a total design capacity of 10 million m2/year.
VCBS Research Department Page | 15CERAMIC TILES INDUSTRY REPORT
2020
FIGURE 10: Detailed design capacity of region-region ceramic tiles in 2019
Source: VIBCA, VCBS research
FIGURE 11: Capicity by region in 2019 FIGURE 12: Capacity by type in 2019
South Central Mekong River
Coast Delta
North Central 7% 1% Granite
7% 21%
Northern
midland and
mountainous
9% Red River
Delta
2019
52%
Ceramic,
Pocelain
Southeast 79%
24%
Source: VIBCA, VCBS research Source: VIBCA, VCBS research
VCBS Research Department Page | 16CERAMIC TILES INDUSTRY REPORT
2020
Some characteristics of the Vietnamese ceramic tiles industry
Operating to maximize capacity, because energy cost is the largest proportion of cost of
ceramic tiles production, so most factories have to operate at 100% or more to optimize
cost, athough the ceramic tiles industry is in the period of oversupply.
The technology used is outdated, currently the number of ceramic tiles production lines is
estimated to account for over 50% of the whole industry capacity, most of which have been
operating for 10-20 years, with design capacity of less than 2 million m2/year, can only
produce tiles with small size and cannot optimize energy cost.
Tile products mainly serve the domestic market, although the production capacity of
ceramic tiles in Vietnam is among the top in the world. They are mostly consumed in the
domestic market due to the fact that the price of our products is unable to compete at World
market, compared to other countries such as China and India in the segment of middle-class
tiles. Currently, only a small number of domestic ceramic tile enterprises (mostly FDI
enterprises) have been developed their export markets quite well over the past years: Prime,
Pancera, Taicera, Hoang Gia, and Bach. Saint, Tasa, Mikado, Viglacera.
3. Output
3.1. Domestic market share of ceramic tiles
According to VIBCA research, before 2012, Chinese tiles held over 50% domestic share. However,
in recent years, the number is only less than 20% of annual consumption (estimated by VIBCA,
2018) thanks to the expansion of scale and technology of Vietnamese enterprises. In addition to
safeguard tax policies and strict control of border trade caused Chinese tile products have been
constrained.
Domestic enterprises are increasingly taking up a large market share, with prominent names such as
Prime estimated to account for about 8% of Vietnam's tile market share with high-class tiles segment
(VCBS estimates), Vitto accounts for approximately 6%, Mikado about 6%, Royal 6%, Viglacera
5% ...
FIGURE 13: Vietnam's market share of ceramic tiles in 2018
Imported from China
20%
The others
35%
Prime Group
8%
Vitto
7%
Mikado
Nice Ceramic 7%
4%
Toko
4% Tasa Viglacera Royal
4% 5% 6%
Source: VIBCA, VCBS ước tính
VCBS Research Department Page | 17CERAMIC TILES INDUSTRY REPORT
2020
3.2. Import-export of Vietnam ceramic tiles
According to data of the General Department of Customs, in 2018, Vietnam's export value of
ceramic tiles reached 205.1 million USD, a slight increase of + 1% yoy. In particular, the two main
export markets of Vietnam are Thailand and Taiwan, recorded a slight decrease in export value in
2018, accounting for 13% and 11% of the export value in 2018, respectively. While the next three
countries of Vietnam's most important export values are South Korea (accounted for 7%),
Philippines (7%) and Indonesia (7%), recorded a positive growth compared to 2017.
