Company Report

Investment highlights: We recently attended the STK analyst meeting for an update on 2Q22 results and the company’s demand outlook for 2H22. In 2Q22, STK recorded net sales and net profit of VND 530 bn (+3.8% YoY) and VND 69 bn (-2% YoY), respectively. Given how inflation is affecting apparel demand worldwide, management believes that it will be challenging to meet the net sales target for the year. As such, we lower our forecasts for STK based on the recent slowdown of orders in the sector. In 2022, we expect net sales and net income to reach VND 2.3 tn (+14% YoY) and VND 299 bn (+7.4% YoY), respectively, 14% and 7% lower in net sales and net profit compared to our previous forecast. In 2023, we expect the equivalent to reach VND 2.5 tn (+8.6% YoY) and VND 314 bn (+5.1% YoY) respectively. Our updated 1Y target price for the stock is VND 45,200/share, representing -8.3% downside and prompting us to issue an UNDERPERFORM rating for the shares.

Investment View: We maintain our BUY rating in place for TNH, with a revised target price of VND 53,800/share, representing a 23% upside from the current price on August 4^th.

We note that growth in 2022 is being affected by previous lockdowns in Q1 due to the Omicron outbreak, as well as last year’s high base set in Q3 and Q4. No significant COVID testing revenue is expected to roll in this year. Long-term outlook to 2023 and onwards is looking solid via: (1) additional healthcare workers shifting in from public to private hospitals, while 2022 - 2023 FDI investment could surprise in Thai Nguyen & Bac Giang province, (2) increasing incentive of Vietnamese government for private investors to build more hospitals to increase urbanization rate, and (3) increasing number and valuation of recent hospital M&A deals in Vietnam.

We expect the company gross revenue to reach VND 478 bn (+13% YoY) in 2022 and VND 574 bn (+18% YoY) in 2023. For net profit, we expect it to reach VND 156 bn (+10% YoY) in 2022 and VND 190 bn (+22% YoY) in 2023. During recent market turmoil, we witnessed small downward pressure in global & local healthcare peers’ valuation, standing at forward P/E of 20.3x and forward EV/EBITDA of 14.4x. We also roll our valuation towards H1 2023 and reflect in our new target price.

Despite 7% revenue growth, HPG’s 2Q22 net profit was VND 4.0 tn, declining -59% YoY due to significant margin contraction amid high input costs and falling steel prices. As a result, we lower our HPG 2022 forecast for revenue and net profit to VND 147.5 tn (-1.5% YoY) and VND 21.6 tn (-37.4% YoY), respectively. Nevertheless, we reiterate our Outperform rating and 1-year target price of 27,600/share, as we believe that HPG’s earnings are bottoming due to the recovery in regional steel prices and the decline in coking coal input costs. HPG’s construction steel volume experienced modest growth of 6% YoY to 1.0 mn tonnes, driven by the export channel which grew 40% YoY in 2Q22. This performance was, however, offset by a slight volumes declines of HRC, billet, and pipe of -1.3%, -47%, and -17% YoY, respectively. The decline in construction steel prices and the surge in coking coal prices by over 200% YoY led to HPG’s YoY gross margin contraction from 32.7% to 17.5%. In addition, HPG recorded an extraordinary net forex loss of VND 1.1 tn due to the depreciation in VND versus USD. In 2023, we expect that HPG earnings will rebound 11% to VND 24 tn due to our projected 9% increase in volume from the main steel product line and stabilization of the gross margin. We believe that HPG will maintain positive volume growth, despite a market slowdown, as it grabs additional market share.

Investment highlights: In 2Q22, VHC recorded net sales and net profit of VND 4.2 tn (+80.4% YoY) and VND 788 bn (+202% YoY), respectively. VHC recorded earnings growth of 242% YoY in 1H22 - a record high level – which we believe to be the peak. Pangasius fillet US export growth has begun decelerating, while China exports began accelerating. Our 1Y target price for the shares of VHC is VND 82,400/share (+0.2% upside), and we maintain our MARKET PERFORM rating given the likely earnings deceleration through 2023.

Earnings in 2Q22 were in line with expectations, as pretax profit was VND 7.4 tn (+50.2% YoY), reflecting vigorous credit growth (+14.4% YTD); strong non-interest income (+76% YoY); and reduced loss provisions (-15.2% YoY). Balance sheet quality remains the sector’s best. NPLs and restructured loans both dropped to 0.61% and 0.36%, respectively, whilst provision coverage of NPLs jumped to 506%. It should be noted that there were hardly any write-offs during the period, suggesting that the VND 4 tn drop in restructured loans was resultant of a recovery in affected clients. In 1H22, PBT aggregated VND 17.4 tn (+28% YoY) and represents 50.5% of our current full year forecast.

As VCB continues to deliver, we maintain our Outperform rating on the stock, with an unchanged 1Y TP of VND 90,700.

We attended PNJ Analyst meeting on July 21^st to update on the 2Q22 results and management view’s on the demand outlook going forward. Given inflationary pressure already affected some consumer discretionary sectors, PNJ management has not found significant impact on jewelry sales given June and July sales remained strong. In 2Q22, PNJ recorded net sales and net profit of VND 8.1 tn (+81.1% YoY) and VND 367 bn (+64.8% YoY), respectively. In 2022, we expect net sales and net profit to reach VND 29.1 tn (+49% YoY) and VND 1.7 tn (+66% YoY), respectively. This translates to 2H22 NPAT growth of 107% YoY since PNJ made losses in 3Q21. In 2023, we expect PNJ to post net sales and net profit of VND 33.4 tn (+14.5% YoY) and VND 2.0 tn (+15% YoY), respectively. Our updated 1Y target price for the shares of PNJ is VND 136,800/share (from VND 142,300/share), which is equivalent to a 20% upside. We lower our target P/E from 20x to 19x, reflecting the demand slowdown attributed to inflationary pressure which is expected to occur from 4Q22. We reiterate our OUTPERFORM rating for the shares of PNJ, given that 3Q22 is the strongest earnings growth quarter.

