Company Report

HT1 recorded 3Q22 revenue of VND 2.3 tn (-5% QoQ, +118% YoY from the low base set in 3Q21). NPAT came to VND 37 bn (-73% QoQ, whereas Q3 2021 saw a loss of 20 bn VND). GPM fell from 13.4% in 2Q22 to 8.4% in 3Q22, due to an 11% QoQ increase in coal prices. We believe that the high level of coal prices will place additional pressure on the company's 4Q22 gross profit margin, as cement companies will find it difficult to raise cement prices further in the face of weaker domestic demand. As a result, we expect that HT1 net sales and NPAT in 2022 will be VND 8.7 tn (+24% YoY) and VND 261 bn (-37% YoY) respectively.

We estimate that HT1 net profit will rebound to VND 400 bn (+54% YoY) in 2023, based on the assumption that coal will fall -10% from its peak in 2022. We maintain our Market Perform rating on HT1, with a one-year target price of VND 10,190/share (+1% upside). We think the stock in the short-term can be supported by the positive news of lower coal prices that could result in positive earnings growth in 4Q22 (+19% YoY), and a public investment boom expected in 2023.

We attended the NVL analyst meeting on Oct 28-2022 and came away with the following key takeaway. While net revenue stayed flat in Q3, NPAT dropped significantly by -56% YoY as the bottom line was negatively impacted by high financial expenses. Due to high leverage of approx. 160% D/E  at the end of Q3 2022 compared to other developers, the company also has a comparatively high amount of USD-denominated debt obligations (24% of its debt being USD-denominated vs. total debt), the financial burden for NVL will be heavier until the end of this year, due to the tightening conditions in the funding market as well as generally unfavorable market conditions.

For 3Q22, VHC reported net sales and net profit of VND 3.3 tn (+46.2% YoY) and VND 460 bn (+80% YoY), respectively. Although having achieved strong growth from the prior year’s low base, VHC recorded its lowest quarterly net profit since 4Q21 in terms of both absolute value and growth in 3Q22. This is due to the US (VHC’s most important export market) exhibiting declining sales of -41% QoQ, reflecting high inventories and persistent inflation. Going forward, we expect that demand will continue to decelerate, while ASP has reached its peak. For 2023, we expect net sales and net income to reach VND 12.9 tn (-8% YoY) and VND 1.7 tn (-27% YoY), respectively. At VND 73,000/share, VHC trades at a 2022 and 2023 P/E of 5.8x and 7.9x, respectively. Our rating for the shares of VHC is MARKET PERFORM, and our 1Y target price is VND 76,400 (+5% upside).

HPG posted a 3Q22 loss of VND 1.79 tn – the first such loss since 4Q18 was driven by a steel business line loss of VND 2.56 tn, due to falling steel prices, higher-cost inventory, and the impact of forex loss. Although steel price volatility can be mitigated, weak demand in both global and domestic markets could remain a challenge for HPG, going forward. As such, we downgrade HPG to Market Perform from Outperform reflecting our significantly reduced 1-year target price of VND 18,000/share (from VND 27,600/share). We cut our 2022 net profit forecast to VND 12.2 tn, a drop of 65% YoY from the peak in 2021. 2023 net profit is expected to be flattish at VND 12.6 tn (+3.3% YoY). While the impact of high-cost inventory could fade over the near-term, we believe the decline in steel prices along with weak demand is likely to cause a negative earnings growth on an YoY basis until the first half of 2023.