FIGURE 13: The proportion of Vietnam's export of paving tiles by
FIGURE 14: The proportion of Vietnam ceramic tiles import by value
value
Indonesia The others
Thailand
Italia 2% 3%
13%
6%
16% Spain 2%5%
5%
9%
Taiwan
10%
11%
The others 14%
Trong 2017 India 6% Trong 2017
50% 53% Ngoài 2018 Korea 13% Ngoài 2018 China
7% 62% 53%
5% 10%
4% Philippines
3%
5% 7%
Malaysia
Indonesia 14%
Malaysia 7%
5%
Source: Tổng Cục Hải Quan, VCBS research Source: Tổng Cục Hải Quan, VCBS research
On the import side, according to data of the General Department of Customs, the total import value
of tiles in 2018 recorded 99.5 million USD, a slight decrease of 1% compared to 2017. Of which, an
import value from China up to USD 53 million (excluding figures of border trade), accounting for
more than 50% of the value of imports in 2018. However, in 2017, the import value from this
country decreased by 15% yoy and the proportion of the whole import value also decreased
significantly by 9% compared to 2017. This partially shows the improvement of comparative
advantages of Vietnamese enterprises. In addition, in 2018, the activity of importing high-value tile
products from Italy (accounting for 6% of 2018 import value), Spain (9%), India (13%) and
Malaysia (14%) generally recorded a value growth compared to 2017.
IV. Supply and demand of Vietnamese ceramic tiles & Forcast 2020
1. Supply and demand of Vietnamese ceramic tiles
According to CWR data, over the past 10 years, the supply of tiles has always exceeded domestic
demand. Compared to 2011, production and consumption were not significantly different, however,
the real estate sector had been frozen over the period 2011-2013 and production has been expanding
domestically from 2014 to the present, which has widened the gap between production and
consumption. This has made the competition among domestic enterprises fiercer. Although
Vietnamese enterprises in recent years have sought opportunities in international markets, merely
10% of the tiles total production from prominence enterprises meets the international export
requiments due to the different taste of size and quality. Also, the fact of export prices are
significantly lower than domestic prices that makes domestic enterprises no longer interested in
export activities.
VCBS Research Department Page | 18CERAMIC TILES INDUSTRY REPORT
2020
FIGURE 15: Viet nam supply and demand of ceramics tile in the period 2015-2019
Million m2 Million m2
800 100
672 690 90
700 634
602 80
600 542 540-560
70
500 60
400 50
300 40
30
200
20
100 10
0 0
2011 2012 2013 2014 2015 2016 2017 2018 2019
Capacity Production Consumption Gap between production & consumption
Source: Ceramic World Review, VCBS research
In 2019, according to our statistics, although the overall design capacity of the industry only
increased slightly by 2.6% compared to 2018, reaching 690 million m2/year due to the addition of
only four new production lines: An Giang Ceramic: 1 production line 3 million m2/year; Vicenza: 2
production lines 11.5 million m2/year; Thanh Ha Ceramics: 1 production line, 3 million m2/year).
However, it is estimated that the production capacity of the whole industry in 2019 has increased to
32 million m2, +4.7% because the projects, officially operating from mid-2018, were fully
operational in 2019. According to our estimates, the demand for ceramic tiles in 2019 is lower than
the growth rate of the construction industry by 8.3% (9M/2019, GSO). When the growth of
individual housing construction accounts for a large proportion without much growth expectation,
besides the real estate construction activity from 2018 to the present is stable, the gap between
supply and demand has widened. Therefore, the gap between supply and demand will widen in
2019.
According to our estimates, the difference between supply and demand in 2019 reached 84 million
m2, an increase of nearly 40% compared to 2018 at 60 million m2. Since then, there has been
pressure to lower prices of common products (ceramic and porcelain). According to data published
by businesses and business meetings of the industry (VGC, CVT, TTC ...), the selling price of
common tile products at the end of 2019 has decreased by 7-10% compared to the beginning of the
year.
