Company Report

2023 was an impressive and significant year for Viettel Post (VTP), as the company managed to post impressive earnings growth of 48% YoY, partially on top of the low base in earnings in 2022. PBT reached VND 480 bn (+48% YoY), and NI reached VND 381 bn (+48% YoY). 2023 EPS is VND 2,654/share. Key growth drivers: market share +3%, core revenue +12% YoY, gross margin improvement: + 1.9 percentage points.

During 1Q 2024, VTP posted a slowdown in both top line and bottom line growth, with revenue -2.1% YoY and PBT -22.4% YoY, only completing 16% of the company’s 2024 PBT target after the first quarter and in line with our expectations. Key reasons: trading segment cutback by 30% YoY, higher cost from new capex investment, gross margin decline by 2.4 percentage points.

AGM held successfully with some key targets: revenue -33% YoY due to trading segment cutback, PBT 462 bn flat YoY, cash dividend of 15% on par

Viewing 1Q 2024 results going forward, we are confident that PVT can continue its growth path for the core tanker business in 2024 as we have previously forecasted (around 18% YoY). We also notice that the recent time charter market has improved again back to its previous peak for the oil/chemical MR (medium range) tanker segment, so a sudden weakness of the tanker market is not imminent. Thus, we maintain our OUTPERFORM rating for PVT with a 1Y TP of VND 30,000/share, and the stock remains our top pick for the transportation sector in 2024.

As Viettel Group (Viettel) and Vietnam Posts and Telecommunications Group (VNPT) were awarded the usage right of 5G wavebands in March 2024, we believe that CTR will require significant capital for BTS (base transceiver station) sites investment, which means a conservative dividend payout level accordingly should be reasonable to accumulate a strong enough retained earnings balance as a safe equity source. However, we observe that CTR intends to pay out higher cash dividends than before. Specifically, during 2016-2021, CTR had maintained a conservative VND 1,000/share cash dividend despite consistent earnings growth. However, that level then increased to VND 2,919/share in 2022 and was approved at VND 2,720/share in 2023 (during the 2024 AGM) (nearly a threefold increase compared to past years). Therefore, we believe that CTR might have to increase its debt component in the capital structure. Additionally, we witnessed lower-than-expected gross profit margin of construction segment and financial income during 1Q24 and expect that 2024 NPATMI will perform a slower growth of 11.6% YoY growth than that of 2023 (16.5% YoY). Nevertheless, we forecast a solid NPAT growth of 19.8% YoY in 2025, mainly driven by the long-term outlook of 5G rollout, which should support infrastructure leasing segment to continue to improve CTR’s overall profit margin. We call for a MARKET PERFORM rating on CTR, with a 12-month DCF target price of VND 133,200/share (equivalent to 3% upside potential).

PNJ recently held its AGM, wherein the company set its 2024 net income target at VND 2.09 tn (6% YoY). We think the company set conservative earnings target due to the recent surge in gold material costs. In 1Q24, PNJ achieved net sales and net income of VND 12.6 tn (+29% YoY) and VND 738 bn (-1.4% YoY). While the company posted strong top line growth thanks to the recovery of retail sales (+12% YoY) and record high gold bar sales (+66% YoY), net income was flat as the company has not yet adjusted sticker prices to offset the increase in gold material costs. Although 1Q24 retail sales showed early recovery sign (+12% YoY), the growth mainly came from larger store network (392 gold stores as of 1Q24 vs 357 gold stores as of 1Q23), while retail sales of existing stores increased by single-digit (our estimates). With the slow recovery in retail sales in 1Q24, we think PNJ prioritized gaining market share in 1Q24, hence explaining the flat net income despite resilient top line growth.

The company held its 2024 AGM on 10 Apr 2024. Approved 2024 guidance for revenue and PBT was VND 61.9 tn (+17.5% YoY) and VND 10.9 tn (+18.2% YoY) respectively. Besides the impressive growth momentum of the global IT segment, FPT targets the continual expansion of its education segment during 2024-2025, as well as the recovery of the online advertising subsegment, with an expected jump from a 2023 low base. FPT also plans to launch its new data center during between late 2024 and early 2025, and expects the improving profit margin of domestic IT through the Made-by-FPT ecosystem. On the other hand, the 2023 cash dividend was also approved at VND 2,000/share (20% of charter capital). According to FPT, the company might maintain this cash dividend level (VND 2,000/share) due to the need to hold onto excess retained earnings to fund for investments to power its long-term growth.

