Company Report

Strong 2Q24 top line growth, bottom-line declined. For 2Q24, IMP posted revenue and NPAT of VND 517 bn (+18% YoY) and VND 66 bn (-17% YoY), respectively, which is lower than our NPAT estimate of VND 80 bn due to lower-than-expected GPM improvement. Gross profit margin declined on a YoY basis (stagnant demand in the over-the-counter market, API increased ~3% on average, new IMP4 production plant depreciation only kicked in 3Q23), but GPM also improved on a QoQ basis. SG&A expense decreased -22% YoY as new cost-saving policies are put into place. As of 1H24, IMP reached 43% and 38% of its target revenue and PBT respectively.

Coupled with policy tailwinds in public hospital bidding channel. Ministry of Health (MoH) recently issued Circular 03& 07/2024 (TT03&07/2024/TT-BYT) providing a list of 93 drugs manufactured by at least three domestic companies on EU-GMP standard production lines that meet the MoH's technical criteria, and quality, price, and supply capacity requirements. Foreign companies are not allowed to enter the public hospital bidding for these drugs. IMP currently has 12 qualifying SKUs in the list, which should lessen the competition for these products going forward.

GMD revenue was VND 1.2 tn +30% YoY, in line with our forecast, with volume improvement being the key. Volume from the Haiphong area (Nam Dinh Vu port) is up 15% YoY to 305k TEU during 2Q 2024, while Gemalink volume is 380k TEU, +48% YoY due to a recovery in exports to both the EU and the US, and additional volume from ad-hoc services from Singapore. Excluding the large one-off gain from Nam Hai Dinh Vu port divestment of VND 1.8 tn during 2Q 2023, GMD’s 2Q 2024 PBT growth would have been 33% YoY, pushing 1H 2024 core PBT growth to 27.5% YoY, meeting our previous expectation.

Jan-July number shows strong volume growth for Vietnam port (+20% YoY in the North, +24% YoY in the South). This reflects expected recovery from low base of manufacturing and import/export sectors of Vietnam. On the supply side, we see capacity growth to be more limited in Southern area (HCMC/Cai Mep) while quite abundant in the North (Hai Phong/Lach Huyen), with +50% capacity growth in next 2 years, posing strong price competition landscape in this area.

We maintain our Market Perform rating on the shares of  VIB with 1Y TP of VND 22,800 (+11% upside), but reduce our earnings estimates for 2024 and 2025. Given the still low liquidity in the property market, especially in southern Vietnam on top of intense competitive pressure, we believe that VIB is facing significant challenges resolving bad debt and boosting disbursements. The NIM is expected to remain under pressure due to a loan rate cut amid a gradual rate hike from deposits. Credit costs should remain high to counter asset quality deterioration. As such, ROE is expected to hover at between 18% - 19% over the medium-term, a decline from the peak of 30% during 2022.

Recent sharp JPY movement is not material to the company’s fundamental and valuation. It has been all over recent news that the Yen has appreciated sharply against the USD as well as the VND due to the BOJ’s sudden rate hike. Specifically, we observe that from its trough, the JPY has appreciated by 9.5% against the VND to VND 172/yen. This has effectively erased all JPY depreciation YTD, and brought the JPY/VND back to the level at the beginning of 2024. In our view, even though the JPY movement is large and sudden, we do not see the impact as too material to ACV. Upgrade to BUY, maintain target price of VND136,000/share. The recent stock price movement is not exactly linked to the fundamentals of the company, and thus presents an attractive opportunity to accumulate the stock. In terms of fundamentals, we maintain our estimate that ACV’s PBT would grow by 38% YoY in 2024F and 20% YoY p.a. in 2025-26F as in our last report. We maintain our 12-month TP of VND136,000/sh (+23.7% upside potential) based on a 2025F EV/EBITDA target of 16x, and upgrade our rating for ACV to BUY (from OUTPERFORM) on valuation grounds.

