Company Report

QNS posted 2022 net revenue and NPAT of VND 8.3 tn (+13% YoY) and VND 1.3 tn (+3% YoY), respectively, achieving 103% and 101% of our 2022 forecasts.

During 4Q22, QNS reported net sales and NPAT of VND 1.9 tn (+25% YoY, -15% QoQ) and VND 427 bn (+11% YoY, +34% QoQ), respectively. Sugar was the main driver of revenue growth, with net sales during the quarter reaching VND 523 bn (+51% YoY, -14% QoQ) as QNS benefited from higher sugarcane volume yield during FY 2022/23. The sugar segment’s GPM fell from 32.8% during 4Q21 to 26.0% during 4Q22, owing to: (i) an increase in the ratio of refined extra sugar to total sugar consumption; and (ii) the sugarcane input price hike outweighing the sugar ASP increase. The biomass segment continued to post a slight profit, while the soymilk segment reached VND 915 bn (+8% YoY, -27% QoQ) in net sales. Soymilk consumption decreased 12% YoY during 3Q22 and 4% YoY during 4Q22 - indicating weak demand for the nutrition market. The soymilk segment’s GPM reached 36.7% during 4Q22 compared to 37.4% during 4Q21 due to rising input costs (soybean, sugar, packaging, etc.). Accordingly, QNS’ overall GPM decreased from 32.1% during 4Q21 to 30.2% during 4Q22.

For 2022, MSN reported a net revenue and NPATMI of VND 76.2 tn (-14% YoY) and VND 3.6 tn (-58.3% YoY). If we exclude the one-off sale of MML’s feed business to DeHeus during 2021, core NPATMI would have remained flat YoY. In our view, all business lines will remain impacted by weak macro conditions. During Q4, MCH revenue declined -16.5% YoY due to tight consumer spend and the high base effect of Q4 2021 (as the company aggressively pushed sales to distributors during Q4 2021). WCM’s revenue during Q4 was also lower QoQ, despite the early Tet holiday (part of Tet sales were recorded during Q4 2022). On the cost front, financial expenses increased 11% YoY during 2022 (Q4 standalone financial expense rose 16.7% YoY) due to a higher debt balance and interest rates. Given the high gearing ratio (D/E of 1.9x by 2022-end), we expect high interest costs to be a theme throughout 2023 should the group fail to de-lever.

We are downgrading our rating on the shares of VNM from OUTPERFORM to MARKET PERFORM, reflecting only 9% upside potential to our lower PER/DCF-based 12-month target price of VND82,900/share (from VND85,000). VNM’s disappointing 4Q22 results were the result of a net sales and net profit decline of 5% YoY and 16% YoY, respectively, while the gross margin was the lowest recorded since 2015. While the price of raw milk powder has declined significantly YoY, VNM’s relatively high-cost inventory is expected to last through the year. Nevertheless, 2023 is marginally more hopeful, as we forecast net sales and net profit growth of 6.4% and 10.3% YoY, respectively – but still off of a low base. Management expects significant gross margin improvement from 3Q23 due primarily to the recent hedging contract for raw milk powder at lower prices. Meanwhile, we are not as optimistic for domestic sales growth, given the inflationary pressure and intense competition. Upside risk: fall in raw material prices; downside risk: loss of market share.

Net income during 2022 increased sharply due to retrospective one-time revenue from Nhon Trach V Industrial Park (IP), and an accounting change from an annual basis to a one-time booking at Phu My II, Phu My II expanded and the Huu Thanh IP. Net revenue reached VND 8.2 tn (+91.6% YoY), whereby IP real estate revenue reached VND 4.2 tn (+5.35x YoY), including the retrospective one-time revenue of Nhon Trach V IP of VND 1.5 tn and a record one-time gain from Phu My II, Phu My II expanded and the Huu Thanh IPs with a lettable area of 91.5 ha. Gross profit margin increased sharply to 43% (+26% YoY), where the Nhon Trach V Industrial Park profit margin reached 84%. NPAT during 2022 reached VND 2.5 tn (3.9x YoY), which is equivalent EPS is VND 7,001/share for IDC.

