Company Report

CTD has moved beyond restructuring, and the current backlog rebound is a supportive factor. For 2021, CTD has already reached approx VND 25 tn in new orders – 3.6x full year 2020 of just VND 7 tn. That such strong backlog should solidify revenue and earnings in 2022. We call for Outperform rating in the shares of CTD with a 1Y TP of VND 103,000 (18% upside vs. 09-Dec-2021 closing price) on back of 2021 strong backlog to secure 2022 sales (+115% YoY) & earnings turnaround (+167% YoY).  

Historically, PVT normally trades in a forward P/E range between 7x to 10x, depending on oil price and profit growth prospects of the company. The company has been in an investment cycle from 2021 by renewing and expanding its fleet in a quite low vessel price environment and has started seeing the results from those investments. With the current oil price ranging above $70 USD/barrel, we expect PVT can start to benefit from a better tanker chartering market from 2022F, when oil demand from the global market resumes gradually. Coupled with good growth prospects for 2022, we apply a new target P/E ratio of 12x for PVT (from 10x), and arrive at our 2022F-end target price of VND 26,200/share (+11% upside from the current market price).  We upgrade our rating for the stock to OUTPERFORM (from MARKET PERFORM), and recommend to accumulate the stock at points of price weakness. A short-term catalyst might come from the liquidation of PVT Athena in 1Q 2022, which might result in a strong one-off profit for the company. Downside risks from our call remain, including lower global oil demand than expected due to COVID-19 new variants, leading to lower chartering price in 2022F.

VPB’s 3Q 2021 PBT took a double hit from a sudden drop in NIM and weaker credit quality. While the latter had been expected, as VPB’s main client segments were heavily impacted by Covid-19, the NIM fell short of expectations due to the combination of a +141% surge in restructured loans, a loan rate cut, and loan mix evolving toward lower-risk loans. Asset quality remains our primary concern, as it should take more time for the mass client segment to fully recover and return to their normal repayment status, in our view. However, we believe that with the gradual improvement in funding costs and NIM rebound over time, the bank will have greater capacity to withstand higher provisioning. Accordingly, pretax profit for 2021 and 2022 are projected to be VND 15.9 tn (+22% YoY) an VND 19.6 tn (+ 23% YoY), respectively. We increase our target PB ratio for the parent bank to 1.7x (from 1.6x) but decrease our target PB ratio for FeCredit to 2x (from 2.2x) reflecting the different recovery pace and prospect between the two entities. Rolling our valuation basis to year-end 2022, we increase our 1Y TP to VND 44,530/share (from VND 39,300), representing potential upside of 13.6%. We call for Market Perform rating on VPB’s shares.

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We reinitiate another BUY rating for HAX. From our recent call in May 2021, HAX share price has increased 45% and reached our previous target. Although there was an unexpected trough in 3Q21 due to nationwide lockdown during fourth wave pandemic, demand for Mercedes cars remains strong, and is quickly recovering in 4Q21. Regardless of short-term risk of another pandemic outbreak, we believe that HAX outlook is getting brighter with: (1) big outlet expansion in Mekong Delta region to spark new demand for Mercedes, (2) automobile demand to boom from 2021 trough, boosted by government incentive, (3) prolonged chip shortage in 2022 to continue benefit auto dealers. Thus, we upgrade our 1-yr target price for HAX to VND 37,500/share, equal to 30% upside from the current price on Nov 26th, plus an expected 5% dividend yield for 2022. We expected HAX total sales and net profit in FY22 to reach VND 6.9 tn (+24% YoY) and VND 228 bn (+138% YoY), respectively.

We maintain our Market Perform rating on the shares of MSN, despite raising our SOTP-based 12-month target price by 12% to VND 172,000/share. Our higher TP reflects subsidiary-related factors, including the: (1) re-rating of WCM due to improved profitability; (2) higher estimates for MML (meat business) and MCH due to improved gross and EBITDA margins; and (3) spin-off and full divestment of its feed business. In 2022, we forecast MSN to maintain strong growth momentum in core NPAT of 65% YoY, as we expect profitability to continue to improve at WCM, MML, and Techcombank. Positive catalysts over time: (1) corporate actions, such as sales of stake in subsidiary/ies or a private placement at the group level or the listing of TCX; and (2) improved performance within its various business units, especially retail and/or mining businesses. 

