Company Report

We raise our 1Y TP on the shares of OCB by 16.2% to VND 32,300 (representing upside of 15.3%), and call for a Market Perform rating. OCB enjoyed robust earnings growth during 3Q 2021 of +71.1% YoY. 22% YoY (+10% YTD) credit growth, solid government bond trading gains of VND 463 bn (vs. VND 78 bn in 3Q 2020), and lower credit costs drove OCB’s bottom-line. What distinguished OCB from other banks during quarter was its credit metrics. While the rest of our coverage universe had experienced QoQ surge in past dues, OCB’s Group 2 loans dropped -51% and NPLs remained flat. However, restructured loans doubled to VND 2 tn (2% of total loans), which was in line with what we observed at many banks. We estimate that OCB will be able to post a robust PBT growth of +20% YoY (VND 5.3 tn) in 2021 before retreating to +16.5% YoY (VND 6.2 tn) in 2022. Downside risk: Higher-than-expected rise in government bond yields, which could impede trading gains; and higher than expected NPL formation.Upside surprise: Higher-than-expected pricing of the 70 mn share issuance; and higher-than-expected profitability of the government bond trading activities. 

VCB’s 3Q21 results were better-than-expected, with PBT reaching VND5.7tn (+15% YoY). Solid credit growth (+11.6% YTD, or +19.4% YoY) and a NIM of 3.15% (-35bps QoQ, but +14 bps YoY) buoyed results. Despite the scale of the support package, the pace of QoQ NIM contraction at VCB was on par with other bank results. In 4Q21, we expect the NIM will trend lower still, as the bank continues to maintain low yields for customer support without much room for improvement on the funding front. Nevertheless, we modestly increase our 2021E PBT by 3% to VND25tn (+8.6% YoY). Rolling forward our valuation basis to 2022E (from average 2021-22E) and applying an unchanged 3.0x PBR, we lift our 12-month target price for the shares of VCB to VND117,000/share (from VND111,500 /share), implying 20% upside potential. Despite our more sanguine outlook on VCB’s medium and long-term prospects, we believe earnings growth over the next couple of quarters could disappoint - impeding near-term performance of the shares. We maintain our Market Perform rating, and prefer to see continued execution on earnings delivery before getting more constructive on the shares. 

We are upgrading VNM from Market Perform to Outperform, as we raise our target price to VND 106,000/share (from VND 103,000/share) based on a blended DCF and 21x 2022E PER valuation methodology (previously 21x avg 2021-22E PER) - implying 17% upside potential. Our positive outlook on VNM reflects a return to growth - Q3 sales (+3.7% YoY) and parent-company sales +4.5% YoY, after three consecutive quarters of contraction. Notably, according to management, sales growth accelerated to above +20% YoY in October. In addition, VNM expects Q4 sales growth in the range of 10%-15% YoY, as last year’s result was impacted by heavy floods in the central region. Downside risk: Lower than expected sales/higher than expected raw material prices.

We upgrade our rating on the shares of MSB from Market Perform to Outperform, and raise our 1Y TP to VND 28,400/share (from VND 23,000/share) - representing upside of 13%. Our upgrade reflects our 2021E and 2022E PBT increase of 16% and 19% vs. previous estimates, respectively. Specifically, we forecast that MSB will post +95% YoY PBT growth in 2021 - fueled by robust credit growth and NIM expansion. Meanwhile, 2022 PBT is expected to increase +25.8% YoY. Even when we exclude the one-off income for 2021 (bancassurance upfront fee) and 2022 (divestment of FCCom and bancassurance upfront fee), core PBT growth is projected at 43% and 20% YoY, respectively. Downside risk: Higher-than-expected NPL formation rate.

We maintain our Market Perform rating for the shares of BID, despite the increase in our 12-month TP to VND50,000 (from VND48,000). 3Q21 results exceeded expectations from a credit growth, NIM sustainability (at 2.97%), and bad debt perspective. The bank wrote off VND5.4tn in bad debt during 3Q21, on top of providing an additional VND7.5tn against problem loans. This caused PBT to inch lower by 1% YoY to VND2.7tn, although asset quality metrics have clearly stabilized. Through 9M21, pretax profit for BID reached VND10.7tn (+52% YoY), completing 79% of our in-house full-year estimate. As restructured loans have more than doubled in 3Q21, we still see some pressure on credit costs going forward which likely will impact the bottom line. We maintain our PBT estimates for 2021E and 2022E at VND13.5tn (+50% YoY), and VND15.5tn (+14% YoY), respectively. An upside risk to our call would be a better-than-expected recovery in restructured loans, as well as any firm progress in its new share issuance of 8.5% pre-money charter capital. Improved capital would enable the bank better growth potential. We also expect that the stock dividend will be finalized by December. Downside risks include macroeconomic weakness.