With lower-than-expected 1Q24 results, we revise down our yellow phosphorus ASP for 2024-2025 to VND 113 mn/ton (+7% YoY, from VND 118 mn/ton) and VND 121 mn/ton (+7% YoY, from VND 123 mn/ton). Net income are hence estimated at VND 3.79 tn (+16% YoY) and VND 5.47 tn (+44% YoY) for 2024-2025. Projected 2024-2025 earnings growth will be primarily determined by (i) sales volume and ASP recovery of phosphorus-related finished products and (ii) reduction in phosphate rock material costs on higher usage of in-house phosphate rock (80% in 2023, 90% in 2024, 100% in 2025).  We apply our unchanged target P/E of 12x on revised 2024-2025 earnings estimates, and derive a new target price at VND 133,000 per share (from VND 142,000). We maintain our MARKET PERFORM rating. Pullback in earnings during 1H24 may weigh on share price performance after a period of strong price rally, though we believe that price weaknesses should present opportunity to accumulate the stock for investors with a long investment horizon.

The 2024FY business plan received shareholder approval, with two scenarios just as for the previous year: Lower bound net profit for 2024FY is targeted at VND 400 bn (+13x YoY), whereby sales volume is assumed to increase 13.3% to 1.63 mn tons. For the upper-bound plan, net income is targeted to increase by 17x YoY to VND 500 bn if sales volume increases by a higher rate of 20.7% to 1.73 mn tons. ASP is assumed to decline 5.2% YoY during the first case and by 5.7% YoY during the second case, primarily due to the high base during the first quarters of the last fiscal year. Returning to cash dividends: After many years of stock dividends, HSG is poised to begin the payment of cash dividends for FY 2023 at 5% on par (VND 500/share – equivalent to a dividend yield of 2.3%).

DCM posted lower-than-expected 3Q23 results, as avg. urea ASP continues a slow recovery as well as higher-than-expected input gas price. The company continued to recognize gas input costs higher than actual costs, reflecting in the rise in provision for the increase in gas input costs. As of 3Q23, the said provision totaled VND 1.3 tn (vs VND 680 bn as of 2022YE and vs VND 1.29 tn as of 2Q23). We had initially expected that DCM to make a partial reversal of said provision in 2H23 as per the announcement of DCM at 2023 AGM, hence helping to reduce gas input costs in 2H23. However, Petrovietnam Group (the largest shareholder of DCM) has not finalized this matter yet. As the timeline for this issue is uncertain at the moment, and that the 3Q23 fuel oil price increased at a faster rate than our assumption, we increase our 2023-2024 gas input cost assumption.

ACB announced a prelim PBT of VND 4.83 tn (-1.7% YoY) for 2Q23 which turned into 1H23 PBT of VND 10 tn, exceeding our expectations and accomplishing 50% of the AGM’s profit plan. This earnings growth slowdown was caused by NIM shrinkage, the provision burden, and weak fee-based earnings. Whilst credit growth rebounded during 2Q23 at 4.6% YTD (vs. -0.6% YTD for 1Q23), total deposit growth was 4.2% YTD. The NPL ratio increased to 1.07% (vs. 0.96% for 1Q23). Given that the LDR (79%) and short-term funding for medium- and long-term loans (19%) were well below the cap, we believe that funding pressure will not be the primary impediment for ACB to stimulate credit growth during 2H23.    