3Q21 PLX revenue increased 26% due to an increase in petroleum prices; however, PBT was just VND 112 bn – declining -90%YoY as nearly all company segments (especially petroleum, transport, and petrochemicals) were negatively impacted by lockdown measures. However, we expect that PLX is poised to recover in 4Q21 due to both pent-up demand and the increase in oil prices. Our 2021 PBT forecast is VND 4.2 tn (+200% YoY), assuming that domestic petroleum sales volume drops -7% YoY to 8.4 mn m3/tons. For 2022, we expect revenue and PBT to further increase 10% and 30% YoY, respectively, to VND 177 tn and 5.4 tn on the back of 9% growth in petroleum sales volume and the recovery in other segments. We reiterate our Outperform rating on the shares of PLX, as well as our target price of VND 67,000/share.

Net profits for HSG and NKG in the recent quarter fell from the peaks in 2Q21, but still posted tremendous growth on an YoY basis, at 108% for HSG and 634% for NKG. Revenue for both HSG and NKG increased dramatically by 89% and 123% YoY respectively, driven by strong export volume and increase in ASP. We expect the earnings of the companies can maintain solid in the coming quarter and post substantial growth on a YoY basis, as both HSG and NKG have secured large export orders for the next 3 months at high price. However, the profit in 2022 can post negative growth of 30-37% from the peak in 2021 due to the normalization in gross margin following the correction in global steel price. Since our last report, the stock price of HSG and NKG has increased by 34% and 85% to their twin peaks in Oct, before correcting back by around -24% due to profit taking of investors and concern of falling global steel price. The current valuation for both stocks is quite fair in our view, taking into account the potential earnings correction in the coming year. Based on 2022 EPS forecasts and the PE target of 7x, our 1-year target prices for HSG for NKG arrive at VND 41,100/share and 45,800/share respectively, reflecting an upside of 7% and 7.8% from the current price. Accordingly, we downgrade the rating for NKG and HSG to Market Perform from Buy and Outperform respectively. However, given solid earnings in the coming quarter on an YoY basis, there can be trading opportunity for short-term investors with high risk tolerance if the stock price experiences a further correction. 

FMC reported net sales of VND 1.6 tn (+0.3% YoY), and NPATMI of VND 56 bn (-19.6% YoY). NPATMI declined due to a combination of high shipping costs (+148% YoY) and the spin-off off its An San factory into a new subsidiary, Khang An Foods (KAF). As such, FMC completed 81% and 72% of its annual targets for net sales and PBT respectively. The company has reserved adequate materials for 4Q21 production and is unaffected by surging material prices, benefiting from improved ASP. FMC management believes that the company remains on track to meet (and even exceed) annual targets. The proposed private placement to C.P. Vietnam (11.11% of outstanding shares at VND 50k/share) will increase its stake in CP to 24.9% post-deal, and raise VND 327 bn for FMC’s capacity expansion. The shares of FMC have re-rated due to the company’s stable profit, which is quite rare in the volatile fishery industry. Our new target price for the shares of FMC is VND 61k/share (up from VND 41k/share), and implies upside of 22.7%. We reiterate our OUTPERFORM rating.

We continue to issue a strong BUY for TNH shares, with revised target price of VND 84,000/share, representing 60% upside from the current price on November 19th. We continue to set an upbeat outlook for TNH, as this year’s earnings have trounced our previous expectations, irrespective of the nationwide pandemic outbreak. Also, with a safer bet in the ability to control pandemic outbreaks of Thai Nguyen province, faster progress of new hospital facilities in 2022 and sustained growth in hospital visits, we decided to raise our earnings forecast for TNH. We now expect the company net revenue to reach VND 430 bn (+28% YoY) in 2021 and VND 525 bn (+22% YoY) in 2022. For net profit, we expect it to reach VND 153 bn (+40% YoY) in 2021 and VND 180 bn (+18% YoY) in 2022. 