We are upgrading both our rating on the shares of HDG to Outperform, and our 1Y target price to VND 52,800 (+18% potential upside). During the 2022- 2023 period, the sale and handover of the Charmvilla project (plus the operational cash flow from the 462 MW within the renewable portfolio) should be quite supportive to HDG results. In addition, HDG’s diversification away from real estate has exhibited progress, especially considering macroeconomic conditions and real estate market headwinds. According to the draft of Power Development Plan 8 (which targets for wind capacity of 13,616 MW by 2025), there remain approx. 7,180 MW to be developed, which is a potential business opportunity for HDG. As such, we believe that HDG has an interesting opportunity in the real estate/renewable energy space given its diversified source of earnings plus the power segment expansion strategy to achieve 1,000 MW over the next five years.

We maintain our view that PVT would benefit from the current lucrative tanker market situation, which might last even after the Ukraine conflict is over, because of associated sanctions from the war. We maintain our current forecast regarding 2022 and 2023 at the moment (NPATMI growth of 23% YoY and 6% YoY). We see some upside for our forecast, but more information would be needed to pinpoint new estimates. In our view, as PVT current time charter contracts will expire one by one from time to time, it might take some time to see full reflection of these recently lucrative market rates on the company’s P&L sheet. Thus, we maintain our current 1Y TP of VND 26,200/share and BUY rating for PVT at this time.

AST has turned a profit since May 2022. PBT is estimated to reach VND 10 bn in 2Q22, and YTD losses could be reduced to VND 10 bn. The FY2022 PBT target is set at VND 23.5 bn (vs a loss of VND 128.4 bn in 2021), which should be achievable. We estimate that AST’s PBT could reach VND 224 bn (+486% YoY and -15% vs 2019) in 2023, and VND 322 bn (+43% YoY and +22% vs 2019) in 2024 when the market fully recovers. We have an Outperform rating for the shares of AST with a 1Y TP of VND 69,000/share (based on a target 2023 P/E of 20x), implying 19% upside from the current market price, reflecting our positive view on AST strong turnaround along with the recovery of the aviation industry.

PAN posted strong performance in 2021, with consolidated net sales increasing 19.7% YoY to VND 10.0 tn, while net income and NPATMI jumped to VND 510 bn (+53% YoY) and VND 295 bn (+57% YoY), respectively. Such strong performance enabled PAN to achieve 99% and 122% of its respective 2021 revenue and profit targets. Subsidiaries which produce and sell staple goods posted resilient revenue growth, including: seeds (NSC; +18% YoY), shrimp, (FMC; +18% YoY), fish sauce (584 NT; +12% YoY), nuts & dried fruit (LAF; +2% YoY), and clam & pangasius (ABT; +7% YoY).  Meanwhile, confectionery revenue (BBC) declined -10% YoY, as confectionery consumption was hard hit by the pandemic. In terms of profitability, ABT, BBC, 584 NT and LAF gross profit margin improved due to: (1) strong rebound in pangasius & clam sales prices; and (2) higher sales from high margin products, such as cakes, premium fish sauce, and value-added nuts & dried fruits.

We attended DPM’s AGM during which management increased their 2022 net income guidance to VND3.5tn (+10% YoY, 268% higher than the initial plan) and DPM’s cash dividend of 50% on par value (9.4% dividend yield, higher than the initial plan of 35% on par value). The AGM did not approve the proposal to raise transportation tariff costs for the 2014-18 period. As such, DPM may not have to pay an additional USD18m or VND430bn to GAS. DPM’s earnings closely track urea price trends, ie having achieved the highest net income in terms of absolute value in 1Q22, only then to decline gradually in 2Q22 and 3Q22, while it could improve in 4Q22 as the high season begins. In terms of YoY growth, DPM still targets to deliver positive earnings growth in 2Q22 (up 60-70% YoY on our estimates) and 3Q22 but could post negative earnings growth in 4Q22. As such, we believe that the share price may continue to exhibit positive momentum over the short term. We now estimate DPM’s 2022E net income to reach VND5.1tn (+59% YoY, from VND2.25tn) and introduce our 2023E net income of VND4.1tn (-18% YoY).

VRE started its turnaround in 4Q21 and continued the recovery momentum in 1Q22. We expect its performance to further improve with the country’s full reopening as the sustained and significant uptick in footfall would expedite the cessation of mall relief. Our earnings forecast for 2022 is VND 7.8 tn (+32.7% YoY) and PAT of VND 2.2 tn (+65% YoY), primarily due to strong growth in leasing revenue given the expected decline in support packages and the contribution of three new malls opening this year. For 2023, we forecast earnings of VND 8.5 tn (+9.2% YoY) and PAT of VND 2.6 tn (+30% YoY) with expectations that leasing revenue continue to recover to pre-Covid levels. Meanwhile, new mall openings in 2022 – 2023 will push organic growth in leasing revenue as well. We reaffirm our OUTPERFORM rating with a SOTP-based 12-month target price for VRE is VND 33,900/share.

We raise our 1Y TP on the shares of REE to VND 105,300 (from VND 86,400), and reiterate our Outperform rating. We increase our FY22 NPATMI 16% to VND 2.4 tn (+27% YoY), driven by the hydropower segment. Per draft of Power Development Plan 8 which requires wind capacity of 13,616 MW by 2025, there are still approx. 7,180 MW to be developed. REE could be one of the potential names, given its strong financial condition and high credit rating.