Company Report

Company Report
TNH VN (Market Perform; TP VND 27,000): National expansion plan to 4x current capacity before 2030

A slow start for 2024, as Tet holiday fell during mid-Q1. For 1Q24, TNH recorded a revenue and net profit decrease of -13% and -39% YoY, respectively. While outpatient visits increased 11%, inpatient visits decreased -8% YoY, as Tet holiday is later and consumption tightening continued . Gross profit declined due to both increased material costs and pre-operating costs associated with TNH Viet Yen (training and payroll for doctors). Net income reached VND 15 bn (-33% YoY), with net income margin decreasing -500 bps and completing 10% of TNH’s 2024 target.

National expansion plan revealed. Shareholders voted for a name change from TNH Thai Nguyen Hospital to TNH Hospital – in preparation of nationwide expansion (targeting Hanoi, Danang, HCMC etc…). Shareholders also approved an increase of foreign ownership from 49% to 70%, which should leave the door open for possible M&A.

12/07/2024

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FRT VN (Outperform; TP VND 211,000): Earnings to turn back positive

The company’s leverage is FRT’s main concern. However, the financial pressure of FRT has eased, reflected in the improvement in the interest coverage ratio (2.5x at 1Q24 vs 0.5x at 4Q23 and 1.0x at 1Q23) on the back of lower borrowing costs (-350 bps YoY and -100 bps QoQ in  1Q24) and improved earnings. With lower borrowing costs, Long Chau can speed up new openings of vaccine centers. FRT also plans to raise capital to scale the vaccine business. The company aims to raise a 10% stake via private placement during late 2024. We now apply higher multiples for the ICT business (from 9x to 11x) on narrower loss and a safer inventory level during 1Q24. As Long Chau now delivers sustainable profit, and the chain is the key growth driver for FRT in the long term, we now use DCF to value the chain. We derive a new target price for the shares of FRT at VND 211,000 (from VND 139,000), and reiterate our OUTPERFORM rating. Long Chau chain accounts for 98% of FRT valuation and 91% of 2025 earnings (vs only 10% in 2022). As such, we view FRT as a pharmacy retail company.

08/07/2024

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VEA VN (Outperform; TP VND 46,500): Support policies to boost consumption ahead

Proposed supportive measures to be approved. During May 2024, the Ministry of Finance proposed a couple of ways to support domestic automobile industry (extending excise tax payment deadline, registration fee reduction from Aug 24 to Jan 25). These measures were quite effective during 2020 (+50% increase in monthly sales after policy was in place) and 2022 (+20% YoY increase in sales volume), but were not as successful during 2H23, which, in retrospect, was the height of the recent consumer belt tightening in Vietnam. So far, excise tax payments extension has been approve, but the registration fee waiver should be approved soon as well.

We maintain our view that total volume for cars during 2024 will increase 9% YoY, but lower our total volume projections for Honda motorbikes to only 2% YoY (from 4% YoY) due to weak performance during Jan-May ‘24.

03/07/2024

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PC1 VN (Outperform; TP VND 32,900): Growth through diversification

PC1 announced their strategical priority to the properties and construction segment, while mineral exploration and power generation serve as secondary focal points. For 2024 guidance, the company sets ambitious target, of 38.5% growth in sales and 77% increase in net earnings, to VND 10.8 tn and VND 525 bn. PC1 expected to distribute a stock dividend in 2023, of 15% on its chartered capital. We see effort of the company in maintaining growth, under the challenging circumstances of the industry. The turnaround of properties should have a stronger impact on earnings, thanks to the size and the low base of performance during the 2022-2024 period. However, the possibility of residential properties projects to generate sales from 2025 (expected by the company) might be hard to accomplish, and we incline towards residential projects could contribute to earnings growth from 2026 onwards. We expect FY24 sales and NPATMIO to reach approx. VND 9 tn (+ 15.4% YoY) and VND 220 bn (+124% YoY). Although our estimates are lower than the company’s guidance, they indicate our expectation in 2024 to witness strong growth in earnings performance following two years of contraction. For 2025F, sales and NPATMI are estimated at VND 8,759 bn (+19.7% YoY) and VND266 bn (+20% YoY).

28/06/2024

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GVR VN (Market Perform; TP VND 36,100): Ever more profitable, rooted in the highest rubber price since 2022

On land conversion progress, GVR is prioritizing the completion of legal requirements, securing investment approvals, and executing investments in industrial park development, aligned with the land use planning strategies in various provinces from 2025 to 2030. The total area of the industrial park by 2025-2030 is expected to be 23,444 ha (+3.57x vs 2024), mostly in Tay Ninh, Binh Duong, Dong Nai, and Ba Ria - Vung Tau province.