TABLE 5: List of businesses raising capacity 2018-2020
Adding
Commercial
capacity Number
Stt Emterprise name Location Type of product Operation
(million of lines
Date
m2/year)
1 CMC Phú Thọ 3 1 Granite T08/2018
2 Mikado Thái Bình 3 1 Granite 2018
3 Nice Hải Dương 30 NA Porcelain, Granite T06/2018
4 BNG Bắc Giang 3 1 NA 2018
5 Vitto Thừa Thiên Huế 8 1 Granite 2018
6 An Giang Ceramic An Giang 3 1 Granite 2019
VCBS Research Department Page | 19CERAMIC TILES INDUSTRY REPORT
2020
7 Vicenza Ceramic Thanh Hóa 11,5 2 Ceramic, Granite 2019
8 Thanh Hà Phú Thọ 3 1 NA 2019
9 Nam Định Granite Nam Định 3 1 2020
10 Sao Đỏ Ceramic Hải Dương 4 1 2020
Source: VIBCA, VCBS research
2. Forecast 2020
We forecast the ceramic tile industry will reduce competitive pressure in 2020
Demand growth in 2020: Based on CBRE estimate of the supply of 2H/2019 apartments in Hanoi
and Ho Chi Minh City is expected to grow better. Besides, the construction industry's expectation in
2020 will maintain the average growth rate of 6-8%/year, equal to the growth rate in 2019. While the
supply of the whole industry is estimated to increase by 15.1 million m2 as of the increased capacity
of factories starting operation between 2019 and in 2020 (Nam Dinh Granite Tiles: 1 production
line, 3 million m2/year; Sao Do Ceramic Tiles: 1 production line, 4 million m2/year). Therefore, we
expect that the demand for ceramic tiles in the whole industry in 2020 will improve better than in
2019. At the same time, thanks to the improvement from the construction demand of H2/2019 will
help the price of products maintain the current selling price or only reduce slightly below 3%.
FIGURE 16: Number of newly launched apartment units in Hanoi and HCM 2014-2019
Apartment unit
45.000
40.000
35.000 31.547 33.000
30.435 30.000
30.000
25.000
20.000
15.000
10.000
HCM Ha Noi
2014 2015 2016 2017 2018 2019 E
Source: CBRE, VCBS research
It is forecasted that in the long-term, the ceramic tile industry will continue to grow thanks to
urbanization and housing demand growth.
According to the GSO in 2018, Vietnam has more than 96 million people. With an average
population growth rate of about 1.2%/year, it is forecast that by 2030, Vietnam's population will
reach 104 million. Vietnam have a large population with a relatively fast population growth rate, and
the current rate of urbanization in Vietnam is still quite low compared to regional countries as well
as developed countries in the world. This will create an incentive to increase the demand for ceramic
tiles in residential-commercial buildings and public infrastructure in the future.
VCBS Research Department Page | 20CERAMIC TILES INDUSTRY REPORT
2020
FIGURE 17: Rate of Vietnam urbanization and some countries in 2018
120%
100%
100% 92%
86%
82%
76%
80%
60%
60% 54%
50%
36%
40%
23%
20%
0%
Campodia Viet Nam Thailand Indonesia China Malaysia US Australia Japan Singapore
Source: CIA World Factbook, VCBS research
According to GSO, in 2018, the average floor area per capita in Vietnam was 24 m2/person.
Especially in developed cities such as Hanoi, Ho Chi Minh, and Da Nang, although having the
highest annual construction value in Vietnam, this figure in 2018 was only less than 30 m2 per
capita. In general, the average floor area of our country is very low compared to neighboring China
(40 m2/capita) or compared to developed countries like the US and Australia (60 m2/capita). This
shows that the demand for housing construction in our country in general and the Southern region in
particular is still very large. This will create motivation for Vietnam's ceramic tiles industry to grow
positively in the coming years.
FIGURE 18: Average floor area of Vietnam and some countries in 2018
m2 per capita
70
60 60
60
50
40
40
28 27
30 24 22
20
10
0
US Australia China Viet Nam Ha Noi Da Nang Ho Chi Minh
Source: GSO, VCBS research
VCBS Research Department Page | 21CERAMIC TILES INDUSTRY REPORT
2020
STOCK RECOMMENDATIONS
CVT – BUY CVT detailed report: here
2019 business activities
In 2019, the tiles industry will still face the oversupply difficulties. In 2019, CVT’s revenue reach
TRADING STATISTICS VND 1,464 billion, + 1.1% yoy, fulfilled 86.1% of the 2019 plan. In general, CVT has achieved a
Stock Exchange HSX fairly positive revenue growth compared to other businesses in the same industry. .
