Company Report

Reflecting our revised estimates, we derive a new 12-month target price of VND 190,000 (previously VND 183,000), which is predicated on an equally weighted target P/E of 28x (from 25x) and our DCF. As SAB gained back market share temporarily during the lockdown period, which is a special circumstance, it is early to conclude that it can sustain its market leader position. However, we think it still deserves a re-rating due to the following: (i) we believe that there will be a strong demand recovery from November post-Covid-19 lockdown; and (ii) SAB can rely on the strength of its on-trade channels and distribution network in order to capture sales volume growth more quickly, as folks begin dining out again. At the current price of VND 159,900/share, SAB is trading at 2021 and 2022 P/E of 26.7x and 23.2x respectively, which is rather attractive compared to its historical average P/E of 34x. With 19% potential upside from the current levels, we upgrade SAB to BUY (from Market Perform). Key downside risks to our call are softer-than-expected sales volume due to the stiffer-than-expected competition, and further lockdowns.

In our estimates, excluding the one-off, non-cash gain from the revaluation of Tan Phat JSC in 2Q 2021, PC1 could still offer an approx. NPATMI of 16% YoY in FY22 (VND 559 bn) - led by three wind power projects (Lien Lap, Phong Nguyen, and Phong Huy). PC1 should also enjoy attractive long-term growth in 2023 NPATMI (+40% YoY), driven by Vinh Hung & Bac Tu Liem projects and Tan Phat’s new nickel project. We call for Outperform rating and 1Y TP of VND 46,800 (+18% upside) on the shares of PC1. An additional 81MW hydropower plants could come on line since 2024 - 2026, lifting total hydropower capacity to 283MW by 2026  - up from 168MW in 2021.  

VHC reported strong growth for 3Q21, with net sales of VND 2.2 tn (+24% YoY) and NPATMI of VND 255 bn (+46% YoY), respectively. Cumulatively, the company accomplished 74% and 93% of annual targets for net sales and PAT. VHC was the most profitable fishery exporter out of Q3 lockdown, benefited from strong demand from the US market coupled with a higher ASP. The company has been running at between 85%-90% capacity while implementing “three-on-the-spot” work-live on-site production and keeping administrative expense stable. As VHC has proven its position as a market leader from time to time, we believe that the shares deserve their re-rating over the past two years. We raise our target P/E for the key segments of VHC – 13x for wellness segment and SGC, and 10x for pangasius segment (previously 10x and 7.5x, respectively) and use mid-2022 TTM EPS as our base. Our new price target is VND 70.2k/share (up from VND 47k/share), implying an upside of 13.4% and a total ROI of 16.6%. We upgrade our rating for the shares from Market Perform to Outperform.

HPG released its 3Q21 results, with revenue and net profit reaching record highs of VND 38.9 tn and VND10.35 tn (up by 56% and 170% YoY), respectively primarily attributable to the HRC segment. Cumulatively, HPG’s revenue and net profit in 9M21 increased 63% and 206% YoY, respectively, to VND105 tn and VND27 tn, respectively. We attribute the strong growth during the quarter to resilient sales volumes and especially to the surge in HRC prices on the back of pre-signed two month contracts. As 3Q21 results are higher than our estimates mainly due to a better-than-expected profit margin, we raise our 2021 net profit forecast by 24% to VND 36.6 tn – translating into 171% YoY growth. Sales volumes across all steel product lines is expected to recover during the final quarter of the year, but the HRC margins could experience a correction compared to the record highs in 3Q21. In 2022, we expect the construction steel sales and HRC volumes to maintain growth of 17% and 28% YoY, respectively. The gross margin should normalize to 24.5% from 28.7% in 2021F due to a 5-6% YoY correction in steel prices. Accordingly, we forecast 2022 revenue and net profit at VND 165 tn (+6% YoY) and VND 32.7 tn (-10.5% YoY), respectively. We reiterate our Outperform rating on the shares, but raise our 1-year target price by 16.7% to VND 63,000/share due to the upward revision in our 2022 earnings forecast.

Viconship announced impressive prelim 3Q 2021 PBT results of VND 149.3 bn (+73.4% YoY), supported by superior volume growth relative to peers and enhanced profit margins post-management reshuffle. We observe marked improvement in company profit margins in 2Q21 and 3Q21. As a result, we increase our PBT forecasts to VND 474 bn (+41% YoY) and VND 604 bn (+27% YoY) in 2021 and 2022, respectively. We reiterate BUY rating on the shares of VSC on the back of higher earnings outlook and the potential strategy change into a growth company after several years of stable earnings, leading to our re-rating to 2022F target P/E ratio of 12x. Pre-money 1-year target price is VND 80,800/share (+26% upside), while post-money target price is VND 46,500/share (after 1:1 rights issuance in the coming time). VSC offers 1:1 rights issuance to all shareholders (ex-rights date on Oct 25), and short-term selling pressure could increase with some large shareholders registering to sell 1.5 mn shares over the near-term. Over the longer term, increased risks come from the new project pipeline which will require large capex with profit uncertanties. However, this also presents Viconship an opportunity to become more of a growth company.