Profits stemming from rubber tree land compensation in industrial parks from 2025. During 2024, we forecast revenue and NPAT to reach VND 24.5 tn (+10.7% YoY) and VND 3.7 tn (+11.4% YoY) respectively, higher than the GVR’s targets. For 2025, we forecast that PAT to increase 50.5% YoY due to profits stemming from rubber tree land compensation in industrial parks like Dong Nai Rubber, Ba Ria Rubber, Dau Tieng Rubber, and Phu Rieng Rubber.

26/06/2024

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FPT VN (Market Perform; TP VND 141,500): Long-term growth outlook with global AI and cooperation across ASEAN region

We reduce our rating on the FPT shares to MARKET PERFORM (from OUTPERFORM), with a 12-month SOTP-based TP of VND 141,500/share (equivalent to 7% upside potential). The company’s 5M24 results exhibited double-digit growth in both revenue and earnings. On 23 Apr 2024, FPT formed an AI (artificial intelligence)-related partnership with NVIDIA, which we believe is the first step toward joining the global AI value chain, especially given FPT’s already well-placed background in AI. Further, we expect that the establishment of AseanConnect.One alliance will help improve FPT’s telecom services quality (especially data center) and enhance customer access.

26/06/2024

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MCH VN (Market Perform; TP VND 235,300): Power brands led by innovation

Masan Consumer Corporation (UPCOM: MCH) is a direct subsidiary of Masan Consumer Holdings (excluding the beer business, Masan Brewery). Since being established, the company has expanded its portfolio brands across eight fast-moving consumer goods (FMCG) categories to become one of Vietnam’s foremost consumer staple companies.

MCH food and beverage segment offers a wide range of products, with hundreds of SKUs under six main categories: seasoning, convenience food, coffee, beverage (mainly energy drinks; again, excluding beer), and processed meat (which moved to MML from 2023); of which its seasoning portfolio including fish sauce, chilli and soy sauce have led the market for years (market share of 45%, 64% and 43%, respectively) MCH also penetrated the home & personal care (HPC) market during 2020 via the acquisition of NET Detergent JSC. In the period 2017-2023, each year, the company introduced 50 initiatives on average to their product pipeline to meet consumer’s daily basic needs.

24/06/2024

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GEX VN: The profit from divestment from renewable projects can be booked from mid-2024

GEX’s 1Q24 PBT arrived at VND 385 bn, soaring by 168% YoY. The gross profit from most segments, especially electrical equipment and construction materials dropped significantly due to weak demand from household channel and higher input cost. However, the gross profit from the industrial park segment increased 34.6% YoY to VND 615 bn during 1Q24, driven by an increase in lease pricing between 7-20% throughout 2023. In addition, GEX recognized a net stock trading profit of VND 111 bn versus a loss of -VND 144 bn for 1Q23 on the back of the positive performance of the stock market during 1Q. We expect GEX’s PBT to increase 67% YoY to VND 2.3 tn, driven by the divestment of renewable projects at an estimated profit of VND 1.1 tn. Management expects the the divestment of most projects can be completed during the second quarter. Excluding the impact of financial income, the PBT would decline by 4% YoY. 

20/06/2024

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VHC VN (Outperform; TP VND 88,000): Upgrade to OUTPERFORM

In May 2024, Vietnamese pangasius exports reached $167.3 mn USD (+5% YoY, flat MoM). According to Agromonitor data, this translates into a 21% approximate increase YoY in terms of sales volume growth. Exports to the US declined -2.1% YoY and exports to China inched up by +1% YoY, which is offset by significant gains in other smaller markets such as the Middle East (+31% YoY) and South America (+44% YoY). ASP to major markets such as the US and China remained stagnant at $2.98 USD/kg (-19% YoY) and $1.91 USD/kg (-17% YoY) respectively in May ’24, which weighed on overall gains in terms of volume growth over 20% YoY for each market. However, we still have been noting a slow MoM recovery in terms of ASP to the US since the trough in Dec’ 23.

19/06/2024

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VRE VN (Outperform; TP VND 29,500): New mall inauguration support VRE to grow in mall leasing business

Given the decelerating retail sales growth in Vietnam, we downgrade our rating on the shares of VRE from BUY to OUTPERFORM, with a reduced 1Y target price of VND 29,500/share (+37.5% upside) from VND 33,600/share. Our target price reduction reflects lower occupancy over the past three quarters from 3Q23 to 1Q24 and sluggish growth of the Vietnam retail market during the first five months of 2024, which has caused us to lower our 2024 net revenue an NPAT forecasts to VND 9.25 tn (-5.6% YoY, 1.7% lower than our previous estimate of VND 9.4 tn) and VND 4.14 tn (-6.2% YoY, 3.2% lower than our previous estimate of VND 4.27 tn), respectively.

