Company Report

We attended the analyst meeting hosted by SAB. The overall message from the CEO is that despite some short-term headwinds due to unfavorable macro conditions, the company is well prepared for growth once demand recovers (which is expected during H2 or early 2024). While the 2023 sales target appears to be a bit of a stretch against the prospect of uncontrollable outside factors, management sees a path forward to meet its annual NPAT target by controlling costs. Given weak Q1 2023 results as well as expectation of weak consumer sentiment to remain in the coming quarter, we cut our 2023 sales estimate by 6% to VND 37 tn (+4.7% YoY), while estimated NPAT remains almost unchanged at VND 5.8 tn (+5.2% YoY). We cut our target price for SAB to VND 182,000/share (from VND 198,500/share) based on a PER of 23x (from 24x) applied on our 2023F EPS due to the soft outlook for 2023, combined with our DCF model. With 13% forecasted upside in the shares of SAB, we maintain our Market Perform rating.

4Q 2022 revenue increased 16% YoY, while NPAT increased 86% YoY during the last quarter of the year, thanks to strong improvement in EPC/EPCI segment and JV contribution. EPC segment recorded strong results thanks to Dai Nguyet project completion, as well as continuation of large projects such as Gallaf – Batch 3, Shwe Jacket…2022 revenue thus reached VND 16 tn (+ 15.5% YoY), while NPATMI reached VND 772 bn (+28.5% YoY). This is 20% higher than our estimate, with the key upside surprise coming from higher EPC/EPCI profit and profit margin. 2022 EPS was VND 1,212/share, +33% YoY, and translating into a trailing-12 month P/E ratio of 22x.

HT1’s 2022 net revenue and NPAT was VND 8.9 tn (+26% YoY) and VND 262 bn (-29% YoY), respectively, achieving 102% and 100% of our 2022 in-house forecast. During 4Q22, HT1 reported net sales and NPAT of VND 2.3 tn (+14% YoY, +2% QoQ) and VND 58 bn (+8% YoY, +58% QoQ), respectively. Cement sales volume during 4Q22 totaled 1.7 mn tons (+5% YoY, + 5% QoQ) with ASP remaining flat QoQ at VND 1.3 mn/ton. Cement sales volume during 4Q21 were low due to COVID-19. During 4Q22, cement sales volume decreased 7% compared to 4Q20. This reflects lower construction activity due to the downturn in the real estate market. Profit has bottomed as input coal prices corrected -10% QoQ. As a result, GPM increased to 9.1% during 4Q22 -up from 8.4% during 3Q22.

Net income during 2022 increased sharply due to retrospective one-time revenue from Nhon Trach V Industrial Park (IP), and an accounting change from an annual basis to a one-time booking at Phu My II, Phu My II expanded and the Huu Thanh IP. Net revenue reached VND 8.2 tn (+91.6% YoY), whereby IP real estate revenue reached VND 4.2 tn (+5.35x YoY), including the retrospective one-time revenue of Nhon Trach V IP of VND 1.5 tn and a record one-time gain from Phu My II, Phu My II expanded and the Huu Thanh IPs with a lettable area of 91.5 ha. Gross profit margin increased sharply to 43% (+26% YoY), where the Nhon Trach V Industrial Park profit margin reached 84%. NPAT during 2022 reached VND 2.5 tn (3.9x YoY), which is equivalent EPS is VND 7,001/share for IDC.

For November 2022, VHC posted net sales of VND 893 bn (-10% YoY and -12% MoM), continuing a decelerating revenue trend from April 2022. However, this is the first month during 2022 where the company recorded a contraction in terms of sales in YoY terms. For 2022, we expect net sales and net profit of VND 13.8 tn (+53% YoY) and VND 2.2 tn (+101% YoY), respectively. This translates to 4Q22 NPAT decline of -10% YoY. For 2023, we expect net sales and net profit to reach VND 12.6 tn (-9% YoY) and VND 1.6 tn (-26% YoY), respectively. At VND 71,000/share, VHC trades at a 2022 and 2023 P/E of 5.8x and 7.9x, respectively. We lowered our target P/E for Sa Giang and the Collagen & gelatin segments from 11x to 10x and applied to the 2023 EPS to arrive at an updated 1Y TP of VND 69,200 (-3% downside). As such, we maintain our MARKET PERFORM rating, for the shares of VHC.

The container shipping market (including the spot market, charter market, and second-hand market) had considerably shrunk during 2022. Though the downcycle might continue into 2023 and even 2024 due to increasing supply, we think that further downside risks are limited in scope, especially in the case of the charter market. The potential reopening of the Chinese economy could act as a key supporting factor for shipping demand in 2H 2023 and could reinflate the sector, a time when inventory destocking might reach completion by 1H 2023, of which we could see a promising reflation in output as well. In our view, the HAH stock price has reflected the worst case scenario, as 2022 P/E is only at a shockingly low 2.8x at current price. We thus expect a re-rating for the stock in 2023, when shipping demand starts to recover. Given our expectation that 2024 will be the worst year for HAH earnings, we use our fine-tuned estimated 2024 EPS of VND 8,558 and a P/E ratio of 5x (historical average P/E in the last cycle under normal conditions) to derive a new target price of VND 42,800/share, implying a 30% upside. We upgrade our rating to BUY.