Given the uncertainty of a full recovery and an upside of just 2% (VND 36,700/share price target) based on our new target price, we downgrade our rating on the shares of ANV from Outperform to Market Perform. At the AGM, management provided net revenue and PBT guidance for 2023 of VND 5.2 tn (+6% YoY) and VND 300 bn (-61% YoY), respectively. PBT guidance was revised down 40% from VND 500 bn (-35% YoY) during April 2023 to VND 300 bn (-61% YoY) during the June 2023 meeting, reflecting management's much less sanguine view on the recovery of fishery exports and gross profit margin contraction in less than two months. Reflecting management’s perception, we too lower our 2023 NPAT forecast 34%  given the: (1) longer-than-expected ASP recovery; and (2) lower-than-expected order volume from the Chinese market.

After the sharp drop of -30% in 1Q23, the company’s urea price continued to decline in 2Q23. DPM urea price now stood at VND 9,000/kg (vs VND 9,600/kg in 1Q23). We believe the urea price is to stabilize around this level throughout 3Q23, before rebounding moderately in 4Q23 when the high season approaches. Having said that, we forecast earnings of DPM to set a trough in 2Q23 in terms of absolute value, but recovery is rather slow. As such, 2023 net income is estimated to drop to VND 1.18 tn (-79% YoY, from VND 1.23 tn estimated previously, lower than the company guidance) due to (1) urea price downtrend, (2) sluggish urea demand and (3) increase in gas transportation tariff. In 2024, net income may increase to VND 1.27 tn (+8% YoY, from VND 1.32tn estimated previously) thanks to the recovery in sales volume. As DPM may have passed the earnings trough period (2Q23), we roll over to 2024 and use higher target multiples to derive a new target price of VND 34,700 per share (from VND 30,600). With an ROI of 10%, we maintain our MARKET PERFORM rating.

Reiterate OUTPERFORM, with new 1Y TP of VND 52,900/share. Raise 2024F NPATMI estimates to VND 554 bn, flat YoY given the recent positive development and expectation of further reocvery of freight rates, leading to a possible re-rating for the industry. AGM set target for NPATMI 2023F of VND 490 bn, - 40% YoY, 10% lower than our estimates. Industry see some positive developments on charter rates (+15-20% from trough) so we expect inventory de-stocking to end around 3Q2023 and industry fundamental to improve from that point on.

Conservative plan: GAS 2023 net profit was conservatively targeted at VND 6.5 tn (a significant decline of 56.6% YoY), based on an average oil price of USD 70/bbl (-30% YoY). According to management, If 2023 oil prices average USD 80/bbl like in the first quarter, GAS’ revenue and net profit could exceed guidance by 10% and 30%, respectively. Cash dividends for 2022 were approved at 36% on par. The AGM approved the issuance of 382.8 mn bonus shares, equivalent to 20% of current outstanding shares. This issuance is expected to take place between 3Q and  early 4Q23. Our current rating for the shares of GAS is MARKET PERFORM. Our 12-month target price of VND 103,000/share is based on a 2023 net profit forecast of VND 12.3 tn (-18.5% YoY). We assume that that volume of dry gas and LPG will drop by 2% and 5.5% YoY respectively, while the ASP is forecast to drop by an average of 14% YoY in 2023.

At the AGM, net revenue and PBT guidance for 2023 was set at VND 11.5 tn (-13% YoY) and VND 1 tn (-50% YoY), respectively. Earnings guidance reflects management's conservative stance, including weak market demand and gross profit margin contraction. For 2023, we expect that net sales and net profit of VND 11 tn (-17% YoY) and VND 1.3 tn (-34% YoY), respectively. At VND 59,000/share, VHC trades at a 2023 P/E of 8.2x. We maintain our Market Perform rating for the shares of VHC, with a 1Y target price of VND 61,000/share (from VND 63,000/share previously) as we lower our net profit forecast by 9%. During 1Q23, VHC reported net sales and net profit of VND 2.2 tn (-32% YoY) and VND 226 bn (-59% YoY), respectively.  VHC suffered a larger revenue decline than rivals ANV (-5% YoY) and IDI (-6% YoY), as the US market saw the largest drop in pangasius exports from Vietnam. However, in terms of net profit, VHC outperforms other exporters due to the US market's higher gross profit margin. VHC’s earnings peak occurred during 2022, especially during 2Q22 with a net profit of VND 802 bn (+207% YoY).