What is so special about the "2 trees, 1 animal" model that Mr. Duc claims a profit of 2,000 billion VND/year?

Durian for 400% profit margin...

Hoang Anh Gia Lai Joint Stock Company (HAGL, code: HAG) has just announced estimated business results for August with revenue from the fruit segment nearly double that of the livestock segment.

Accordingly, HAG's net revenue in August is estimated at 660 billion VND. Of which, fruit trees contributed 338 billion VND, livestock brought in 182 billion VND and 140 billion VND came from the supporting industry.

Regarding output in August, HAGL sold 32,584 pigs and 30,900 tons of bananas. However, the output of exported bananas and bananas used for animal feed production was not announced in detail as in previous reports. Information on business results and output of products in July was also not announced by this enterprise.

The company does not announce profits. According to HAGL, in accordance with shareholders' opinions, HAGL will update profits periodically every quarter.

Regarding output in August, HAGL consumed 32,584 pigs and 30,900 tons of bananas.

In August, Mr. Doan Nguyen Duc - Chairman of HAGL informed that the pilot activities of growing vegetables and raising "walking chickens" were not very effective, so HAGL will stop these areas, focusing only on three pillars including pigs, bananas and durian ("one pig, two trees").

Mr. Duc also said that HAGL currently has about 7,000 hectares of bananas, 1,200 hectares of durian, 600,000 pigs, and 1,000 hectares of other fruits. With durian, 700 hectares have been planted in the 4th and 5th years, meaning they can be harvested by the end of 2024.

This year alone, HAGL harvested about 1,000 tons from 3 gardens, equivalent to 80 hectares. In the context of high durian prices like the current period, it is expected that this product will bring in large revenue and profit for the group in the near future.

Regarding bananas, HAGL also said that the company's revenue and banana output are expected to increase sharply in the fourth quarter of 2023.

Mr. Duc's "2 trees - 1 animal" formula

At the investor meeting held last August, Mr. Doan Nguyen Duc - Chairman of the Board of Directors of HAGL affirmed that HAGL has found the main direction in business, no longer the situation of "raising this child and abandoning that child or planting this tree and cutting down that tree".

HAGL has invested in rubber, oil palm, vegetables, passion fruit, etc. Each type of crop, HAGL can only maintain for a few years before continuing to change direction. Similarly, with livestock, HAGL also failed with cattle farming. Up to this point, Mr. Doan Nguyen Duc is optimistic and believes that HAGL is on the right track when choosing "2 trees - 1 animal" (banana, durian and pig) for development.

Up to now, HAGL has built and basically completed this "2 trees - 1 animal" model. The products are both aimed at the domestic and export markets. Obviously, HAGL realizes that raising "walking chickens" and growing vegetables and fruits in the Northern Central Highlands cannot bring about the same economic efficiency as growing bananas, durians and raising pigs.

According to Mr. Duc, HAGL has so far made a profit of 1 million VND per pig. The price of bananas is currently at 10.5 USD/box. HAGL's bananas have been exported well to China. In July alone, HAGL made a profit of 115 billion VND thanks to pigs and bananas.

With durian, this year's profits are clear as mentioned above. In 2024, HAGL expects that durian profits may even exceed bananas. In the future, HAGL's greatest value will be durian orchards.

According to Mr. Duc, up to now HAGL has made a profit of 1 million VND per pig.

It is known that in the first half of 2023, HAGL's net revenue reached VND3,144.9 billion, up 55% over the same period last year. However, corporate profit after tax decreased by 26%, reaching VND385.2 billion. Profit of parent company shareholders reached VND382.3 billion.

The auditors issued an opinion emphasizing that the Group's accumulated loss was more than VND2,959.4 billion, and HAGL's short-term debt exceeded its short-term assets by VND2,004 billion. These factors indicate the existence of a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern.

However, HAG's board of directors said the Group can repay its debts when due and continue operating in the next accounting period.

Up to now, Mr. Doan Nguyen Duc - Chairman of the Board of Directors of HAGL still affirms that the main business path is "two trees - one animal": Growing bananas - durian and raising pigs, and with the current positive business situation, by 2024, HAGL's profit will not be less than 2,000 billion/year.

In fact, in terms of business prospects, HAGL is considered a business that directly benefits from China's increasing demand for fruit consumption.

After the Protocol on banana export between Vietnam and China was signed in November 2022, Vietnam's banana exports to China in the first half of 2023 increased by 40% in volume and 23% in value, respectively, over the same period last year.

Currently, HAGL is one of the leading banana exporters in Vietnam and the Chinese market accounts for 80 - 90% of the group's banana export output.

Last May, HAGL established a joint venture company in China, in which HAGL holds 50% of the capital (the Chinese partner holds 50% of the capital). In the past, HAGL sold bananas wholesale through imports, periodically auctioning them off... but now HAGL can bring branded bananas directly to supermarket channels.

It is known that HAGL's partner is a company specializing in fermenting bananas and bringing them to the supermarket channel. The advantage of this company is that it has a ready retail network. The banana brand HAGL retails to China is Pleiku Sweet (super sweet Pleiku banana), packaged according to Japanese standards in small quantities of about 3-4 fruits.

According to HAGL, this consumption channel helps the company's products to have more stable prices than before. Currently, the output is about 100 containers/month, and is expected to increase in the near future because "they eat up as much as they sell".

Regarding durian, with 1,200 hectares of Musang King and Mong Thong Thai durian in Vietnam and Laos, HAGL is currently the enterprise with the largest durian garden in Southeast Asia. Of which, the durian area in Laos accounts for 80%. In 2024, durian is expected to contribute greatly to HAGL's revenue when 50% of the area will bear fruit.

Faced with concerns that durian prices may fall or face competition from Thailand, the Philippines, and China, Mr. Doan Nguyen Duc assessed that market demand is very high. Currently, the durian supply from Southeast Asian countries to the Chinese market only meets about 10% of the country's population, so there is no need to worry too much.

Fresh durian in China is selling for more than $10/kg, significantly higher than the average of about $6/kg in Southeast Asian countries. With 1,200 hectares of Musang King and Mong Thong Thai durian in Vietnam and Laos, Hoang Anh Gia Lai is currently the enterprise with the largest durian garden in Southeast Asia. Of which, the durian area in Laos accounts for 80%.

According to Mr. Doan Nguyen Duc, although the revenue from durian is not large compared to the scale because only a part of the cultivated area is bearing fruit, the profit margin of durian trees is much higher than other business segments, up to 400%. In 2024, durian is expected to contribute greatly to Hoang Anh Gia Lai's revenue when 50% of the area will bear fruit.

In terms of business prospects, HAGL is considered a business that directly benefits from China's increasing demand for fruit, especially durian.

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