Company Report

At the current price, GEX is trading at a 12M trailing PE of 18x. Given the strong growth in the first half of 2021, we believe that that GEX’ earnings will well exceed guidance for 2021. We believe that the increase in input prices is a risk which could cause pressure on electrical segment margin, as the Company’s low-cost inventory could deplete over time. However, the incremental revenue generation from VGC, the IPO plan of sub-holdings, and the possible extraordinary profit from the divestment of wind power plants should be supportive catalysts for the shares over the medium-term. 

PHR recently held its AGM, wherein management set its 2021 pretax profit of the parent company to decline -25% YoY due to a slow licensing process for the VSIP 3 industrial park project. As there is a mismatch between the parameters actually measured and the figure preliminarily submitted to the local government, the company had to adjust related documents, lengthening the licensing process. Nevertheless, we expect this issue to be resolved in 4Q21, enabling PHR to book land compensation income of VND 449 bn each year for both 2021 and 2022 (lower than VND 863 bn in 2020). We estimate 2021-2022 pretax profit at VND 981 bn (-29% YoY) and VND 852 bn (-13% YoY), respectively. We derive a new 1-year SOTP target price at VND 57,100 (from VND 58,500), which represents a 1% return on investment inclusive of a 7% dividend yield. For the time being, PHR remains an attractive dividend play. We maintain our MARKET PERFORM rating on the shares of PHR. Over the longer term, the Tan Binh 2 industrial park is to be the main earnings growth driver, as it is awaiting to be added to the 2021-2025 Master Plan for Industrial Park Development. We hence incorporate Tan Binh 2 in our high case valuation.

After recently attending the IMP AGM on the 22nd of April, we found that the growth driver for both IMP earnings and the share price has been lower in the short to medium term. The target of the EU-GMP approval process for the 4th factory has been seriously delayed to 2023, while the raw pharma material price is rising again amid the complex progress of the global pandemic situation, leading to our decision to lower previous earnings estimate for FY21 and FY22. Also, given that the IMP share price has risen 30% since our last call in January and has reached our previous target price, we decided to rerate IMP from BUY to UNDERPERFORM, lowering the target price to VND 69,000/share. This equates to a slight upside of 1%, plus a dividend yield of 2% from the current share price.

We are upgrading our rating on the shares of BID to Outperform (from Market Perform) given its improving fundamentals and as we roll forward of our valuation to June 22. We lift our 12M target price for BID to VND 48,000/share (previously VND 46,430/share), implying 14% upside potential. For 1Q21, BID posted a pretax profit of VND 3.4 tn (+87.2% YoY, completing 26% of the AGM plan), which was driven by a 1.8% YTD credit growth, a 179% YoY increase in writebacks, and an improvement in CIR. The Bank also accelerated provisioning to improve its asset quality, with NPL ratio remaining at 1.76%, and LLC ratio increasing to its highest level, at 107.6%.  

DRC recently held its AGM wherein a very conservative 2021 plan with net sales of VND 3.9 tn (+6% YoY) and pretax profit of VND 300 bn (-6% YoY) was approved. We estimate 2021 net sales and pretax profit of VND 4.2 tn (+14% YoY) and VND 471 bn (+47% YoY, 12% higher our previous estimates), respectively, driven by radial tire sales volume growth and reduction in depreciation expense. Being aware of the current radial factory is approaching full capacity,   management proposed to raise radial production capacity from 600K units to 1 mn units, driving earnings growth for the company from 2024. With a higher 2021 earnings and target multiple (from P/E of 9x and and EV/EBITDA of 4.5x to P/E of 10x and EV/EBITDA of 5x), we derive a new target price at VND 27,900 per share (from VND 23,500), representing potential upside of 6%. We maintain our MARKET PERFORM rating on the shares of DRC. 

HDB delivered decent 1Q 2021 results, with a TOI and PBT of VND 4.2 tn (+32.3% YoY) and VND 2.1 tn (+67.9% YoY), respectively. Growth was supported by strong credit expansion of 5% YTD, robust fee income growth (+98% YoY), and a gain from trading bonds (+VND 396 bn vs. a loss of – VND 32 bn in 1Q 2020). Credit quality was reasonably contained. Between 2021 and 2022, we expect pretax profit to grow by a respective +23% and +25% YoY to VND 7.2 tn and VND 8.9 tn. Our estimate for 2021 is lower than AGM guidance of VND 7.3 tn (+25% YoY), primarily due to our lower assumption of credit growth (+20% vs. +26% YoY). Rolling forward our valuation to mid-2022, our 1Y target price on the shares of HDB is VND 34,000/share (previously VND 29,500/share), which translates into a 13.3% upside. We reiterate our Outperform rating on the shares of HDB.