We have reduced our 1Y target price for the shares of DPM to VND 38,700 per share (from VND 46,300) – representing 10% downside. As a result, we are downgrading our rating from Market Perform to UNDERPERFORM. Not surprisingly, Q4 net income dropped 32% YoY despite stellar earnings growth of 194% YoY during the first three quarters of 2022, as urea prices plunged. During January 2023, urea prices dropped to approx. VND 12,000/kg (vs VND 14,200 during 4Q22).

PVD reported a profitable bottom line figure after 3 consecutive loss quarters, with NPATMI reaching VND 54 bn in 4Q 2022. Our prediction held true that there would be a turnaround in PVD performance from the end of 2022, as we continue to see higher day rate and utilization rate for its Jack-up (JU) fleet, and no more impact from forex loss. The company finished 2022 with consolidated revenue of VND 5.4 trillion (+34% YoY) and NPATMI of VND -99 bn (compared with a profit of VND 19 bn in 2021)

During 4Q22, ACB posted a pretax profit of over VND 3.6 tn (+19.2% YoY), which helped the bank achieve PBT for 2022 over VND 17.1 tn (+42.6% YoY). ACB’s profit has exceeded its AGM-set profit target by 14%, amid difficult market conditions. The strong results were supported by strong interest income (+34.6% YoY); robust FX trading income (+111.8% YoY); and a significant decline in loss provisions (-52.2% YoY). The 4Q22 NIM did expand, albeit at a slower pace of 6 bp linked quarter to 4.6%. A notable improvement in NPLs was another key highlight for 4Q22, due to a large bad debt item having been written off. Despite a huge provision reversal during 2022 due to a significant reduction of Covid-era restructured loans (-25% QoQ), ACB still maintained a strong credit buffer, which should enable it to withstand the volatility in the current operating environment.

Being foreign debt-free could allow NT2 to avoid the impact of rising lending rates and FX risks that competitors are facing. A stable dividend yield play is what we are looking forward to, rather than earnings growth. A price correction could offer a more attractive dividend yield. As of the 10-Feb-2023 closing price, NT2 traded at a 5.2x FY23R EV/EBITDA and a 8.9% dividend yield. Compared to deposit rates offered by banks, it would be attractive if the current dividend yield NT2 pays out could deliver more than 10%. Dividend payment in beginning of 2Q23 could be catalyst after the 2023 AGM decision which could offer an outperformance in short-term. With a 1Y TP of VND 30,880 with a projected 9.9% upside, we call for a Market Perform rating for the stock.

We attended SAB’s analyst meeting on February 9 to discuss 4Q22 results and the 2023 outlook. For 4Q22, SAB posted net sales and net profit of VND 10 tn (+11.4% YoY) and VND 1.1 tn (-23% YoY), respectively. This fell short of our estimates, due to higher-than-expected raw material, advertising, and promotion expenses. Going forward, management believes that input costs will reach their peak during 2023 and should start to level off during 2024. Meanwhile, SAB continued to cut its production costs aggressively, and improved its product mix to maintain healthy margins. The approved M&A plan to increase the stake in two associates and turn them into subsidiaries should be beneficial for SAB over the long-term, given its expansion in product portfolio, distribution networks, and direct control of quality as well as production efficiency. 

We maintain our Market Perform for the shares with a revised 1-year target price of VND 20,000/share, which is predicated on an equally-weighted target 2023F PE and EV/EBITDA of 11x and 6.5x respectively. We use higher target multiples as we believe that the company has already passed the worst period in 2H22. However, the shares may already be reflecting an earnings recovery for 2023 and could face short-term profit-taking pressure given the weak projected earnings during the first half of the year.