For 9M/2019, the accumulated sales volume reach about 11.7 million m2 (11 million m2 tiles, 0.7
Market price (VND) 20.600
million m2 tiles) equivalent to the same period. Although the selling price of common products
Target price (VND) 30.200 (ceramic and porcelain ) has dropped 7% from the beginning of the year to the present due to
Daily volume 117.006 oversupply pressure across the industry, CVT maintain the revenue growth momentum thanks to the
product restructure, the company aims to increase the proportion of high-end segment: launched
Market cap (VND) 756b saince Q4/2018.
Shares (mil) 36,9 Gross profit: Though the price of common products has decreased by 7% compared to the beginning
of the year, besides the 2019 depreciation expense recorded at VND 122.7 billion increased by
10.7% compared to the same period, the cause of 3th line of the CMC2 factory started to partially
depreciate from Q2/2018. However, thanks to the new granite product, which have a good profit
margin compared to ordinary tile lines, it has reduced the decline of gross profit margin. In 2019
Correlation betweet gross profit margin reached 19.3%, decreased 0.8% over the same period.
VN-Index and CVT ’s price
Net profit: in 2019, CVT ’s NPAT achieved VND 167 billion, -0.9% yoy. Net profit margin reached
CVT VN-
11.4%, decreased slightly 0.2% over the same period, mainly influenced by the adjustment of gross
40.000
Index
1.300
profit margin.
35.000 1.200
1.100 Forecast 2020
30.000
1.000
25.000
900 Based on the expectation of Vietnam's construction growth in 2020 will maintain an average growth
20.000 800
15.000
rate of 6-8% / year equivalent to the growth rate in 2019. Besides, based on CBRE estimates the
700
10.000 600 supply of apartments of Hanoi and Ho Chi Minh City in H2/2019 that is expected to grow better and
Jan-18
Sep-18
Jan-19
Sep-19
Mar-18
May-18
Jul-18
Nov-18
Mar-19
May-19
Jul-19
Nov-19
forecast the total growth of the whole year of 2019 in these two areas will be around 10%.
Therefore, we expect the demand of ceramics tile to improve better in 2020 than that 2019. At the
CVT VN_INDEX
same time, the recovery from construction demand in H2/2019 will help the selling price of tile
products maintain the current selling price or only reduce slightly below 3%. From the analysis are
mentioned, we forecast that CVT's revenue growth in 2020 will be 6-10% yoy, reaching about VND
1,608 billion.
We estimate that CVT ’s EBT will reach about VND 219 billion, + 11% yoy, based on the revenue
growth potential and CVT's gross profit margin is expected to remain at 18-18.5% in 2020 when
CVT's price of common products are expected to be less volatile, in addition to the proportion of
consumption of high-end product lines continues to improve. Furthermore, up to now, we have not
realized the risks of strong fluctuations from input material costs.
Investment opinion
New granite products have operated effectively since the first quarter of 2019, CVT have
launched sugar matt granite tiles (Q1/2019), bar tiles (Q2/2019) and porcelain tiles ( Q4/2019)
with a unique design, according to our preliminary survey, these products are being received
quite positively by the market. This was partly shown through the Q3/2019 Financial
Statements when the revenue, gross profit margin and ROIC grow better over the same
period.
VCBS Research Department Page | 22CERAMIC TILES INDUSTRY REPORT
2020
Attractive dividend yield: According to the resolution of 2019 AGM, CVT is expected to
pay a cash dividend of 25-30% in 2020 equivalent to 12.4-14.9% dividend yield something if
Shareholder Structure we compare to the current market price. In the past, CVT also showed that the dividend
payment was quite stable, on average from 2015 to 2019, the annual cash dividend payment
rate was 18.75% of the face value. In the long term, according to our estimates, after the CVT
10,9%
reinvestment needs, the average dividend can be maintained at least 25% (refer to the forecast
in the detailed update report).
10,3%
Value stock: Based on the comparison with other companies in the same industry, we belive
57,7% 6,7% that CVT is being priced lower by the market than its peers, when the company's P / E trailing
is 5, 1x (at the closing price on November 19, 2019) is lower than the industry average of
4,3%
5.5x.
6,3% 3,7% o CVT's revenue growth, profit after tax and profitability over the last 3 years are
quite highly compared to competitors in the same industry.