Credit quality remained a challenge for CTG during 3Q 2021, with provisions remaining quite elevated. As a result, we are lowering our: (a) PBT forecast for 2021 and 2022 by 3% (to VND 17.7 tn, +3.6% YoY) and 14% (VND 21.6 tn, +22% YoY), respectively; (b) Target price on the shares to VND 39,700 (from VND 42,300) – implying 23% upside; and (c) Rating to OUTPERFORM from BUY. All three changes applied to the shares of CTG reflect our belief that the credit quality and restructured loans might be a challenge to profitability for CTG over the next couple of quarters. Downside risk: Higher-than-expected credit costs and NPL-formation. Upside potential: The divestment from Vietinbank Leasing and completion of the exclusive bancassurance contract with Manulife may support the bank’s profitability and its capital buffer.

As we roll forward our valuation basis to 2022, we increase our 1Y target price to VND 49,000/share (from the current VND 46,400/share), intimating just 14% potential upside. With such limited potential upside, we are lowering our rating on the shares of TPB from Buy to Market Perform, as the shares have risen 20% since our most recent upgrade in August. Although we remain positively pre-disposed to the shares of TPB, the shares have already priced-in the recent private placement and above peer earnings momentum. Pretax profit for 2021 and 2022 are projected at VND 5.8 tn (+33% YoY) and VND 7.2 tn (+23% YoY), respectively. Upside surprise: Stronger capitalization after the recent private placement (CAR improved to 14.63%), should be supportive for the bank to gain an even higher credit quota. Downside risk: Higher-than-expected NPL formation.

DGC’s 3Q21 net income jumped 107% YoY to VND 488 bn, exceeding our expectation of VND 430 bn, given higher than expected yellow phosphorus and downstream sales product prices. As a result, we raise both our 2021 and 2022 net income forecast 13% and 7%, respectively, to VND 2.0 tn (+109% YoY) and VND 2.8 tn (+40% YoY). Further, given the production restrictions China, the price of yellow phosphorus could peak in 4Q21. As such, we expect that 4Q21 net income will be abnormally high at VND 871 bn (+258% YoY). Over the longer-term, yellow phosphorous prices are more expected to increase at a high single-digit pace given the solid demand from the semiconductor industry. By applying an unchanged target P/E of 13x on 2022 revised financials, we derive a new target price of VND 190,000 per share (from VND 177,000). With an ROI of 23% (inclusive of a 1% dividend yield), we call for maintain our BUY rating. We note that Vinachem (owns 8.9% in DGC) has started divestment of its stake in DGC from November 8th with a starting minimum price of VND 152,100 (lower than the current price of VND 155,500). Given the low liquidity of the stock, the divestment may dampen the share price over the period of divestment (November 8th – December 7th). As such, we recommend to accumulate the stock on price weakness.

We reiterate our OUTPERFORM rating on the shares of DCM, as we raise our 1Y target price to VND 40,400 (from VND 31,500) – representing an ROI of 10% (inclusive of a 4% dividend yield). Our improved outlook is predicated on DCM’s 3Q21 pretax profit of VND 393 bn (+257% YoY). This result which well exceeded SSI Research’s estimate of VND 300 bn, as here to stay elevated urea prices drove DCM’s outperformance. We are increasing our 2021 and 2022 pretax profit 53% and 44%, respectively, to VND 1,559 bn (+118% YoY) and VND 1,588 bn (+2% YoY). The current coal shortage coupled with China limiting production should push up urea prices further amid the higher import demand from India. Higher oil/gas prices are also supportive of higher urea prices, although this may negatively impact production costs at DCM. On any short-term weakness in urea pricing, we would accumulate the shares.