In 3Q 2022, PVT revenue grew impressively by 38.7% YoY to VND 2.33 tn while PBT growth is even more impressive at 143% YoY to reach VND 481 bn, including an one-off gain from PVT Athena’s disposal of VND 211 bn. This result has been in line with our expectation so far, benefiting from the higher charter rate of its vessels in the international market, while domestic market is stable. From our discussion with the company, we expect this favorable condition for tanker owners to continue into upcoming quarters, since we do not see any improvement from the Russia-Ukraine conflict in the short-term and the tanker market is still in uptrend. There might be some impact on forex loss in 4Q 2022, but that should be offset by higher earnings from better charter market condition. Thus we maintain our previous forecast for PVT as in our previous report (here), while we revise down our 1Y target price to VND 24,000/share (from VND 26,200/share) based on a lower P/E target of 10x (from 11x) to reflect our overall market lower rating. We maintain our OUTPERFORM rating for the stock on the base of stock price upside and positive outlook into 2023.

In 3-6 months, we see core earnings of 4Q 2022 to improve further when more charter contracts are renewed at a more favorable price, which should be the main catalyst for the stock price in the coming time. Also, there should be further gain on asset disposals from 2 vessels (PVT Eagle, PVT Dragon) in the upcoming quarters, which should be another catalyst to watch.

Investment highlights: We attended PNJ’s analyst meeting on Oct 25, 2022, and came away with the following. Strong sales and net profit growth of 104% and 132% YoY, respectively, during 3Q22 came in as we expected given the prior year’s low base and continued pent-up jewelry demand since the beginning of the year. Management noted that sales hit record highs on Vietnamese Women’s Day during October. While management must closely monitor demand over the near-term, PNJ anticipates demand to due to decelerate in 2023 due to inflationary pressures. Meanwhile, PNJ expects to continue its store expansion plan for next year (approx. between 30-40 new stores in 2023), since this is PNJ’s key long-term growth driver. We did, however, lower our 1Y TP to of VND 117,300/share from VND 136,800/share, reflecting decelerating earnings growth for 2023. Nonetheless, we maintain our OUTPERFORM rating on the shares of PNJ.

SCS is trading at P/E 2022 and 2023 forward of 11.5x and 10.8x respectively, which is at the lowest level in its historical range. This de-rating reflects slower growth prospects in the coming time, coupled with a high dependence of the company on the currently weak external demand side, which is reasonable in our view. On the good side, SCS stands out as a beneficiary of USD appreciation as most of its revenue is denominated in USD terms, while its costs are all in VND. Our DCF model points to a 1-year target price of VND 71,900/share (~1.4% upside), meaning an UNDERPERFORM rating for the stock.  In the short term, 4Q 2022 earnings would be muted compared to high base last year, as this year high retailer’s inventory level coupled with lower demand leads to no high season for the year end.

We believe the VHM will stand firm during this period of tighter credit and rising funding costs given its available land bank, solid balance sheet with low net debt/equity ratio, proven track record in projects sales and development, and capital raising capability. However, we maintain a cautious view on market demand whilst interest rates continue to increase, affecting the firm’s sales and future earnings.

At current price of VND 52,500/share, VHM trades at a 2022 and 2023 P/E of 8.0x and 6.5x, respectively, which is lower than historical average and relatively attractive when compares with peers. However, given the fact that there are multiple headwinds within the overall real estate sector that may last until next year the soonest, we do not expect a strong upside catalyst for the stock in the near term.

Our 1-year target price for the stock is VND 69,000 per share based on the SOTP method, equivalent to an OUTPERFORM rating. The Company boasting a high net cash position (~24% of current market capitalization) and certain exposure to the promising industrial park business could be a safe choice amid the current rising interest rate environment.

Short term view: we expect 3Q22 earnings to decline single digit owing to the lack of one-off land compensation income. This together with heavy market sell-off will weigh down on PHR share price. Nevertheless, we think PHR share price may bounce back in 4Q22 along with the recognition of one-off land compensation income, enabling the company to post 73% YoY net income growth in 4Q22, in our estimate.

We initiate coverage of  NVL with a Market Perform rating and 1Y target price of VND 80,700 (1.6% downside potential). Over the 2022- 2023 period, NVL’s sales and handover will likely be driven by multiple ongoing projects, but mostly focused on Aqua City, NovaWorld Phan Thiet, and NovaWorld Ho Tram.

