Company Report

We maintain our Market Perform rating on the shares for BSR, but raise our target price to VND 21,600/share given the low interest rate environment. Our target price is based on a 2024 P/E and EV/EBITDA target of 10x and 5x, respectively. Over the short-term, we believe that the share price can outperform the market due to robust earnings growth next quarter. However, due to the volatile nature of the company’s earnings due to fluctuations in both oil prices and crack spreads, the shares are likely more suitable to short-term investors with a high-risk tolerance. In addition, any news regarding the listing on HOSE would be supportive to the share price.

HPG trades at a 2024F P/E and EV/EBITDA ratio of 12.5x and 7.2x, respectively. We maintain our MARKET PERFORM rating, but raise our 12-month target price to VND28,500/share (from VND19,800), as we roll over our valuation basis to 2024F (from 2023F) and increase our target PE and EV/EBITDA to 13x and 7.5x, respectively, given the recent significant decline in the market interest rate. We expect a more significant recovery to take place from late 2023 or early 2024.  As the current price has already reflected part of the earnings recovery in the coming year, we believe investors should wait for a price correction to accumulate the stock over a longer-term investment horizon. Upside risk: stronger-than-expected demand for steel products in the domestic market; downside risk: lower-than-expected steel prices.

We increase our 2023 NPAT estimate by 32% over our previous forecast, encouraged by lower-than-expected PVC input prices. Our new one-year price target for the shares of BMP is VND 99,200/share (from VND 84,300/share) as we roll forward our price target to 2024F - representing +13% upside. We reiterate our MARKET PERFORM rating for the shares of BMP. 2Q23 earnings surpassed the prior quarter records due to resilient ASP and lower-than-expected PVC input prices despite lower sales volume. Net sales and NPAT were VND 1.3 tn (-14% YoY, -7% QoQ) and VND 295 bn (+103% YoY, +5% QoQ), respectively.

VHC posted 2Q23 results, wherein net profit reached VND 412 bn, declining -48% YoY but improving +88% QoQ due to gross margin expansion and lower selling expenses. While sales were in line with our expectation, 2Q23 NPAT was better than expected. For 2023, we expect net sales and net profit to reach VND 11 tn (-16.9% YoY) and VND 1.46 tn (-26% YoY). This is 11.4% higher than our previous net profit forecast. For 2024, we expect net sales and net profit to reach VND 12.4 tn (+12.6% YoY) and VND 1.7 tn (+17.8% YoY), respectively.  Our 1Y target price for VHC is VND 80,500/share (from 71,500/share), representing an upside of 3.9%. We maintain our MARKET PERFORM rating on the shares of VHC.

2Q23 earnings of DCM came out better than our expectation with net income of VND 290 bn (-72% YoY, but 26% QoQ). We have previously anticipated that 2Q23 earnings may be worse than that of 1Q23 as urea price continued to drop in 2Q23. In fact, the urea sales price dropped by -11% QoQ, which roughly halved the gross profit margin from 20.8% in 1Q23 to 11.3% (close to 12% in 2H19, when the domestic demand was weak due to adverse weather condition) in 2Q23. Additionally, expenses for science and technology development declined more than we expected in 2Q23. This, together with the increase in financial income, brought DCM to its 2Q23 earnings results, though we think at this point the company has reached a bottoming out point in terms of earnings going forward.

In 2Q 2023, SCS recorded revenue of VND 172 bn (-17.4% YoY) and PBT of VND 147 bn (-10% YoY), continuing the declining trend since 4Q 2022 and in line with our estimates. However, looking to the QoQ comparison, things look brighter with clear recovery in all financial attributes from previous quarters:  revenue growth of 6.4% QoQ and PBT growth of 14% QoQ.

With these results, 1H 2023 revenue reached VND 334 bn (-26.5% YoY) and PBT reached VND 277 bn (-24% YoY). However, such results do not register as a surprise to us, and overall performance during 1H 2023 has closely matched with our current estimates for 2023 and passed the halfway point for the year, which we find to be an encouraging sign.

2Q23 revenue reached VND 288 bn (+10% YoY), while Q2 NPAT recorded the best performance in two years. This result is in line with our forecast when the SZC MOU contract was announced at the end of 2022. Revenue from leased industrial park land was VND 263 bn (+3.9% YoY), having rented 15 ha to the Sonadezi Corporation (owns 46.8% of SZC) at USD 72/m2 (+17% YoY). The gross profit margin jumped from 36.4% in 2Q22 to 53.9% due primarily to increase in average lease prices, which cushioned SZC’s earlier actions of booking additional land costs for the remaining land in the fully-owned Chau Duc Industrial Park since 1Q22. In addition, shophouse sales in the Sonadezi Huu Phuoc Residential Area reached VND 11.7 bn, while there was no revenue in 2Q22. Interest expense increased 21% YoY due to the recognition of loan from the golf course which came on line. General and administrative expenses decreased -30% YoY due primarily to the reduction cost of salaries. Net income reached VND 95.9 bn (+56% YoY).