With coal prices rising at a more accelerated pace than that of oil/gas, gas-based urea producers in Vietnam like DPM are key beneficiaries of this trend as they do not bear high coal prices while taking advantage high urea sales prices. NPK sales volume also have improved significantly over 2Q21. Combined with one-off items of VND 329 bn (recognized in 2Q21 and 3Q21), we increase our 2021 pretax profit to VND 2.099 tn (+148% YoY), while 2H21 pretax profit growth is estimated to increase 200% YoY. We believe that 2022 core earnings could increase another 9% YoY, but without the one-off income as prior, total pretax profit is estimated at VND 1.929 tn (-8% YoY). As the company benefits from the recent urea price uptrend, we increase target multiples and derive a new target price at VND 42,200 (from VND 32,000). With an ROI of 5% (dividend yield of 6%), we call for an MARKET PERFORM rating for DPM.  In the short term, DPM share price momentum may still be strong on the back of solid 2H21 earnings. 

For 2021, we lower our gas volume estimate from 8.15 bcm to 7.75 bcm to reflect the impact of the strict Q3 lockdown on dry gas consumption by industrial and power plant users. Any recovery in Q4 will be gradual in nature.  Nevertheless, higher oil prices likely will offset this volume cut. Our 2021 revenue and NPAT forecast of VND 73.7 tn (+19.5% YoY) and VND 8.8 tn (+8.6% YoY), respectively, remains largely unchanged from our previous estimates. For 2022, we are looking top and bottom line growth of 23.6% and 25.2% YoY, respectively, driven by a strong gas volume recovery (25% YoY to 9.6 bcm, about 3% lower compared to post-Covid-19 levels) on the back of more robust business activity.  On our higher 2022E EPS, we raise our 12-month TP price for GAS to VND118,500/share (from VND101,500), based on an equal blend of a target PER of 19x and EV/EBITDA of 11x, and 2022E earnings. We reaffirm our Outperform call on GAS. Downside risks: weaker-than-expected dry-gas volumes and lower-than-expected fuel-oil prices.

We are upgrading the shares of DCM to OUTPERFORM from MARKET PERFORM, as we increase our one-year target price 26% to VND 31,500. As gas-based urea producers are well positioned to benefit from the rise in coal prices and the coal shortage in China associated with decarbonization target, heavily flood and coal mine accidents, we are also increasing our 2021 and 2022 earnings estimates by 0.5% and 7%, respectively. As DCM is a gas-based urea producer its profit margin will benefit when coal prices rise at a more accelerated pace than that of oil/gas, as DCM does not bear the increase in coal price - enjoying the benefit of higher urea sales prices. Also, as DCM’s net cash balance continues to improve (net cash per share of VND 6,921 at 2Q21 vs VND 1,645 at 2Q20), we expect that DCM will increase its 2021-2022 dividend to 12% on par value (vs 2020 dividend of 8% on par value), equivalent to 2021-2022 payout ratio of 82%-76% (vs 2020 payout ratio of 79%). The urea plant of DCM will be fully depreciated around 2023 year end, raising net income and hence dividend payment significantly afterwards.

MWG’s August net income dropped -32% YoY, as social distancing and lockdown policies tightened. This was well foreseen, and we were not surprised by lower-than-usual results. From September 16th, southern provinces began to relax social distancing/lockdown measures, allowing MWG to serve customers in-store and to provide home delivery services in areas deemed to be of low pandemic threat. This was welcome news, as re-opening prospects in this case were faster than our previous assumption of a re-opening around November. Given the speedier re-opening of MWG outlets, we increase our 2021-2022 net income forecasts by between 1%-2% to VND 4.5 tn (+14% YoY) and VND 6.0 tn (+35% YoY), respectively. By applying unchanged target multiples on 2022 revised-up earnings for the ICT segment and sales for the grocery segment, we derive a new target price on the shares of MWG of VND 143,000 per share (from VND 130,000). With upside potential of 13%, we reiterate our OUTPERFORM rating. Downside risk to our call would be a longer-than-expected duration of the COVID-19 pandemic.

The 3Q ’21 earnings will be a bit surprise due to the contracted volume compensation. Being debt-free could save earnings from interest costs and FX risk, and also provide more stable cashflows since 2H ’21 onwards. NT2 could offer a FY21/FY22 dividend yield of 7.3%/8.7% which could be much better than the 6-12 month banking deposit rate of 4%-5.5%. Our 1Y TP for NT2 is VND22,900 along with 18.5% ROI including 7.3% dividend yield. We call for Outperform rating on the shares of NT2.