Given KBC’s share price increase of 44% since our last report (26 May 2021) coupled with the dilution arising from the recent private placement, we are lowering our rating on the shares of KBC from BUY to MARKET PERFORM. Considering that KBC’s 9M21 results fulfilled only 37% of the year’s PAT target, we have lowered our FY2021 net sales and net profit forecasts to VND 4.8 tn (-16%) and VND 1.2 tn (-35%), respectively. Despite our downgrade, we nevertheless raise our 1-year target price 13% to VND 50,000/share, reflecting the strength of land prices in Haiphong and Bac Ninh. Our current valuation does not take early-stage projects into account, such as industrial parks in Long An, or the residential project in Vung Tau.

The company recently announced its 3Q21 earnings results. In light of these quarterly earnings, along with significant progress in the cement industry, we expect net sales and net profit to reach VND 4.14 tn (-4% YoY) and VND 155 bn (+2% YoY) in 2021. For 2022, we expect net sales and net profit to reach VND 4.06 tn (-2% YoY) and VND 168 bn (+9% YoY) respectively. Reflecting our estimates, we derive a 12-month target price for BCC of VND 15,200, combined from the 2022 target P/E of 10x, P/B of 0.8x, and EV/EBITDA of 4.0x, which equates to a downside of -38% from the current price. Outlook is currently threatened by: (i) increasingly fierce competition, with new capacity launched in the region (ii) weaker demand when the export market normalizes (iii) further hike in price of coal, electricity, and clinker export tax, (iv) an abnormally high valuation compared to industry peers, due to an overly optimistic market outlook. We thus issue a SELL recommendation for BCC.

SAB reported 3Q21 net sales and net profit of VND 4.3 tn (-47% YoY) and VND 472 bn (-68% YoY), respectively, the lowest level since 2014. Depressed results were due to the prolonged lockdown restrictions which caused distribution to be grounded for the majority of Q3. The company, however, is guiding for an improved outlook and is confident of GPM expansion in 2022. Positive forward-looking factors include a rebound in production volumes, a marginal increase in ASPs, and effective hedging of raw materials. After the recent share price run up of +9%, we downgrade our rating on the shares of SAB from BUY to OUTPERFORM, with an unchanged 1Y target price of VND 190,000/share (+10% upside potential). 

We are upgrading our rating on the shares of DPM from MARKET PERFORM to OUTPERFORM, and are increasing our 1Y target price to VND 55,000 per share (from VND 42,200) – representing an ROI of 14% (including a 5% dividend yield). Any price weakness in the short term may provide an opportunity to accumulate the stock. Our upgrade reflects DPM’s 3Q21 pretax profit increase of 240% YoY, which well exceeded SSI Research’s expectation of 200% YoY for 2H21, thanks to the skyrocketing urea prices. As a result, we revise our 2021 and 2022 earnings forecasts 40% and 42%, respectively, to VND 2.9 tn (+246% YoY) and VND 2.7 tn (-6% YoY). Despite assuming that the urea price may peak in 4Q21, 1H22 urea prices may still be higher than that of 1H21, hence generating an expected earnings growth of 68% HoH in 1H22. DPM also shared that 2022 transportation tariffs are likely to be sustained at 2021 levels, as the company secured adequate gas volume from cheap oil fields. As such, we put aside our previous concern regarding a possible rise in transportation tariffs. 

Despite the credit contraction (- 1.5% QoQ) during 3Q 2021 due to the pandemic, income streams at ACB remained robust (+27% YoY). This allowed ACB to accrue bonuses in advance for 4Q 2021, and provide an additional VND 820 bn (+406% YoY) against bad debt while maintaining relatively flat bottom-line YoY at VND 2.6 tn. Throughout 9M 2021, PBT was VND 9 tn (+40% YoY) - completing 85% of the AGM plan and 75% of our in-house estimate. With its prudent stance toward risk management, ACB’s credit cost are likely to remain elevated for the remainder of 2021 and 2022. However, we believe that the bank could be able to maintain its NIM at 4%, given gradual improvement in CASA, and the room to optimize liquidity ratios. Accordingly, PBT for 2021 and 2022 are projected at VND 11.8 tn (+23% YoY) and VND 14.7 tn (+24% YoY), respectively. Our rating for the shares of ACB is BUY, and our 1Y target price is VND 41,750/share.

