Company Report

We reiterate our Outperform rating on the shares FMC. Our updated one-year price target for FMC is VND 56,200/share (from VND 50,600/share), as we roll forward our price target to 2024F EPS - representing +21% upside. FMC exports reached USD 87 mn (-26% YoY) and outperformed the Vietnamese shrimp export market (-32% YoY) during 1H23 due to FMC’s key market in Japan which remain stable YoY.  During 2Q23, FMC reported net sales and NPATMI of VND 1 tn (-27% YoY, +2% QoQ) and VND 71 bn (-59% YoY, +53% QoQ), respectively as 2Q22 was the earnings peak of FMC. 

July preliminary results: total revenue VND 9.8 tn (-11% YoY, +4% QoQ), in which ICT &CE and grocery revenue were VND 6.7 tn (-21% YoY, flat MoM) and VND 2.8 tn (+17% YoY, +11% MoM), respectively. With worse-than-expected 2Q23 results, we revise down our 2023 net income estimate to VND 1.27 tn (-69% YoY, from VND 3 tn). 2024 net income is estimated at VND 4.99 tn (+294% YoY, from VND 4.6 tn). We believe that MWG’s earnings passed the trough in 2Q23 and is on a recovery trajectory. Hence we raise our target multiples and derive a new SOTP-based target price of VND 61,500 per share (from VND 59,400). Since our last BUY call on July 12^th, the MWG share price has increased by 10%. As our new target price offers 14.1% upside, we rate the stock as OUTPERFORM (from BUY).

At the current price, HSG is trading at 2024FY P/E, P/B and EV/EBITDA forwards of 23.6x, 1.2x and 7.6x respectively, while NKG trades at 2024 P/E, P/B and EV/EBITDA forward of 20.4x, 0.9x and and 8.1x respectively. Our rating for both stocks is Market Perform, with a 1-year target price of VND 19,300/share for NKG, and VND 19,900/share for HSG based on target PB and EV/EBITDA of 0.9x and 7.5x respectively for NKG, and 1.2x and 7.5x for HSG respectively.

Given the degree of support from Cir. 02, we believe that NPL formation rates have peaked during 1H23, and that the NPL ratio will be vacillate around 3% for the remainder of 2023. VIB has exhibited less interest in corporate bonds and real estate developers in general. However, asset quality still deteriorated, as lending rate hikes have affected customer prepayment. Although we believe that early government intervention in the real estate sector will help shorten the industry's recovery time compared to the previous cycle, the recovery path remains hazy at least another year, in our view. Thus, we maintain our Market Perform rating on the shares of VIB with a 1-year target price of VND 22,700 per share.

We are maintaining our OUTPERFORM rating on the shares of VCB with a 2024 target price of VND 105,900/share (from VND 92,633/share after adjusting for the stock dividend) - representing an upside of 18.7%, as we roll forward our valuation basis, assuming that the company’s private placements will be successful, and increase our target PB to 2.7x (from 2.4x) due to the lower interest rate environment. VCB posted VND 9.3 tn pretax profit (+25% YoY) vs. our estimate of VND 10 tn (+35% YoY), as the bank booked more provisions than we had anticipated. Nevertheless, we continue to view the 2Q23 results as strong and the 1H23 provisions as pre-emptive and will likely enable future provisions to be reduced from 2H23. During the period, VCB also bucked the trend in both NIM (+2 bps QoQ) and asset quality (flat NPL ratio of 0.8%, and further fortified its provision coverage at 386%). The only drawback for the quarter, in our view, was that CASA nudged -43 bps lower to 30%, as the peer average CASA improved 45 bps. We however do not consider this as significant, as VCB continues to possess the lowest funding cost in the sector due in large part to its stable depositor base. CASA should further improve over the near term as deposit rates remain at a low level.

DGC delivered net income of VND 882 bn (-54% YoY) for 2Q23, which exceeded company guidance of VND 630 bn. Compared to the latest quarter, net income increased 7% QoQ, due primarily to higher usage of in-house phosphate rock, as ASP continued its downtrend. We expect that earnings for 2H23 will rise 11% vs. 1H23 as the price of yellow phosphorus and related products recover - along with the rebound in demand from fertilizer and semiconductor producers. The price of DAP-type fertilizer has increased between 12%-15% from the trough of July due to higher agro-commodity prices. Meanwhile, we expect that demand for yellow phosphorus from semiconductors to recover during late 2023, helping DGC to post double digit net income growth for 2024. We estimate 2023 and 2024 net income of VND 3.59 tn (-41% YoY, from VND 3.8 tn) and VND 4.34 tn (+21% YoY), respectively. We derive a target price for the shares of DGC of VND 84,000 per share – representing upside of 14.4%. We call for OUTPERFORM rating on the shares.

For 2023, we expect that the company will post net sales and net profit of VND 63.4 tn (+5.7% YoY) and VND 9.1 tn (+5.9% YoY), respectively. This is -1.3% lower than our previous net profit forecast. Such an outlook translates into 2H23 net sales and net income growth of +10% and +18% YoY, respectively. For 2024, we expect net sales and net profit to reach VND 67.4 tn (+6.3% YoY) and VND 10.7 tn (+17.2% YoY), respectively. Our 2024 net profit forecast is 4.4% higher than our previous estimate. We raise our GPM assumption for 2024 from 42.1% to 43% to reflect the declining trend of imported milk powder. Our updated 1Y target price for the shares of VNM is raised to VND 86,600/share (from VND 82,000/share), based on our 2024E EPS and DCF methodology. With upside of 19%, we reiterate our OUTPERFORM rating on the shares of VNM.  