FPT trades at an attractive FY22E and FY23E P/E of 15x and 12.7x, respectively, on the back of 22%  and 18%  EPS growth under our base case. Meanwhile, peers with an average of 6%  and 15%  EPS growth in 2022 and 2023, respectively, are trading at an average FY22E and FY23E P/E of 17x and 15x. While the IT spending weakness need to be monitored, in light of FPT’s low cost advantage, having the lowest exposure to the EU market compared to peers, a healthy interest coverage ratio, and an abundant net cash position, we remain positive on the stock. We call for Outperform rating on FPT with 12-month SOTP-based TP of VND95,400 representing 31% upside potential. Key risks: extreme recession could negatively impact the domestic & global IT services sector, as well as digital advertising segments.

During 1H22, KDC recorded net sales and profit before tax of VND 6.4 tn (+30% YoY) and VND 427 bn (+27% YoY), respectively. Edible oils revenue reached VND 5.3 tn (+30% YoY) in 1H22, with a GPM of 14.8% (up from 13.8% in 1H21). Frozen foods revenue reached VND 986 bn in 1H22 (+19.6% YoY), with a GPM of 64% (up from 53.7% in 1H21).

In 2022, we estimate that KDC’s net revenue and NPAT will reach VND 14.3 tn (+36% YoY) and VND 827 bn (+27% YoY), respectively. Revenues of edible oil and frozen food are estimated to grow 37% and 23%, respectively. For 2023, we expect a 6.5% YoY increase in edible oils revenue during a time that KDC will expand to high-end products in its FMCG portfolio. We also expect 6.7% growth in ice cream sales, as the ice cream market should return to normalcy. We estimate that the GPM for edible oils and frozen foods will be 18.4% (2022: 15%) and 58% (2022: 59%) in 2023, respectively, due to a likely sharp drop in palm oil prices from 2H22. In 2023, we expect KDC’s revenue and NPAT to be VND 15.3 tn (+7% YoY) and VND 1.0 tn (+26% YoY), respectively. Therefore, 2022 and 2023 EPS would be VND 2,926 (+25% YoY) and VND 3,757 (+28% YoY), respectively (based on the number of outstanding shares as of September 2022)

KDC trades at a 2022 and 2023F P/E of 22.2x and 17.3x, respectively, being normalised from the high levels in previous years (2018-2020), which we see as fair, considering KDC’s earnings are likely to increase sharply in 2022 and 2023.  We rate the shares of KDC as Market Perform and a12-month target price of VND 63,600/share (-1% from the current level). Using 2023E, we apply P/E and EV/EBITDA targets of 12x/9x for the edible oil segment and 19x/12x for the food product segment. We also use P/B metrics for relative valuation, with an industry median of 1x for edible oils and 6x for food products.

We expect that the company’s plan to re-enter the US market this month will keep 2022 general ASP at a high level of $2.80 USD/kg (from $2.10 USD/kg in 2021) and sales volume growth at 20% YoY (volume growth of 26% YoY in 2H 2022). As a result, we forecast ANV net revenue and net profit to be VND 5.4 tn (+54% YoY) and VND 870 bn (+576% YoY) respectively in 2022, translating into an earnings growth of 948% YoY in 2H22, as 2H21 was a low base due to high cost of COVID-19 prevention. However, the pangasius price might have peaked in 2Q 2022. Accordingly, we forecast ASP to drop to $2.40 USD/kg (-15% YoY) and sales volume growth at 15% YoY in 2023. This leads to GPM decreasing to 21% in 2023 from 29% in 2022.  In 2023, we estimate ANV to post net revenue and net profit at VND 5.3 tn (-1% YoY) and VND 615 billion (-29% YoY). Therefore, 2022/2023 EPS would be VND 6,823/share (+576% YoY) and VND 4,824/share (-29% YoY).

ANV is trading at 2022 and 2023F P/E of 7.6x and 10.7x, respectively, which are fair, in our view, considering ANV earnings will decelerate in 2023. Our target price for ANV arrives at VND 47,700/share based on 2022EPS and a target P/E of 7.0x. Our target price represents a mild 7% downside from current market level. We thus issue a Market Perform rating for ANV.

Estimates and investment view: Given H1 results, we trim our forecasts for 2022 and 2023. Our new estimates foresee a -11.6% decline in NPAT in 2022 before the bottom line increases 11% next year. Next year, the situation could be rosier, with expectations of 7.8% sales growth and margin expansion. Based on our updated estimates, sales growth in H2 2022 is 8.2% with NPAT being flat YoY.