STK reported 3Q net profit results of VND 62.4 bn, increasing 210% YoY from the low base of prior year, thanks to the uptrend in polyester prices. The company also provided a window into 4Q21 and beyond. Apart from benefiting from the global increase in yarn prices, the recent conclusion of both anti-dumping natters should allow STK to expand sales volume domestically and in the US market. Over the longer term, we expect capacity expansion from Unitex starting from 2023, which should provide sustainable growth. As a result, we increase our 1Y target price from VND 43,300/share to VND 69,400/share (+14.7% upside). We reiterate our OUTPERFORM rating on the shares of STK.

Despite a -36% YoY slump in generation volume, 3Q 2021 NPAT aggregated VND 603 bn compared to VND 124 bn in 3Q 2020. This significant YoY increase was primarily attributed to lower O&M expenses at Ca Mau.  ​​​​​​​At present, we do not rate the shares of POW, given current unpredictability of sales and expenses at the Ca Mau plant.

We are initiating coverage on the shares of DPR with a BUY rating, and are establishing a 1 YR target price of VND 91,000 – representing an ROI of 20% (including the 4% dividend yield). We see significant potential in DPR’s large land bank, which can be converted into industrial parks – a major opportunity for the company to unlock value and revenue going forward. The increase in demand for industrial parks is particularly pronounced in Binh Phuoc province, more so once the highway connecting Ho Chi Minh City – Binh Duong province (Thu Dau Mot) – Binh Phuoc province (Chon Thanh) is completed in 2025. By way of example, lease rates for industrial parks in Binh Duong province have increased 50% since 2019 (from $80/sqm in 2019 to $120/sqm in 2021). The highway completion should cause lease rates to accelerate.  Further, Binh Phuoc’s 54%-59% lease rate discount to Binh Duong’s ($55-65 USD/sqm in Binh Phuoc vs $120-160 USD/sqm in Binh Duong) makes industrial parks in Binh Phuoc substantially more attractive to SMEs. That being said, we believe that DPR’s traditional natural rubber business will still continue to benefit from higher market prices in the short-term. Also, income from rubber tree disposal will likely post a double-digit growth in 2021-2022 thanks to the recovery in demand from furniture exporters. For 2021, we estimate earnings to rise by 28% YoY, thanks to a favorable natural rubber price and higher income from rubber tree disposal. For 2022, we believe that DPR will recognize land compensation income of VND 317 bn – pushing earnings 100% higher YoY. 

With a FY21-25 CAGR of 12.3% YoY, we believe that the shares of REE remain attractive given the current growth momentum in hydropower, wind projects, and other long-term projects (E-Town 6 office building) and public investment which will drive M&E (Long Thanh airport-terminal). As a result, we raise our 1Y TP for the shares of REE to VND86,400 (from VND64,000), which represents 14% upside. We call our OUTPERFORM rating on the shares. 

GAS reported 3Q NPAT of VND 2.4 tn, up 19.1% YoY on a consolidated basis. Meanwhile, NPAT of the parent company reached VND 2.5 bn (+16% YoY). The results exceeded the company’s preliminary results and our estimates, despite the significant drop in gas consumption during 3Q due to strict lockdowns in the Southern provinces. Cumulatively through 9M2021, GAS posted NPAT of VND 6.8 tn (+9.2% YoY), completing 97% of its full year earnings target. Upbeat 3Q earnings prompt us to increase our 2021 NPAT forecast by 10.2%. For 2022, we raise our base case assumption for Brent oil prices from USD 68/bbl to USD 75/bbl (+7% YoY). Accordingly, we increase our 2022F NPAT to VND 11.8 tn (from VND 10.9 tn previously) translating into a 22% YoY growth. After factoring in our earnings revisions, we derive a new TP of VND 130,000/share (from VND 118,500/share) based on an equal blend of a target PER of 20x (from 19x) and EV/EBITDA of 11.5x (from 11x), and using 2022E earnings. As the share price appreciated by 40% in the past 2 months, and in our base-case ROI is just at 8%, we downgrade our recommendation on GAS from Outperform to Market perform. Nevertheless, GAS remains our preferred stock in the oil & gas sector and we recommend investors to accumulate the shares at an attractive entry point.