Company Report

VHC reported strong growth for 3Q21, with net sales of VND 2.2 tn (+24% YoY) and NPATMI of VND 255 bn (+46% YoY), respectively. Cumulatively, the company accomplished 74% and 93% of annual targets for net sales and PAT. VHC was the most profitable fishery exporter out of Q3 lockdown, benefited from strong demand from the US market coupled with a higher ASP. The company has been running at between 85%-90% capacity while implementing “three-on-the-spot” work-live on-site production and keeping administrative expense stable. As VHC has proven its position as a market leader from time to time, we believe that the shares deserve their re-rating over the past two years. We raise our target P/E for the key segments of VHC – 13x for wellness segment and SGC, and 10x for pangasius segment (previously 10x and 7.5x, respectively) and use mid-2022 TTM EPS as our base. Our new price target is VND 70.2k/share (up from VND 47k/share), implying an upside of 13.4% and a total ROI of 16.6%. We upgrade our rating for the shares from Market Perform to Outperform.

For 2021, we lower our gas volume estimate from 8.15 bcm to 7.75 bcm to reflect the impact of the strict Q3 lockdown on dry gas consumption by industrial and power plant users. Any recovery in Q4 will be gradual in nature.  Nevertheless, higher oil prices likely will offset this volume cut. Our 2021 revenue and NPAT forecast of VND 73.7 tn (+19.5% YoY) and VND 8.8 tn (+8.6% YoY), respectively, remains largely unchanged from our previous estimates. For 2022, we are looking top and bottom line growth of 23.6% and 25.2% YoY, respectively, driven by a strong gas volume recovery (25% YoY to 9.6 bcm, about 3% lower compared to post-Covid-19 levels) on the back of more robust business activity.  On our higher 2022E EPS, we raise our 12-month TP price for GAS to VND118,500/share (from VND101,500), based on an equal blend of a target PER of 19x and EV/EBITDA of 11x, and 2022E earnings. We reaffirm our Outperform call on GAS. Downside risks: weaker-than-expected dry-gas volumes and lower-than-expected fuel-oil prices.

Despite the positive revenue growth of 16% in 2Q21, BMP’s net profit fell by 73% YoY to VND42bn due to a sharp contraction in the gross margin, stemming from surging input costs. We believe the company’s business results will hit their lowest level ever in 3Q21, with the capacity utilization rate falling to between 20-50% during the July to September period, due to the social-distancing measures in place in Southern Vietnam. We lower our 2021E sales volume for BMP from 115k tons to 99 k tons (-10% YoY), and our gross margin from 18.2% to 14.0%, which leads to a 52% cut to our net income. Accordingly, we expect 2021E revenue and net profit at VND4.8tn (+3% YoY) and VND202bn (-61% YoY), respectively. Following our earnings cut, we downgrade our rating on the stock from MARKET PERFORM to UNDERPERFORM with a lower 12-month target price of VND51,700/share (previously VND55,000), based on an unchanged target PER of 11x now applied to our 2022E EPS (previously 2021E). We look for the share price to drop in the short-term, and then stabilize as we anticipate a recovery in business results from 4Q21. For 2022E, we expect the company’s results to recover with net profit rebounding to VND391bn (+ 94% YoY), on the back of 13% YoY growth in sales volume and a 5% correction in the plastic resin price. Upside risk: lower-than-expected input costs. 

VHC held an analyst meeting on Aug 9th to discuss Q2’21 financial results and production status during the 4th Covid-resurgence in Vietnam. In 2Q’21, VHC recorded impressive Q2’21 results, wherein net sales and net profit grew by 41.3% YoY and 16.3% YoY respectively, bouncing off a low base in Q2’20. This was mostly thanks to the reopening of the US economy (60% of total VHC pangasius exports). With the current disruption experienced during this instance of viral resurgence, management is not very positive about 2H21. While the problem lies neither on the demand nor the supply side (production applying the “3 at the spot” work/live on-site practices in place), disruption in the transportation of goods due to container shortages is causing difficulty when it comes to managing costs, as many orders are stuck at seaports. We updated our estimates to reflect uncertainties in 2H21 (cutting NPAT estimates by 4% and 6% in 2021 and 2022 respectively). However, we still expect a good recovery from VHC in 2022, assuming that global shipping costs will wind down (-15% YoY and 2.9% of sales). We also rolled forward our 2022E EPS to derive an updated target price of VND 47,000/share (+12% upside). As such, our rating for the stock is MARKET PERFORM.