Tuning our 2023F core PBT assumptions 5% to VND 1.45 tn (+24% YoY). Including the one-off gain of VND 94 bn, our new 2023F PBT estimate is VND 1.55 tn, +6% YoY (up from VND 1.48 tn). This means that for 2H 2023, we envision a stronger core PBT of VND 772 bn (+29% YoY). PBT is expected to decline -4.3% YoY during 2024F, as we assume lower one-off income in 2024F and a flattish core PBT if we exclude the one-off gains for both years. Downgrade to MARKET PERFORM (from OUTPERFORM), with 2024 TP of VND 24,000/share (from VND 23,200/share). PVT is trading at 2023F and 2024F P/E forward ratio of 8.27x and 9.0x, respectively, which is at the high end of its historical P/E band. The stock remains our favorite play in the tanker industry (currently in an upcycle) with outstanding management, but we’d recommend to accumulate at a lower share price.

IDC is one of the largest industrial park developers in Vietnam, with 727 ha of available lettable land in Long An, Ba Ria Vung Tau, and Thai Binh provinces. Low compensation and clearance costs should enable IDC to maintain its gross profit margin of IP segment at above 50% between 2023 to 2026.  IDC trades at a 2023 P/E of 10.2x and P/B of 2.5x, and 2024 P/E and PB of 8.9x and 2.4x - lower than industry average of 14.8x and 3x, respectively. We have OUTPERFORM rating for the shares of IDC, wherein our 1-year target price is adjusted to VND 53,200/share (from VND 51,400/share), representing an upside of 8.8% from current market price. With 101.76 ha new signings and a payment schedule to be accelerated from one year to six months, as we observed amongst large clients, IDC’s cash flow should continue to improve.  We believe that IDC can maintain its cash dividend at 40% of par value during 2023 and 2024, with the dividend yield of 8.3%.

In 2Q 2023, GMD recorded better results than our expectation, surpassing even in such a low-key picture in terms of external demand, handily exceeding previous estimates. Net sales only declined by -6.7% YoY, while core PBT declined by a mere -10% YoY (while recovering by 8% QoQ). Revenue for 1H23 only declined by -2.4% YoY to reach VND 1.8 trillion, while PBT reached VND 2.5 trillion, including a VND 1.8 trillion one-off profit from Nam Hai Dinh Vu Port divestment recorded in 2Q 2023 (in line with our estimate of VND 1.8 trillion). Excluding the one-off gain, 1H2023 core PBT otherwise would have registered at VND 642 bn (-11% YoY). This also beat our in-house estimate thanks largely to a higher gross margin.

Reflecting positive performance on YoY basis and stable growth outlook of VRE’s core business of mall leasing, we reiterate our BUY rating on the shares of VRE with 1Y target price of VND 38,700/share (28.8% upside), a slight decline of 4% compared with our previous TP due to the rescheduling of new mall openings. Valuation (2023E EV/EBITDA of 8.8x, both below historical and regional peer average of 15x) is also attractive, in our view. Key downside risks to the shares of VRE include: (i) delay in development of Vinhomes mega projects which could impact the company’s expansion; and (ii) weaker-than-expected consumption which may lead to a slowdown of tenant expansion plans.

We maintain our Market Perform rating on the shares of TCB, with a 1Y TP of VND 38,700/share as we roll our valuation basis to 2024. We undoubtedly believe in the long-term prospects of the property and the corporate bond markets in Vietnam, and that a key market player, like TCB would eventually reap the rewards. Over the short-term, however, we continue to foresee challenges which is not likely to be resolved in its entirety over the short-term, but instead could take at least 2-3 years to resolve. During this time, the absorption rate in the property market may not be desirable and may adversely affect the cash flow of developers/landowners. Accordingly, TCB’s earnings growth may not match the impressive years (2014-2021) near-term. We project that the bank’s pretax profit for 2023 and 2024 will reach VND 23.3 tn (-8.5% YoY) and VND 27.2 tn (+16.1% YoY), respectively. Hence, ROE is projected to remain around 15% vs. the industry average of 16.2%.

KBC Q2 reported revenue and NPAT was VND 2 tn (+421% YoY) and VND 747 bn (vs. losses of -VND 323 bn in 2Q22), respectively. The strong growth during Q2 was primarily attributed to revenue from industrial land lease increasing 625% YoY, accounting for 95% of total revenue. Cumulatively, during the first six months of 2023, total revenue reached VND 4.27 tn (+294% YoY) and net income achieved VND 1.8 tn (+800.3% YoY), fulfilling 47% and 45% of full year revenue and net profit target, respectively.  By end of Q2, KBC had 185 ha committed to lease to several clients, of which KBC handed over 128 ha during the first six months. During 2H 2023, KBC management expects to deliver up to 100 ha in Quang Chau, Tan Phu Trung and NSHL IP. Meanwhile, the company also expects to hand over residential land in Phuc Ninh UA once the LUF payment to the State is complete. Should this be the case, KBC may achieve its challenging target of VND 9 tn (+840% YoY) in revenue and VND 4 tn (+151% YoY) in NPAT this year.

We attended the SAB analyst meeting on August 3, 2023 to receive an update on 2Q23 results and the sales outlook for 2H23, and get a better sense of the current competitive landscape. For 2Q23, SAB posted net sales and net profit of VND 8.3 tn (-7.7% YoY and +33.8% QoQ) and VND 1.2 tn (-32.5% YoY and +20.6% QoQ), respectively, which were in line with expectations. Q2 results were a byproduct of weak consumer demand, along with the stricter enforcement of Decree 100. Management indicated that it would be a challenge for the company to meet its annual targets, given that the domestic demand recovery remains slower than expected. On a positive note, market share gains have resumed since the Tet holiday, reducing the market share gap between SAB and its major competitor.