Our last rating on DRC was MARKET PERFORM, as we believe that 2023 earnings will likely decline due to weak demand, which forced DRC to reduce prices charged to its customers in order to protect sales volume, hence effectively squeezing the profit margin. Q2 earnings (-39% YoY) came out even worse than company guidance (pretax profit of VND 63 bn vs company guidance of VND 80 bn). Earnings may start to recover in 2H23 (+57% HoH, -28% YoY) thanks to (i) the second half of the year traditionally being the high season and (ii) a gradual recovery in demand in both the domestic and export market.

We reiterate our Outperform rating on the shares of QNS, citing our improved outlook on the company. We revise up estimated 2023 NPAT by 35% compared to our previous forecast, encouraged by higher domestic sugar prices and higher refined sugar (RS) production volume. Our target price for QNS is VND 65,000/share (from VND 58,000/share), representing a +22% upside (total ROI 27%).

During 2Q23, STK reported net sales and net profit of VND 407 bn (-23% YoY; +41% QoQ) and VND 38 bn (-47% YoY) respectively, beating our estimates. Going forward, the company is confident that orders will continue to improve in terms of volume during 3Q23 and 4Q23 on QoQ basis. The declining trend of average PET chip prices should continue to help widen the price gap, and lead to a higher GPM during 2H23. During 2023, we expect net sales and net profit to reach VND 1.8 tn (-14.7% YoY) and VND 167 bn (-31% YoY), respectively. During 2024, net sales and net profit are estimated to reach VND 2.2 tn (+19.7% YoY) and VND 225 bn (+34.4% YoY), respectively. We applied the  historical average P/E of 14x to 2024 EPS to reach our new target price for the shares of VND 33,400/share (up from VND 26,800/share), indicating upside of 5%. We reiterate our MARKET PERFORM rating. As STK operates in the upper stream of the sector value chain, we expect sales results to be the first sign of a sector recovery, followed by other garment manufacturers. 

ACB announced a prelim PBT of VND 4.83 tn (-1.7% YoY) for 2Q23 which turned into 1H23 PBT of VND 10 tn, exceeding our expectations and accomplishing 50% of the AGM’s profit plan. This earnings growth slowdown was caused by NIM shrinkage, the provision burden, and weak fee-based earnings. Whilst credit growth rebounded during 2Q23 at 4.6% YTD (vs. -0.6% YTD for 1Q23), total deposit growth was 4.2% YTD. The NPL ratio increased to 1.07% (vs. 0.96% for 1Q23). Given that the LDR (79%) and short-term funding for medium- and long-term loans (19%) were well below the cap, we believe that funding pressure will not be the primary impediment for ACB to stimulate credit growth during 2H23.    

After receiving a large one-off land compensation income in 2022, PHR earnings are expected to decline in 2023-2024, due to: (i) the lack of land compensation income, (ii) less land available for lease in Tan Binh 1 Industrial Park, and (iii) less land tracts with aged rubber trees which can be cut down and sold as raw wood. We estimate 2023-2024 consolidated pretax profit at VND 696 bn (-38% YoY) and VND 607 bn (-13% YoY). While Nam Tan Uyen 3 IP and VSIP 3 IP may deliver profit from 2024, it may not be adequate to offset the reduction in income from Tan Binh 1 IP and from rubber tree disposal, and the absence of one-off land compensation income. We expect income from those 2 IPs may only aid earnings growth from 2025 onwards.

GAS is trading at 2024F PE of 15.5x. We maintain our MARKET PERFORM rating for the shares of GAS and raise our 12-month target price to VND106,000/share (from VND 103,000/share), based on 2024F EPS (from 2023F EPS) and an unchanged 1-year target PE of 16.5x. Key upside/ downside risks to our call include: stronger-/weaker-than-expected dry-gas volume; and higher/lower-than-expected fuel prices.

Becamex (HOSE: BCM) remains a leading industrial park developer, with total available land of 888.5 ha for lease. At the same time, the commercial land area is 1,250 ha in Binh Duong New City (100% owned by Becamex), and profit margin at 43%, according to Capitaland. The VSIP-Warburg Pincus joint venture is forecasted to be quite profitable due to the growth in leasing demand for land and factories. Using RNAV method, we rate the shares of BCM as OUTPERFORM, with a target price of VND 88,700/share (upside 9.6%). Over the short-term, information about the transfer of land to sub-developers in the Binh Duong New City project and the start of Cay Truong Industrial Park should support the share price going forward.

Although we are not raising our earnings forecasts for 2023-2024, we are now more positive on VNM versus the overall market given the impact of lower input costs as well as a lower WACC in our DCF valuation. Therefore, we are upgrading the shares of VNM from Market Perform to Outperform, and increasing our target price to VND 82,000/share (from VND 74,700/share), which represents an upside of 14%. We are of the opinion that the share price has already priced in previous difficulties, and therefore might have bottomed out. Looking ahead, a likely return to profit growth in coming quarters and demand recovery in 2024 support our view on VNM.