VietinBank Securities
o Financial risk, although CVT is borrowing more than the industry average.
Vicem
However, according to our assessment, CVT still has room to use leverage to
Nguyễn Quang Huy_Chairman
optimize shareholder benefits - ROE, when profit margin ratios remain high, in
Lê Quốc Hưng addition to the CFO remains positive.
Sông Hồng JSC
Dương Quốc Chính_Vice Chaiman
The others
TABLE 6: Compare CVT and companies in the ceramic tiles industry
2016- 2016-
Trailing
2018 2018 2016-
Market 9M/2019 9T/2019 9M/2019 9M/2019 P/E
Average Average 2018 ROE 2018 9T/2019
Company name cap Revenue NPAT Gross Gross traling
revenue NPAT (%) Average D/E (%)
\(VND b) (VND b) (VND b) profit (%) profit (%) (19/11/20
growth growth ROE (%)
19)
(%) (%)
CVT 756 1.039.621 108.563 10,0% 2,0% 18,0% 10,4% 27,6% 36,7% 58% 5,1
VIT 292 1.010.241 55.074 6,0% 1,0% 12,5% 5,5% 17,6% 20,2% 205% 3,6
VIH 62 6,0% -18,0% 0,3% 48,3% 6,2
TLT 97 5,0% -10,0% 23,4% 65,4% 6,2
TTC 75 268.229 12.930 17,0% -33,0% 13,6% 4,8% 13,0% 17,1% 6% 4,6
VHL 700 1.486.826 93.382 4,0% 11,0% 18,3% 6,3% 23,3% 24,3% 36% 5,0
GMX 133 198.886 17.584 10,0% -8,0% 29,3% 8,8% 26,0% 26,3% 13% 6,0
Average 227 741.046 44.743 8,0% -9,5% 18,4% 6,4% 17,3% 33,6% 65,1% 5,3
Median 115 639.235 36.329 6,0% -9,0% 16,0% 5,9% 20,4% 25,3% 24,8% 5,5
Source: Fiinpro, VCBS research
VCBS Research Department Page | 23CERAMIC TILES INDUSTRY REPORT
2020
Valuation
We use FCFE and FCFF method with the assumptions below and forecast detailed in CVT report.
They estimate the intrinsic value of CVT share at VND 30,200 per share, UPSIDE +36%.
VGC – POSITIVE VGC detailed report : here
2019 business activities
In 2019, Ceramic tiles business reached the revenue of VND 2,764 billion, increased 4.5% yoy,
TRADING STATISTICS accounting for 27.3% of total VGC's revenue, decreased 3% compared to the same period.
Stock Exchange HSX o In 2019 sales volume grew about +5.5% yoy, in addition to the price of common products
(ceramic and porcelain), which decreased by 7% from the beginning of 2019 due to
Market price (VND) 18.000 oversupply pressure across the industry. Nevertheless, thanks to an effort to restructure the
Target price (VND) 20.400 ceramic tlies bussiness, which has been implemented by VGC since 2018, a part of the
strategy focuses on the design, R&D of high-end segment products: Euro tile (My Duc
Daily volume 121.511 factory, Thai Binh factory), Color body (Tien Son factory) and Viglacera premium.
Market cap (VND) 448,3b According to our research, these high-end products of VGC are being well received by the
market as the quality is compared with imported products from Spain and Italy, along with
Shares (mil) 21,5
significant discounted prices due to benefit from tax and logistics costs.
o The VGC factories are operating exceeds of 5-10% design capacity to optimize production
costs. However, inventories of member companies and subsidiaries producing ceramic tiles
tend to increase over the same period. According to the information from the BOD,
Viglacera Thang Long subsidiary (TLT) currently has inventory of about 60 days of
Correlation betweet production, Viglacera Hanoi subsidiary (VIH) about 40 days and Viglacera Tien Son
VN-Index and VGC ’s price subsidiary (VIT) about 60 days (The current optimal level of inventory for tile companies
are about 30 days). Though, Viglacera Tien Son's inventory days, in our assessment, are not
VN- too concerned when Euro Tile premium tiles are well received by the market and the
Index
product types are diverse.
