BTIG initiated coverage on VinFast Auto (NASDAQ:VFS) with a Buy rating and set their 12-month price target at $10.00 for the Vietnamese automaker.
The automaker successfully entered the U.S. market, initiating direct deliveries of their first electric vehicles to American customers at the beginning of 2023. However, the company disclosed in December that they have formed a partnership with a dealership located in North Carolina, a move aimed at boosting sales efforts in North America.
VinFast’s flagship facility in Vietnam boasts a capacity of producing 250,000 to 300,000 EVs per year. Although the delivery guidance for 2023 stands at 40,000 to 50,000 EVs, the company anticipates aggressive scaling due to growing demand. Their objective is to significantly increase production, targeting expansion in sales to approximately 50 global markets.
VFS's local strategy relies on sourcing of as much as ~60% of components locally, while competitors import as much as 80-90%. This helps VFS benefit from a lower tax rate of around 10% (compared to the usual 20%) until 2032, an advantage that helps VFS to be competitive locally.
In October, VFS acquired VinES, a battery company, helping the automaker to integrate vertically. VFS also signed a Letter of Intent (LOI) with the U.S. government for a possible $500M loan. the loan would help build a battery facility in Vietnam, accelerating production and diversifying the global EV battery supply chain for VFS.
In short, BTIG anticipates VinFast to increase production in Vietnam in 2024 and in North Carolina by 2025, with VinES playing a crucial role in driving long-term margin expansion.
Shares of VFS are up 1.42% in pre-market trading Wednesday morning.