Company Report

We trim our 2024F net income to VND4tn (2,259% YoY, from VND4.3tn) due to the one-off expenses in 3Q24, and our 2025F net income to VND5.7tn (+44% YoY, from VND6tn) to reflect the slow consumption recovery and grocery store expansion into new provinces, which might weigh on profitability. The solid 2025F earnings growth is driven by continuous improvement in the ICT & CE and grocery segments, lower losses from the pharmacy business and the absence of one-off expenses. With revised financials and the inclusion of Erablue chain into the valuation, we derive a new SOTP-based 12-month target price for MWG of VND77,000 per share (from VND76,000), implying 28% upside potential. As the share price recently pulled back on seasonal earnings weakness amid heavy foreign selling pressure, we upgrade our rating for MWG to BUY (from OUTPERFORM). Longer term, the improvement in earnings of BHX would be the main growth driver from 2026, while earnings growth of the ICT & CE chains will likely normalize after strong growth in 2024-25. We estimate a 2026-28F net income CAGR of 15-20%.  

We upgrade our rating on the shares of HPG from OUTPERFORM to BUY, with a 1-year TP of VND 31,700/share. Over the short-term, the recent recovery of steel prices, the increase in sales volume, and update on AD tariffs for imported HRC should be supportive to the share price.

Revenue and net profit in 3Q24 came in at VND 34 tn and VND 3.02 tn, respectively, achieving strong growth of 19% and 51% YoY. This was driven by strong growth in long steel sales volume of 39% YoY, as well as through a substantial increase in earnings from agriculture and real estate of 206% YoY to VND 583 bn, which equated to 19.3% of total earnings during the quarter. On the other hand, HRC volume was resilient with a slight increase of 4% YoY, despite strong competition from China and a slowdown of exports.

On Aug 15, the Government agreed to reduce registration fee policy by 50% for three months, despite Ministry of Finance’s suggestion not to go forward with the policy. As a result, we expect better-than-expected car sales for VEA’s JVs (Toyota, Honda and Ford VN) in 2H24. Coupled with other catalysts such as consumer spending recovery and an attractive dividend yield (2024F and 2025F dividend yields for VEA are 11% and 10%, respectively) lead us to believe that VEA could provide upside from here. We maintain our 1-year target price of VND 46,500/share. Given the forecasted return of 15% (including 11% dividend yield), we maintain our OUTPERFORM rating on the shares of VEA.

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.

As we increase our 12-month target price from VND84,800/share to VND93,400/share (20% upside potential) – rolling over our SOTP valuation to mid-2025E and reflecting SSI’s higher valuation for TCB, we also upgrade the shares of MSN to OUTPERFORM (from Market Perform). 2024-25 should be an eventful period for MSN group: Upcoming milestones include the divestment from mineral processing unit H.C. Starck, the plan to list Masan Consumer Corporation (MCH: currently trading on UPCoM) on HOSE, and the possible stake sales. These recent moves/plans suggest that the Group is actively restructuring to focus on its core consumer business. During 2024, we expect a broad-based recovery across all segments. We believe that revenue growth from its consumer retail chain subsidiary, Wincommerce (WCM), will be achieved via rapid new store openings, a payoff from the restructuring during the 2022-23 period, and a recovery in consumer spend. Subsidiary Masan Consumer (MCH) has consistently proven resilience, having outperformed peer since 2019 (CAGR of 10% in revenue and 11% in NPAT). We believe that the company will maintain this momentum through 2024, leveraging synergies of the retail platform (WCM) and other product innovations.

For 2024, we expect a broad-based recovery across all segments.  We believe that revenue growth from consumer retail chain subsidiary, Wincommerce (WCM), could come from rapid new store openings, restructuring during the 2022-23 period that should start yielding fruit, and a recovery in consumer spend. Subsidiary Masan Consumer (HOSE: MCH) has consistently proven resilience and outperformed peers since 2019 (CAGR of 10% in revenue and 11% in NPAT). We believe that the company will maintain this momentum through 2024, levering synergies of the retail platform (WCM) and the innovative product innovations.

Despite the general decline in the first half, PAN maintains its revenue and NPAT guidance of VND 15.2 tn (+11% YoY) and VND 840 bn (+6% YoY), respectively, with expectation of market dynamics weathering the storm (a better Winter-Spring crop, recovery and lower cost of operating business of fisheries sector). For 1H23, PAN posted revenue and NPATMI of VND 5.3 tn (-14% YoY) and VND 105 bn (-40% YoY), respectively. Excluding non-recurring asset sales in 1Q23 from subsidiary Bibica Corp (BBC), the NPATMI decrease would be 21% YoY.  By segment, aquaculture saw the largest drop due to the economic downturn, coupled with a high 1H22 base. For agribusiness, a higher COGS and weak demand for the seed business was observed, while packaged rice, pesticide and fumigation saw an increase.

