Company Report

Given the uncertainty of a full recovery and an upside of just 2% (VND 36,700/share price target) based on our new target price, we downgrade our rating on the shares of ANV from Outperform to Market Perform. At the AGM, management provided net revenue and PBT guidance for 2023 of VND 5.2 tn (+6% YoY) and VND 300 bn (-61% YoY), respectively. PBT guidance was revised down 40% from VND 500 bn (-35% YoY) during April 2023 to VND 300 bn (-61% YoY) during the June 2023 meeting, reflecting management's much less sanguine view on the recovery of fishery exports and gross profit margin contraction in less than two months. Reflecting management’s perception, we too lower our 2023 NPAT forecast 34%  given the: (1) longer-than-expected ASP recovery; and (2) lower-than-expected order volume from the Chinese market.

Despite weak auto consumption, VEA remains attractive due to its unique advantage of being affiliated with top auto manufacturers including Toyota, Honda, and Ford, and its generous dividend (100% dividend payout, with a dividend yield of 11% last year). For this year we expect VEA to post lower income from JVs but high interest income through its strong cash reserves. Our 2023 estimate for consolidated revenue and net profit is VND 4.3 tn (USD 182 mn, -14% YoY) and VND 7 tn (USD 299 mn, -8% YoY). We also introduce our 2024 estimate, which assumes lower interest income and a slight recovery in auto consumption. Our 2024F consolidated revenue and net profit is at VND 4.3 tn (USD 184 mn, +0.5% YoY) and VND 7.1 tn (USD 305 mn, -1% YoY), respectively.

After the sharp drop of -30% in 1Q23, the company’s urea price continued to decline in 2Q23. DPM urea price now stood at VND 9,000/kg (vs VND 9,600/kg in 1Q23). We believe the urea price is to stabilize around this level throughout 3Q23, before rebounding moderately in 4Q23 when the high season approaches. Having said that, we forecast earnings of DPM to set a trough in 2Q23 in terms of absolute value, but recovery is rather slow. As such, 2023 net income is estimated to drop to VND 1.18 tn (-79% YoY, from VND 1.23 tn estimated previously, lower than the company guidance) due to (1) urea price downtrend, (2) sluggish urea demand and (3) increase in gas transportation tariff. In 2024, net income may increase to VND 1.27 tn (+8% YoY, from VND 1.32tn estimated previously) thanks to the recovery in sales volume. As DPM may have passed the earnings trough period (2Q23), we roll over to 2024 and use higher target multiples to derive a new target price of VND 34,700 per share (from VND 30,600). With an ROI of 10%, we maintain our MARKET PERFORM rating.

Reiterate OUTPERFORM, with new 1Y TP of VND 52,900/share. Raise 2024F NPATMI estimates to VND 554 bn, flat YoY given the recent positive development and expectation of further reocvery of freight rates, leading to a possible re-rating for the industry. AGM set target for NPATMI 2023F of VND 490 bn, - 40% YoY, 10% lower than our estimates. Industry see some positive developments on charter rates (+15-20% from trough) so we expect inventory de-stocking to end around 3Q2023 and industry fundamental to improve from that point on.

NTC is trading at a forward 2023 P/E and P/B at 13.1x and 5.0x, respectively – higher than the average industrial park developer P/E of 11.5x and P/B of 2.1x. We recommend an OUTPERFORM on the shares of NTC, with a target price of VND 185,900/share (upside 11%) based on RNAV valuation. We believe that the NTC3 industrial park will start operating at the end of 2023 with a commercial land area of 254 ha, while industrial parks in Binh Duong have run out of leased land with occupancy rates reaching over 92%. NTC3 Industrial Park should be the main source of revenue for NTC, with a forecasted gross profit margin of over 45% and project NPV of VND 2.5 tn.