35.000 1.300
1.200
30.000 In 2019, contructions glass and Sanitary wares, showers business reached the revenue of VND
1.100
25.000 1.000
900
2,091 billion, +0,2% yoy, accounting for 20.7% of total VGC's revenue, decreased 3% over the same
20.000
15.000
800 period. The reason of sharp decreasing in selling price due to competitive pressure of domestic and
700
10.000 600 Malaysian import products.
Jan-18
Sep-18
Jan-19
Sep-19
Mar-18
May-18
Jul-18
Nov-18
Mar-19
May-19
Jul-19
Nov-19
The industrial zone real estate business, revenue of 2019 reached VND 2,532 billion, a sudden
growth of +123% yoy due to increasing the rental area, over 170 ha, increased 70% compared to the
VGC VN_INDEX
same period of 2018. Besides the rental rate, there was a good growth in the rental price at the
expanding of Yen Phong I IP ang Dong Van 4 IP.
VCBS Research Department Page | 24CERAMIC TILES INDUSTRY REPORT
2020
Accumulated to November 2011, the total planned land of VGC reaches nearly 2,800 ha (excluding
Shareholder Structure
Thuan Thanh IP, Bac Ninh). In which: the clearing land is 1,705 ha, available for sales reaches 1,312
ha and leased area recorded 868 ha.
Gross profit in 2019 reached VND 2,422 billion, increased + 18.5% yoy. Gross profit margin of
VGC reached 23.9%, increasing by 0.7% compared to the same period of 2018. Because of
increasing in the proportion of rental industrial zone revenue returned high profit margins, compared
38,6%
to gross profit margin of the other businesses.
61,4% In particular, the gross profit margin in 2019 of the ceramic tiles business recorded a slight
improvement of 24.3%, increasing by 2.3% over the same period in 2018 thanks to high-end tile
product lines: Eurotile, Color Body, Viglacera Premium have a good gross profit margin compared
to common tiles, contributing to the improvement of the gross profit margin, under the pressure of
reducing the selling price of common tile products (as of the end of the year). The third quarter of
2019 has decreased by 7% compared to beginning of the year).
Ministry of Construction The others Net profit in 2019 reached VND 758 billion, increased +13,6% yoy, reaching 102% of the 2019
plan. NPAT margin remained at 7.5% over the same period, mainly due to the weak operation of
joint venture construction glass companies.
Forecast 2020
Based on the revenue growth potential of VGC's businesses, we forecast that VGC's revenue in 2020
will be about VND 10,692 billion, equivalent to a growth rate of about 6-7% yoy.
At the same time, we estimate that EBT will reach about VND 612 billion, + 16% yoy, based on the
revenue growth potential and gross profit margin basis (detailed in the VGC report).
Investment opinion
Stocks are no longer at attractive price with high safety margins.
In short-term, the prospect of industrial zone business. Although construction material
businesses are running into difficult phase due to the less positive construction situation and
competitive pressure from each segment, VGC is expected of continuous growth, thank to the
prospect of industrial zone business. Based on surveys of some Northern Industrial Zones, we
appreciate the potential of VGC's revenue growth in the period of 2020-2021, as expanding of
crucial industrial zones, such as Yen Phong I (expected leasing time 2018- 2021), Dong Van 4
(2018-2021), Yen My (2020-2024) are very attractive and Yen Phong IIC Industrial Zone will
bring additional revenue-profits from 2021.
Long-term growth prospect of domestic construction development: Demand for housing
and infrastructure in the future will grow positively while the urbanization rate and the
average floor area per person in Vietnam are still fairly low, comparing to some countries in
the region and developed countries in the world. Activities of attracting FDI and the policies
of supporting industrialization and modernization of the Government will create dynamics to
develop the construction sector. Therefore, we expect the demand for construction materials
nationwide and VGC in particular still has room for long-term growth.
Valuation
We use FCFE and FCFF method and assume asset liquidation at the end of 2050. We estimate the
intrinsic value of VGC share at VND 20,400 per share. Refer to the valuation assumptions below
and the forecast detailed in the VGC report.
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