During 2Q 2023, benefiting from a tight global drilling market, PVD exhibited a very strong comeback from both the low base last year and on a QoQ perspective – matching expectations. Revenue declined -6.7% YoY (due to no hired rigs this year compared to one hired Hakuryu-11 rig last year) and was up +15% QoQ. NPAT grew in both QoQ (surging +196% QoQ) and YoY terms. Excluding the one-off gain of VND 70 bn from a contract termination agreement, core NPAT would be VND 94 bn, +113% QoQ. 

DGC delivered net income of VND 882 bn (-54% YoY) for 2Q23, which exceeded company guidance of VND 630 bn. Compared to the latest quarter, net income increased 7% QoQ, due primarily to higher usage of in-house phosphate rock, as ASP continued its downtrend. We expect that earnings for 2H23 will rise 11% vs. 1H23 as the price of yellow phosphorus and related products recover - along with the rebound in demand from fertilizer and semiconductor producers. The price of DAP-type fertilizer has increased between 12%-15% from the trough of July due to higher agro-commodity prices. Meanwhile, we expect that demand for yellow phosphorus from semiconductors to recover during late 2023, helping DGC to post double digit net income growth for 2024. We estimate 2023 and 2024 net income of VND 3.59 tn (-41% YoY, from VND 3.8 tn) and VND 4.34 tn (+21% YoY), respectively. We derive a target price for the shares of DGC of VND 84,000 per share – representing upside of 14.4%. We call for OUTPERFORM rating on the shares.

We reiterate our OUTPERFROM rating on the shares of PVT despite lowering our 1Y TP to VND 23,200/share (~17% upside) from VND 24,000/share. 4Q 2022 revenue and gross profit increased 17% and 33% YoY, respectively, due to 25% YoY growth in transportation segment revenue associated with higher charter rates, as the FSO segment stabilized. We see a strong tanker charter market supported by sanctioning measures on Russia oil&oil products increasing ton-mile demand for oil transport. Full year 2022 PBT thus reached VND 1.5 tn (+40% YoY), which is 8% higher than SSI Research estimates due to a surprising asset disposal gain during 4Q. Excluding all asset disposal gains, 2022 PBT would have been VND 1.2 tn (+17% YoY), slightly higher than its PBT CAGR of 15.6% over the past ten years.

We initiate a BUY recommendation for the share of DBD (Binh Dinh Pharmaceutical & Medical Equipment) with the target price of VND 73,000/share, which is equal to a total return of 35% from the current price as of March 23th, 2022. We saw DBD as an attractive investment as the company: (1) capable of manufacturing highly complex products - cancer treatment and dialysis fluid, (2) active in products R&D with significant unused capacity, (3) about to hold one competitive GMP-EU factory, (4) is a potential target for large M&A deal. We expect DBD sales and net profit in 2022 to reach VND 1.78 tn (+9% YoY) and VND 223 tn (+21% YoY) respectively. We also expect DBD sales and net profit CAGR at 9% and 13% respectively during 2023 – 2028, backed with expansion in drug store sales channel, increase in capacity and impact of GMP EU certification to drug bidding activities in hospital. 

We are initiating coverage on the shares of pre-IPO (February 2022) Nova Consumer Group Joint Stock Company (NCG) with our 1Y target price for the shares of NCG is VND 53,200/share, implying a 22% upside relative to the IPO starting price. NCG is a leader in the animal health, feed, and farm market segment, having long-established customer relationships with the ability to create a full “3F” supply chain. It also has the advantage of being a part of the Nova Group ecosystem (including Novaland, Nova Consumer Services and six other members), which should allow potential future synergies and sharing resources. There is also the potential for strong growth in the FMCG business, from both organic growth and M&A perspective (on-going transactions:  Anco Family Food, a well-established beverage company, and a nutrition company). From 2022, NCG is widely anticipated to consolidate the consumer business, including Anco Family Food (sausage), milk, energy drink and coffee. Excluding one-off items in 2021, NCG should post strong core profit growth of 109% YoY in 2022. Through 2021-2026, however, we estimate that NCG will continue to post a net profit CAGR of 26.8%.

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.