17/06/2024

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NLG VN (Market perform; TP VND 43,000): Envisioning a substantial presales recovery from last year

NLG recorded net sales of VND 205 bn (-13.0% YoY, -87.5% QoQ) and a net loss of VND 65 bn (reversal from net profit during 1Q23 and 4Q23). Fewer units in the Izumi City, Southgate, and Mizuki Park project were handed over during 1Q24 than earlier during 1Q23 and 4Q23. During 1Q24, due to the low property sales, the SG&A exp/revenue ratio was high, at 70.6% but still lower than 1Q23. For the past few years, NLG has witnessed an increasing trend of selling and administrative expenses SG&A/ revenue ratio from 16.7% during 2019 to 30.8% during 2023, and the SG&A expenses/ratio during 2023 was the highest among listed Vietnam developers.

14/06/2024

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HDB VN (Outperform; TP VND 29,000): Solid earnings growth

We reiterate our Outperform rating on the shares of HDB and roll our valuation forward to mid-2025 with 1Y TP of VND 29,000/share - representing upside of 22.4%. Our valuation is presented without considering the potential dividend yield of 6.3%. We believe that solid credit growth (higher than 20%) will hold up during 2025, allowing HDB to maintain NIM over 5%, and manage the NPL ratio between 1.8% and 2.0%. This should facilitate HDB to generate robust earnings growth and uphold ROE above 20%. However, credit expansion, particularly in real estate and related sectors, should be properly monitored if the market recovers more slowly than expected.

08/06/2024

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QNS VN (Market Perform; TP VND 56,700): High cash dividend

We downgrade our rating to Market Perform (from Outperform) on the shares of QNS, with an increased target price to  VND 56,700/share (from VND 55,400/share), as we roll forward our price target to mid-2025F. QNS trades at a 2024F P/E of 6.3 and 2025F P/E of 6.1x, which is lower than its five-year historical range of between 6.3x-11.5x. However, we believe that QNS’s earnings growth will be lower for 2H24 and flat for 2025, as the sugar business suffers lower growth, and the soymilk segment takes more time to return to normal.

07/06/2024

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DCM VN (Market Perform; TP VND 38,700): Earnings to rebound on reduced depreciation

DCM’s net income dropped -75% YoY during 2023 to VND 1.09 tn, owing to a sharp correction in urea ASP (-37% YoY), while the reduction in gas input costs (-3% YoY) was not sufficient enough to shield earnings. Looking forward, we expect global demand for fertilizer to gradually recover after being impacted by El Nino during 2023, enabling fertilizer prices to increase from last year low base. While revenue is projected to grow by 11% YoY to VND 14 tn in 2024, the reduction in depreciation expense should help earnings of DCM to rebound significantly during 2024 (net income of VND 1.84 tn, +69% YoY, from VND 2 tn).

Base case: Meanwhile, 2025 revenue and net income could remain flat at VND 14.3 tn (+2% YoY) and VND 1.85 tn (+1% YoY) as current urea capacity is rather full, while the revenue stream from NPK fertilizer remains quite small. Given this earnings outlook, our 1 year target price for the shares of DCM is VND 38,700/share. We call for MARKET PERFORM rating, as  DCM’s share price rallied 22% since our last OUTPERFORM rating. DCM remains our favorite dividend yield name, offering a 5.3% yield.

07/06/2024

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CTG VN (Outperform; TP VND 38,500): Setting sail

We reiterate our Outperform rating on the shares of CTG, although with a reduced 1Y TP of VND 38,500/share (from VND 41,400). As there is no timeline for state divestment below 65%, a resolution for raising capital by CTG remains blurry and is hindering long-term growth. All the while, the earnings outlook for 2024-25 remains exceptional compared to peer, with PBT growth of +17% YoY and +35% YoY, respectively, as we expect the heavier provisioning to come to end during 2024. ROE, therefore, should achieve a more desirable level of 20% during 2025. CTG is the third largest bank in Vietnam with strong brand recognition, solid customer base, and good deposit franchise, all of which would be an advantage for CTG to maintain a resilient NIM and expand fee-based services. A capital raising is the key to the growth puzzle for this bank.

06/06/2024

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