FY21 NPAT growth is forecast at 23% YoY. According to management, CTR expects higher growth of 30% YoY under base case. Our forecast is a bit more conservative, given the potential impact from Covid-19. Key CTR growth drivers are from ‘defensive’ segments such as telecom infrastructure operations, telecom infrastructure leasing segment, and telecom construction which likely will be less sensitive to Covid-19, and are a good defensive play. CTR also offers more attractive EPS growth in FY21/FY22/FY23 of 22%/15%/25%, respectively, comparing favorably to Asian peers of 20%/10%/8% over the same timeframe. With 1Y target price of VND 88,900 - representing 6% upside, we call for Market Perform rating on the shares of CTR. 

We maintain our MARKET PERFORM rating on the shares of VNM, however, we modestly cut our 1-year target price to VND 103,000/share (from VND 107,000/share) based on an unchanged target PER of 21x applied to our 2021-2E EPS as we lower our forecasts for 2021/2022 period given the impact of the fourth resurgence of Covid-19. In addition to reduced consumption by low-income consumers-who have been hit the hardest during the pandemic, the strict social distancing measures applied in many cities/provinces throughout Vietnam since May have also placed some difficulties in product distribution via the general trade (GT) channel (which accounts for about 85% of VNM’s domestic sales). As such, we are of the view that the initial plan for 2.5% growth in revenue and flat YoY earnings for 2021 becomes a bit more challenging for VNM  - unless the pandemic can be contained by the Aug-Sept period.  

2Q21 results broke previous records: HPG’s revenue and net profit hit new record highs in 2Q21 at VND 35.1 tn and VND 9.745 tn, surging by 72% YoY and 254% YoY respectively. The surge was driven by both strong volume growth, and a rising price from the steel segment. Cumulatively, the company’s revenue and net profit in 1H21 posted VND 66.26 tn (+67% YoY) and VND 16.71 tn (+230% YoY), accomplishing 55% and 93% of its annual target.  We forecast HPG’s revenue and net profit to reach VND143 tn (+59% YoY) and VND 29.5 tn (+118% YoY) respectively in 2021. Although the resurgence of Covid-19 may put pressure on volumes and ASP in the short term, we expect that net profit in 2H21 may still attain strong growth of 51% YoY thanks to resilient HRC demand, as flat-steel exports are expected to maintain strong growth in the upcoming 2 quarters. HPG is trading at 2021E and 2022E P/E of 7.5x and 7.9x respectively, which we still consider to be attractive. We maintain our Outperform rating for HPG, with a 1-year target price of VND54,000/share based on a consistent target P/E and EV/EBITDA of 9x and 6.5x respectively. In this note, we adjust the EPS and target price following the company’s 35% stock dividend and 5% cash dividend paid in May 2021.

In light of these positive results, we keep maintain our 2021 estimate and rollover our target price using the 2021- 2022 estimates for VHC. In 2021, we estimate net sales and net profit of VND 8.9 tn (+26.3% YoY) and VND 946 bn (+34.2% YoY), respectively. For 2022, we forecast net sales and net profit to reach VND 10.2 tn (+14.6% YoY) and VND 1.28 tn (+36% YoY), respectively, predicated on the assumption that ASP will reach USD 3.20/kg. As such, we increase our 1Y target price on the shares of VHC to VND 50,000/share (+13% upside) [from VND 43,700/share] using an average of our forecasted 2021-2022 EPS. Since our last call on 10/5/2021, the shares of VHC have increased 22%. We reiterate our OUTPERFORM rating on the shares of VHC. At VND 44,250/share, VHC reads at a 2021 and 2022 P/E of 8.5x and 6.3x, respectively. 