The 2021 AGM held on Apr 27 approved the annual plan, featuring 20% PBT growth and a 38% increase in charter capital. The Bank also released its 1Q 2021 earnings, which exceeded consensus with total operating income (TOI) of VND 9.1 tn (+45% YoY) and pretax profit of VND 4.6 tn (+109% YoY and 79% QoQ). Solid performance was fueled by all income streams, and reasonably controlled asset quality. The customer base continued to expand by 1 mn (+17% YTD) during 1Q 2021. We forecast MBB to achieve VND 13.6 tn in pretax profit (+28% YoY, completing 106% of the AGM plan) for 2021. For 2022, PBT is expected to reach VND 16.4 tn (+20% YoY). We also roll forward our valuation to June 2022, and our 1Y target price for the shares of MBB is VND 36,000/share (+20% upside). We reiterate our BUY rating on the shares of MBB.

DPM recently held an Annual General Meeting on 26 April 2021, whereby management sought approval to pay a 2020 cash dividend of 14% on par (higher than historical level of 10-12%), anchored on strong 2020 pretax profit growth of 82% YoY. For 2021, management set very conservative revenue and pretax profit growth targets of up 6% YoY and down 48% YoY, respectively. Nevertheless, we forecast revenue and pretax profit to increase by 19% YoY and 4% YoY (+6% and -7% compared with previous revenue and pretax profit estimates as we revise up our assumptions for urea selling prices and related gas input costs). At VND19,000 per share, DPM trades at a 2021E P/E, P/B, and EV/EBITDA of 11.6x, 0.9x and 2.3x, respectively. We derive a new target price of VND19,700 per share (from VND18,400 per share). With 4% upside to our target price (and a 6.5% 2021E dividend yield), we maintain our Market Perform rating on the shares of DPM.  

After attending Sabeco’s AGM, we are downgrading our rating on SAB from OUTPERFORM to Market Perform due to several challenges that we see on the horizon, which include: (i) rising raw material prices; (ii) a potential COVID-19 resurgence; and (iii) higher SG&A spend in order to claw back lost market share. We are also lowering our 12-month target price for SAB to VND195,900/share (+15.4% upside potential) from VND214,000 - representing a total return of 17% (including a 2% dividend yield for 2021E). That said, off of the low 1H20 base, we do expect a strong recovery in 1H21E, and for all of 2021E we expect SAB to report net sales and net profit of VND34.1tn (+21.8% YoY) and VND5.7tn (+15% YoY), respectively. 

We attended the VNM 2021 AGM held on 26 April. The company set out a conservative 2021 plan, with net sales growth targeted at just 4.1% YoY (not including ASP hikes) and NPAT being flat YoY. We are downgrading our rating on the shares of VNM from Outperform to Market Perform, and lowering our 12-month target price to VND109,000/share (from VND121,000), based on P/E and DCF methodologies – as we trim our 2021E sales and NPAT by 1% and 1.3%, respectively, on the back of the weaker-than-expected 1Q21 results (net sales and NPAT decreases of 6.4% YoY and 6.5% YoY). Our new TP implies upside potential of 13.5%. Strong raw material input increases are also key contributing factors leading to their discouraging plan. Management did explain that the weak demand was the result of complications from the COVID-19 pandemic situation. Given that we expect very low earnings growth in 2021 with a modest growth outlook in the coming years, VNM is now lagging the growth expected at other listed companies. 

After attending the STB AGM on the 23rd of April, we have decided to upgrade our rating on the shares of STB to Outperform, along with our 1Y target price of VND 26,949/share (previously VND 24,300) - representing 20% potential upside. We came away from the meeting quite positive on STB’s pace of legacy asset debt settlement. The Chairman is confident that STB will clear all debt-challenged assets in 2022, which is three years ahead of the STB restructuring plan, and a year ahead of what the Chairman had initially anticipated at last year’s AGM. Meanwhile, the core business remains stable, with limited stress on asset quality (NPLs at 1.7%; restructured loans under Cir 01 amounting to 0.2%) and decent 2021E bottom line growth (+20% YoY). The worst looks to be behind STB, and the settlement of its underwater legacy assets has been moving in the right direction.