STK posted a disappointing 4Q22 result, as net sales and profit reached VND 430 bn (-14% YoY) and VND 42.9 bn (-43% YoY), respectively. Q4 results were well below our expectation. Sales remained weak (especially for virgin yarn), given poor consumer sentiment and with retailer inventory overload. GPM fell sharply to 14.9% during 4Q22 (4Q21: 15.1%; 3Q22: 17.6%). Going forward, management expects average chip costs to  decline from  2Q23 with a sales volume recovery taking place from 3Q23 when the inventory build dissipaters. During 2023, we expect the company to post net sales and profit growth of 2.5% and 6.6% YoY, respectively. For 2024, we expect net sales and profit growth of +11.3% and +13.6% YoY, respectively, assuming an overall market recovery and expanded capex by the Unitex factory. Our target price for the shares of STK is VND 28,600/share (-1.4% downside), and we rate the name as UNDERPERFORM.

VNG Corporation (UPCOM: VNZ) was established in 2004 by founder Le Hong Minh. VNG Corporation has been a large player in game publishing and developing for 18 years. VNG Corp. has also tapped into the cloud/data center segment during the 2006-2007 period and the Zalo social networking platform during 2012. The ZaloPay e-payment platform was created during 2016. VNG Corporation has been listed on UPCOM since Jan 5, 2023. Positive single digit growth is expected for the gaming sector. Revenue growth for gaming could be improved due to the higher quality gaming experience, content, graphics, and design. It’s noted that high revenue growth from Vietnam game sales during 2011-2022 was led by mobile game on back of booming internet/3G,4G/smartphone penetration. Notably game sales growth peaked in 2020-2021 due to covid. However, the internet/3G,4G/smartphone penetration is now quite high and set to limited expansion and the expectation of any big change could be less likely under our concerns. We thus think that Vietnam game sector’s sales growth could be softened to single digit rate.

Preliminary 2022 results of ACV: 99 million passenger throughput, consolidated revenue of VND 15.3 trillion (+225% YoY) and pretax profit of VND 7.5 trillion (equivalent to 74% of 2019 level). The results were supported by strong pent-up demand for domestic travel, forex gain from JPY-denominated debt, and landing area consolidation into the P&L. 2023 plan: 116 million passengers (on par with 2019 level), consolidated revenue of VND 18.4 trillion (on par with 2019 level) and pretax profit of VND 8.5 trillion (17% lower than 2019 level). Upgrade to OUTPERFORM, with 1-year target price of VND 98,000/share based on 2024F EV/EBITDA target of 18x (from 18x 2023F EV/EBITDA). China’s early reopening and strong earnings growth outlook in 2023-2024F are the key reasons for our call.

GMD announced the full divestment of the Nam Hai Dinh Vu port, which we view as positive for the shares of GMD, given the significant one-off profit for 2023 and the potential more rapid ramp-up of the Nam Dinh Vu Phase 2 project. Despite a weak outlook for the seaport sector in 2023, GMD could find a way to maintain volume growth, restructure its business in the highly competitive Haiphong port cluster area by giving more focus to Nam Dinh Vu port, and use the sale proceeds for new project investment to reduce its financial burden in the midst of a high interest rate environment. We estimate that 2023 PBT will increase 85% YoY to VND 2.4 tn under our base case. We rate the shares of GMD a BUY, and increase our 1Y-TP of VND 57,400/share (from VND 45,200/share), implying 26% upside.

We upgraded STB to a BUY rating, with our new 1Y TP of VND 29,500 share (+25% upside). Our upgrade reflects enhancement in asset quality via legacy accruals having been fully booked (bringing on NIM to double in 3Q22 to 4.43%), as well as aggressive purge of bad debt and legacy assets. Accordingly, the NPL ratio dropped significantly by 37 bps to 0.9% in 3Q22, as the lowest point after the M&A event. Not to mention, one of the key differences between STB and other commercial banks is that STB had zero exposure to corporate bonds as of Q3 2022, and low loan exposure to real estate developers (2.1% of gross loans).