We expect NVL’s strong unbilled backlog of USD9.9bn (at the end of 1H 2022) to create a decent base for earnings growth in 2023-2025. We also expect NVL’s earnings quality to improve, with actual bookings from the handover of products to home buyers rather than financial income or goodwill recognition. However, we will continue to keep a close watch on the company’s presales in 2H 2022-2023 as the property market is cooling down at the moment. 

Our forecasts for FY22 are revenue of VND29.2tn (+95.9% YoY) and NPAT of VND 5.6tn (+73.4% YoY), driven by the delivery of remaining units at the NovaHills Mui Ne, Aqua City, NovaWorld Ho Tram and NovaWorld Phan Thiet projects. In addition, NVL expects to launch four new projects in late 2022 or early 2023, including: (1) Grand Sentosa, (2) NovaWorld Mui Ne, (3) a project in Nha Be District, HCMC, and (4) a new project in HCMC. However, we continue to expect ongoing presales at current projects (mainly Aqua City, NovaWorld Phan Thiet and NovaWorld Ho Tram) to have the most significant contributions to our presales forecast of USD3.3bn in 2023F (flat YoY growth vs 2022F).

In 1H 2022, PVS net sales posted strong growth of 33% YoY due to the low base effect set in Q3 2021, as last year PVS during the quarter was negatively affected by the nationwide lockdown, affecting all of its key business segments. However, such performance is still well along our expectations, as many oil&gas projects in Vietnam such as White Lion Phase 2B, Yellow Camel, Block B, etc. have been stalled. The company relies instead on the international market with key contracts like Al-Shaheen Gallaf Batch 3 & Posco Shwe Phase 3 to fill up its capacity and backlog at the time being.

Investment view: We reiterate our Outperform rating, but lower our 1-year target price to VND 128,000/share (from VND 135,000/share) or +13% upside. Our lower target price is based on higher WACC in our DCF valuation and lower target P/E (from 20x to 19x), taking into account of higher interest rates. Our estimates are based on a Brent oil price assumption of USD 95/bbl in 2022 and USD 85/bbl in 2023. For 2023, we estimate that GAS will undergo mild slippage with a 5.1% YoY decrease in earnings, due primarily to our lower 2023 oil price. Still, we believe that GAS will deliver improved gas volumes in our forecast (+10% YoY). Key downside risks to our call include weaker-than-expected dry-gas volume, and lower-than-expected fuel prices.

Short-term view: Quarterly earnings peaked in Q2 2022. Based on our current estimates, GAS likely will post 12% earnings growth in H2 2022, decelerating relative to H1 2022 (+96% YoY). As such, there could be limited price catalysts in store for the shares over the short-term.

In general, we believe that the shares closely track global oil price movements. Looking toward next year (despite the slight decrease in earnings due to our oil price assumption for 2023 now being lower than consensus), we believe that GAS’s earnings will remain buoyant. Moreover, GAS’s rich net cash balance of USD 1.2 bn at Q2 2022 is a significant advantage during the period of rising interest rates.

1H22 performance: Consolidated revenue and NPATMI surged to VND 6.2 tn (+60% YoY) and VND 175 bn (+112% YoY), respectively, achieving 43% and 49% of full year 2022 guidance. Net income increased across all segments: seeds (+24% YoY), pesticides (+45% YoY), shrimp (+42% YoY), pangasius & clam (+120% YoY), fish sauce (+17% YoY). Consolidation of VFG’s financials into PAN further enabled growth in addition to  one-off earnings from an asset disposal at BBC. Packaged foods (confectionery, dried nuts and fruit, seasonings) posted encouraging sales growth of 11% in H1 2022, and is expected to accelerate during H2 with the arrival of the high season.  Meanwhile, dried nuts & fruits earnings declined -29% YoY owing to FX losses. For 3Q22, the company targets to reach net sales of VND 3.6 tn (+43% YoY) and NPATMI of VND 53 bn (+38% YoY).