VinFast Auto (NASDAQ: VFS) became a public-listed entity in the US stock market on 15 August this year through a SPAC (Special Purpose Acquisition Company) merger. I think it is also a company with one of the largest disconnects between fundamentals and price that I’ve ever seen. I’ll lay out what I know, and you can judge my thought.
Founded in 2017, VinFast manufactures EVs (electric vehicles), e-scooters, and e-buses. The company started producing e-scooters in 2018, ICE cars in 2019 (the production of internal combustion engine vehicles was phased out in late-2022), and e-buses in 2020. Its first EV product line consists of a range of SUVs (sport utility vehicles) which it began manufacturing in December 2021. VinFast’s manufacturing facility – which has 1,400 robots and is highly automated – is located in Hai Phong, Vietnam and has an annual production capacity of 300,000 EVs. Through June 2023, VinFast has delivered 105,000 vehicles – most of which are ICE vehicles – and 182,000 e-scooters.
Vietnam is VinFast’s headquarters and the company’s primary market at the moment. As of 30 June 2023, VinFast had sold around 18,700 EVs, mostly in Vietnam, since inception; the deliveries of the 182,000 e-scooters since the company’s founding all happened in the same country too. The company has ambitions beyond Vietnam and has set its sights on the USA, Canada, France, Germany, and the Netherlands as its initial international markets. VinFast commenced US deliveries of EVs in March this year while it expects to start delivering EVs into Europe in the second half of 2023. The company has recorded around 26,000 reservations for its EVs globally as of 30 June 2023.
Controlling nearly all of VinFast’s shares currently (99.7%) is Pham Nhat Vuong, the founder and majority shareholder of Vingroup, a Vietnam-based conglomerate. Vingroup has a major economic presence in Vietnam – the company and all of its listed subsidiaries collectively accounted for 1.1% of Vietnam’s GDP in 2022 and they have a combined market capitalisation of US$21.0 billion (note that this does not include the value of VinFast) as of 30 June 2023.
In the two weeks since VinFast’s listing, the company’s stock price closed at a high of US$82, on 28 August 2023. This gave VinFast a staggering US$190 billion market capitalisation based on an outstanding share count of 2.307 billion (as of 14 August 2023). At the market-close on 29 August 2023, VinFast’s share price was US$46. Though a painful 44% fall from the previous day’s closing, the US$46 stock price still gives VinFast a massive market capitalisation of US$107 billion, which easily makes it one of the top five largest auto manufacturers in the world by market capitalisation. But behind VinFast’s market size are the following fundamentals:
- 2022 numbers (I would have used trailing numbers, but they’re not readily available): Revenue of US$633.8 million, an operating loss of US$1.8 billion, and an operating cash outflow of US$1.5 billion
- As I already mentioned, VinFast has (1) 26,000 reservations for its EVs globally as of 30 June 2023, and (2) delivered 105,000 vehicles – most of which are ICE vehicles – and 182,000 e-scooters from its founding through June 2023.
For perspective, here are the equivalent numbers for Tesla, the largest auto manufacturer in the world by market capitalisation (US$816 billion on 29 August 2023), and a company whose valuation ratios are often said by stock market participants to be rich:
- Trailing numbers: Revenue of US$94.0 billion, operating income of US$12.7 billion, and operating cash inflow of US$14.0 billion
- Trailing deliveries of 1.638 million vehicles worldwide.
So given all the above, what do you think about my statement above, that VinFast is “a company with one of the largest disconnects between fundamentals and price that I’ve ever seen”?
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