We maintain our 2023 forecast for petroleum sales volume at 10.9 mn m3 (+4% YoY), whereby retail volume is set to increase 12% YoY to 7.3 mn m3. Total revenue is forecast at VND 282 tn, a decline of -7% YoY due to the drop in average petroleum prices of 14% YoY. We maintain our Market Perform rating on the shares of PLX, with 1-year target price of VND 39,600/share. We expect the company’s earnings growth to continue on a YoY basis over the next two quarters off the 2022 low base and the one-off profit event from the PGB deal can be a supportive element. However, the share price may have already been priced in the catalysts, so we would wait for another correction prior to accumulating the shares.

Over the short term, we see improving market sentiment as a result of recent interest rate declines. However, we anticipate that market liquidity would improve gradually, possibly from 2H23 when multiple supporting measures and declining interest rates should exhibit a more visible impact on the market.  Meanwhile, medium- and long-term prospects for the sector remain positive, underpinned by population growth, on-going urbanization, and strong underlying housing demand. At current price of VND 56,500/share, VHM trades at a 2023 and 2024 PE of 8.4x and 7.8x, respectively, and 2023 and 2024 PB of 1.4x and 1.2x - lower than historical averages and relatively attractive compared to peers.

Phu Nhuan Jewelry’s (PNJ) financial performance trailed behind our expectations, with net income in April declining by -24% YoY. However, we think the results more truly reflected the state of the general economy. We expect earnings of the company may still decline by double digits in 2Q23 and 3Q23, as the economic downturn may still weigh on jewelry consumption. Rate cut action by the Vietnamese central bank brought on a decline in policy rates by a range of 200-300 bps YTD, but it may take time for this to aid multisector economic recovery. We expect overall consumption demand to recover in 4Q23. As such, earnings may only swing back to positive territory from 4Q23. With worse-than-expected April performance, we revise down our 2023-2024 net income assumptions by -8% and -5% respectively to VND 1.74 tn (-4% YoY) and VND 1.96 tn (+13% YoY). We derive a new target price at VND 81,400 (from VND 86,000) per share based on 2024 financials (from average 2023-2024) and unchanged target P/E of 15x. With an upside of 11.1% from the current share price, we downgrade our rating to MARKET PERFORM (from OUTPERFORM). PNJ may only be suitable for investors with a long term investment horizon, wherein investors can get exposure to the jewelry retail industry which benefits over time through the expected rise in disposable income, and the transition from traditional trade to modern trade outlets.

We upgrade the share of STB to a BUY rating from Outperform, as we roll-forward our valuation to mid-2024 and arrive at a 1Y TP of VND 34,500 per share (up from VND 29,000). Our double upgrade reflects asset quality holding up well, as STB hasn’t any corporate bond investment exposure and only limited exposure to real estate developers. In addition, pretax profit growth looks appealing for 2023 and 2024, even without one-off income from the sale of legacy assets. Given the potential upside of 22.3%, we recommend to accumulate STB shares at price weakness.  For 2023, we reduce our pretax profit 9.2% forecast from our previous estimate to VND 9.5 tn (+50% YoY), due to weaker-than-expected NFI growth (-26.4% YoY) as sluggishness in credit demand weakened cross-selling activities, as well as a lack in other income (-71% YoY). However, it should be noted that if we exclude the one-off income item from bancassurance during 2022, NFI is expected to increase 3.5% YoY for 2023.  

VNM reported 1Q23 net sales and net profit of VND13.9tn (+0.3% YoY, -7.6% QoQ) and VND1.9tn (-16.5% YoY, +2% QoQ), respectively, trailing our expectations. Domestic sales continued to struggle, given weak consumer sentiment and aggressive competition in the market. For 2023, the company has set an annual sales and net profit target of VND63.4tn (+5.5% YoY) and VND8.6tn (+0.5% YoY), respectively, which we believe to be rather conservative. We also lower our 2023E earnings to reflect challenging overall market conditions. We expect 2023E net sales and net profit to reach VND63.8tn (+6.4% YoY) and VND9.2tn (+7.3% YoY), respectively. Our new earnings are 3% lower than our previous net profit estimates. For 2024E, we expect net sales and net profit to reach VND67.8tn (+6.3% YoY) and VND10.2tn (+11.3% YoY), respectively. We lower our DCF/PER-based 12-month target price for VNM to VND74,700/share (from VND82,900/share) as we now use a lower target PER of 16x (from 18x) to reflect the gradual loss of market share. Our new TP implies 13.5% upside potential. We maintain our Market Perform rating on the shares of VNM. 