We maintain our Market Perform rating on the shares of VNM, but marginally lower our 1-year target price to VND 107,000/share (from VND 109,000/share) as we lower our target P/E multiple – implying 17% potential upside. Given the lack of expected growth for 2021 and the weak growth outlook for 2020-2024 (NPAT CAGR of 4%), VNM’s growth metrics are now lagging other local listed companies. In 2021, VNM faces dual headwinds: a) Covid-19 impact on demand; and b) a surge in raw material input prices. As such, we apply a lower target P/E of 21x (versus 23x, using VNM’s average 2018-present forward P/E) on average 2021-22F EPS. For 2021, we modestly lower our sales forecast by 1.4% to reflect lower than expected revenue from the school milk program.  Our updated estimates suggest 5.3% YoY and 1.3% YoY revenue and NPATMI growth, respectively, for VNM in 2021. In the short-term, we don’t see any rerating catalysts for the company, and we will monitor the monthly sales closely. 

We recently attended the DGC AGM, where a very conservative earnings growth guidance of only 16% YoY for 2021 was approved. Guidance does not take into account new projects such as Mine Site 25 (commercial operation expected in 2Q21), and electronic-grade phosphoric acid (commercial operations expected in August 2021). Considering that, we estimate 2021 earnings will increase 40% YoY. For 2022, we expect the Nghi Son project to begin operation, generating earnings of approx VND 140 bn (assuming 70% utilization rate). With the current undersupply of caustic soda in Vietnam, Nghi Son will be a long term earnings driver for DGC. At VND 68,800 per share, DGC trades at a 2021 P/E of 8.6x. With an expected earnings growth of 40% YoY in 2021 and double digit EPS growth expected in 2022 and 2023, we believe that DGC deserves a P/E of 10x. As a result, we derive a 1-year target price at VND 80,000 per share, equivalent to an ROI of 16% - including a 4% dividend yield.  Our recommendation for the stock is Outperform.

Vigorous income growth helped SHB whittle down its bad debt load in 2020. Improvement of both NIM and non-interest income helped TOI to soar 30% YoY to VND 12.2 tn, but PBT grew just 8% YoY to VND 3.3 tn – along the  Bank’s 2020 plan. Provision expenses increased sharply to VND 4.6 tn (+92.5% YoY), while the NPL ratio (including VAMC bonds and legacy debt) dropped from 4.02% (2019) to 3.35% (2020). 2021 earnings projected to surge +70% YoY, reaching VND 5.6 tn. Growth is expected to come from 15% credit growth, NIM expansion of +34 bps, CIR reduction to 34.7%, and a provision reduction of -14% YoY. We raise our 1-year target price to VND 20,100/ share (from VND 18,500/ share), tracking higher EPS (+68% YoY) in 2021 due to the flourishing of profit. With implied upside of 7%, we maintain our MARKET PERFORM rating on the shares of SHB.

Dabaco held its analyst meeting recently to update about its impressive 2020 results, as well as providing details for the business plan in 2021. Overall, we had some positive takeaways from the meeting. Fruitful results in 2020 represented the Group’s long-term strategy to invest in its core business and expand the farming capacity and sow herd, even during difficult years in 2016-2018. DBC plans to expand aggressively in terms of sales volume in 2021 by raising the utilization rate of its current factory, as well as contract farming. A high and stable hog price is expected in 2021, which will still support its core business tremendously. In the period 2022-2023, new breeding and farming projects are in the pipeline, which will help expand the scale even further. With its currently strong financial position, the Group is at an advantage to exploit its HORECA and real estate segments to earn extraordinary profits in 2021, very likely to exceed management’s prudent net profit plan for the year. In 2021, we estimate net revenue and net profit to reach VND 11.9 tn (+18.9% YoY) and VND 980 bn (-30% YoY) respectively. At the current price of VND 60,900/share, DBC is being traded at 2021F P/E of 6.9x and EV/EBITDA of 5.1x, which is lower than peers’ average P/E of 10x and EV/EBITDA of 6x. We applied an unchanged target P/E of 8x to 2021F EPS of VND 8,797, to arrive at a 1Y-target price of VND 70,400/share (15.6% upside). As such, our rating for the stock is OUTPERFORM.