Our new target price is VND 80,000/share based on 2023 EPS (targeted P/E of 18x) and DCF valuation. Given the 10% potential upside, we downgrade our rating to Market Perform on the shares of VNM.

GAS remains our top pick in the oil & gas sector, which is one of the top domestic beneficiaries of high oil prices. We also lift our 12-month target price for GAS from VND 134,000/share to VND 143,000/share (20% potential upside) as we roll our EPS base to mid-2023 tracking our belief of even higher fuel oil and LPG prices. We base our target price on blended target PE of 20x (from 22x) and DCF valuation. For 2022, we raise our NPAT forecast for GAS from VND11.6 tn (+35% YoY) to 13.4 tn (56% YoY) on higher oil price assumptions (from USD480/ton to USD500/ton for fuel oil and from USD700/ton to USD800/ton for LPG) and a higher dry gas volume forecast, from 8.1bcm to 8.2bcm (+13% YoY) in 2022.

1Q2022E exciting PBT growth of approx. 29% YoY could be catalyst. Aside from waiting for 5G development guidance, residential construction sales (+40% YoY) has been pushed to be one of company growth driver along with telecom infrastructure leasing segment (+142% YoY). Per latest investor meeting, management set an internal target for 2022 PBT of VND 653 bn (+38% YoY) which is 10% above our forecast.  On back of FY22E/FY23E EPS growth of 25.9%/32.2%YoY, CTR currently trades at FY22E/FY23E P/E of 20x/15x respectively. Meanwhile, global telecom infrastructure leasing companies currently trade at FY22E/FY23E P/E of 25.5x/22.6x but at lower EPS growth of 18.1%/10.2%YoY. We thus call for BUY rating on these shares with 1Y TP of VND VND135,900 with 24% upside. 

FY21’s strong backlog and attractive new order book in 2022 are very supportive to the shares of HTN. In 2021, HTN’s ending backlog reached approx. VND 29.8 tn (+36% YoY). The strong backlog should solidify revenue, NPAT, and also post-money EPS growth for 2022. Our FY22E & FY23E EPS has factored in the dilution from the 25 mn new share private placement since 2H2022. We call our Outperform rating on the shares of HTN, along with our 1Y TP of VND 69,300 (25% upside) on back of a strong backlog in 2021 that will secure 2022 revenue (+60%yoy), NPAT (+44.3%yoy) and also post-money EPS growth (+26.6%yoy).

In our view, the supply chain disruption could carry through into 2023 longer than we initially expected, due to a trifecta of factors: (i) the surge in Omicron cases and the potential for new variants; (ii) China’s zero-Covid policy; and (iii) rising tensions between Russia – Ukraine, which will exert more pressure on global trade. Additionally, new vessel deliveries in 2022 are limited to only 3.1% of the current fleet. Thus, we expect both international and domestic container shipping to perform well with favorable conditions through 2023.With six new vessels to be added to the fleet between 2022 – 2024, HAH is ambitiously expanding into the Intra-Asia market to take advantage of the favorable market environment. We believe that the company’s new services will be profitable, given advantages of their low-cost fleet (8 out of 14 vessels having been invested into at low cost). We estimate that HAH will maintain high earnings growth during 2022 and 2023, and revise our NPATMI forecast to VND 744 bn (+67% YoY, +12.7% from our previous forecast) and VND 902 bn (+21% YoY) respectively, translating to an EPS of VND 14,641 in 2022 and VND 17,742 in 2023. We reiterate our BUY rating for HAH, with a revised 1Y TP of VND 106,000/share (unchanged target P/E of 7x), implying a 28% upside.

Net profits for HSG and NKG in the recent quarter fell from the peaks in 2Q21, but still posted tremendous growth on an YoY basis, at 108% for HSG and 634% for NKG. Revenue for both HSG and NKG increased dramatically by 89% and 123% YoY respectively, driven by strong export volume and increase in ASP. We expect the earnings of the companies can maintain solid in the coming quarter and post substantial growth on a YoY basis, as both HSG and NKG have secured large export orders for the next 3 months at high price. However, the profit in 2022 can post negative growth of 30-37% from the peak in 2021 due to the normalization in gross margin following the correction in global steel price. Since our last report, the stock price of HSG and NKG has increased by 34% and 85% to their twin peaks in Oct, before correcting back by around -24% due to profit taking of investors and concern of falling global steel price. The current valuation for both stocks is quite fair in our view, taking into account the potential earnings correction in the coming year. Based on 2022 EPS forecasts and the PE target of 7x, our 1-year target prices for HSG for NKG arrive at VND 41,100/share and 45,800/share respectively, reflecting an upside of 7% and 7.8% from the current price. Accordingly, we downgrade the rating for NKG and HSG to Market Perform from Buy and Outperform respectively. However, given solid earnings in the coming quarter on an YoY basis, there can be trading opportunity for short-term investors with high risk tolerance if the stock price experiences a further correction.