We roll-forward our valuation to mid-2024 and adjust our 1Y TP to VND 24,300 (from VND 22,800). Given the high exposure to real estate developers (12%), mortgage loans (18%), and corporate bonds (10.7%), we are concerned that TPB’s asset quality weakness will last longer than expected - impeding the NIM recovery. As such, we believe that an additional provisions will be the best consideration for TPB. With such difficulties, earnings growth fragility and narrowed ROE are what we expected to happen for both 2023 and 2024. Therefore, we maintain our Market Perform rating on the shares of TPB. For 2023, we project that TPB’s pretax profit will achieve VND 8.2 tn (+4.8% YoY). We believe that NIM contraction (-30 bps YoY) and provisioning burden (+22% YoY) will impede 2023 core profit growth. Against a modest showing of PBT during 2023, we project that 2024 pretax profit will be VND 9 tn (+9.8% YoY), driven by NII and NFI growth of 11.9% and 24.4% YoY, respectively.

Despite posting a massive loss of VND 320 bn during the first quarter, animal feed and livestock producer DBC still stands behind its NPAT guidance of VND 565 bn (+10,854% YoY vs. 2022, and +86% YoY vs. 2019), as management anticipates a strong recovery in hog prices and gains from pending real estates. Our net revenue and NPAT estimate is at VND 11.1 tn (-4% YoY) and VND 320 bn (+6062% YoY), respectively, predicated on the assumption that animal feed and husbandry unit should only see a mild recovery and real estate earnings will be booked. We also introduce our 2024F revenue and NPAT forecast of VND 12 tn (+9% YoY) and 494 bn (+54% YoY), respectively.  At current market price, DBC is traded at 2024 P/E and EV/EBITDA of 10.8x and 7.2x, which look quite fair compared to historical ranges (8-12x for P/E and 4-9x for EV/EBITDA).

From our last report, Vietnamese trade in general has not improved by a great degree, with Jan-May tracked 2023 total trade value declining by -14.7% YoY, but slightly up by +5% MoM for May. Especially, imports by value is still declining by -18% YoY in May, and this is a bad signal for export in 2H because a large part of Vietnamese import value is materials for manufacturing. Thus, we have grown more concerned and are watching closely export recovery prospects for 2H 2023. The recent 5% MoM growth in May exports is a positive sign. So we maintain our estimates for GMD as-is for now, but might revise down our estimates if exports do not improve further in the coming months of 2023. Specifically, we maintain our total port volume assumption for GMD of 2.7 mn TEU, -10% YoY in 2023F and 3.4 mn TEU, +22% YoY in 2024F. Tariffs are expected to maintain stable in this period. Thus, we maintain our forecast for 2023F-2024F.

For 2023, KBC maintains its target (approved at the EGM held in December 2022) of VND 9 tn in revenue (+840% YoY) and VND 4 tn in net profit (+151% YoY). Such an optimistic plan is based on the expectation of delivery of: (i) 250 ha of industrial land (Quang Chau & Nam Son Hap Linh IP account for the majority); and (ii) 10 ha of residential land (mainly in Phuc Ninh Urban Area) during the year. While the company is quite confident in securing land leases, there does remain the risk of delay in land delivery due to slower-than-expected land clearance and the procedural processes which could lead to lower-than-expected earnings. We reiterate our positive outlook on KBC’s IP business as most of its ongoing and upcoming projects are located in key industrial hubs in Northern Vietnam (Bac Ninh, Bac Giang, Hai Phong, Hung Yen) where it directly benefits from the relocation trend of production from China to Vietnam. However, we do not exclude risks of weakening global demand, global minimum tax, higher labor cost, difficulties in land clearance, and insufficient infrastructure that could pose challenges to KBC, as well as the sector in general.