FPT continued its impressive growth path during the first half of 2024, with revenue and NPAT achieving of VND 29.3 tn (+21.4% YoY) and VND 4.4 tn (+21.2% YoY), mainly driven by the technology segment.

Overall, the 1H24 results were in line with our expectations. Our respective 2024 and 2025 NPAT forecasts for FPT are VND9.3tn (+19% YoY) and VND11.1tn (+19% YoY). Our SOTP-based 12-month target price for FPT is VND142,800/share (from VND141,500) and we upgrade our rating to OUTPERFORM (from Market Perform).

During 2Q24, FMC reported net sales and net profit of VND 1.2tn (+20.3% YoY) and VND 83bn (+10% YoY), respectively. This is impressive considering Vietnam shrimp exports by value remained flat YoY during 2Q24. Largely due to the solid gross margin improvement, FMC earnings advanced +46% QoQ. We attribute FMC’s cost effectiveness to its new farming area in Vinh Thuan, which employed more efficient farming operations and resulted in greater fecundity. We note that FMC’s survival rate of its aquaculture is 80%, drastically higher than the Vietnam avg. of 50%. During 2H24, management expects higher volume and ASP compared to 1H24, due to seasonal impacts. For 2024, we expect net sales and NPATMI to reach VND 5.9tn (+16% YoY) and VND 312 bn (+13% YoY), respectively. For 2025, we expect net sales and NPATMI to reach VND 6.4 tn (+9.1% YoY) and VND 362 bn (+16% YoY), respectively. Our 1Y target price for FMC is VND 55,400/share (+16.5% upside), and reiterate our OUTPERFORM rating for the stock.

VNM posted impressive 2Q24 earnings, which exceeded preliminary consensus estimates. Net sales reached VND 16.7 tn (+9.6% YoY), breaking the all-time high record for sales during the quarter, driven by domestic and overseas sales growth of +6% and +30% YoY, respectively. Notably, overall market share increased by 1.2pp in 2Q24. The gross profit margin reached 42.4% (+170bps YoY), a solid improvement over the past ten quarters, resulting in net income advancing +21% YoY. During 1H24, net sales and net profit reached VND 30.8 tn (+5.7% YoY) and VND 4.9 tn (+18.6% YoY), respectively, completing 49% and 52% of the target for the year. As Q2-Q3 are VNM’s high seasons, management expects the strong sales momentum to continue over the next several months.

HPG’s 2Q24 net profit came in at VND 3.3 tn, achieving growth of 129% YoY and 16% QoQ, in line with our expectation of VND 3.1 tn. This impressive growth was driven by the steel sales volume with construction steel up 31% QoQ and 61% YoY given both market demand and the gain of market share. As 2Q24 earnings were in line with our expectation, we maintain our 2024 net profit forecast of VND12.8tn (+86.6% YoY). We assume that the company’s construction steel and HRC volume will reach 4.5 mn (+17.6% YoY) and 3.05 mn tonnes (+10% YoY), respectively, for 2024. Over the short-term, we expect 3Q24 net profit to decline QoQ from the 2Q level due to the correction of regional steel prices and lower volume amid the low season, before recovering in the final quarter. The YoY growth in 2H24 will likely slow down to 32% YoY from 233% in 1H24 due to a higher base in 2H23 and lower steel prices.

The company’s leverage is FRT’s main concern. However, the financial pressure of FRT has eased, reflected in the improvement in the interest coverage ratio (2.5x at 1Q24 vs 0.5x at 4Q23 and 1.0x at 1Q23) on the back of lower borrowing costs (-350 bps YoY and -100 bps QoQ in  1Q24) and improved earnings. With lower borrowing costs, Long Chau can speed up new openings of vaccine centers. FRT also plans to raise capital to scale the vaccine business. The company aims to raise a 10% stake via private placement during late 2024. We now apply higher multiples for the ICT business (from 9x to 11x) on narrower loss and a safer inventory level during 1Q24. As Long Chau now delivers sustainable profit, and the chain is the key growth driver for FRT in the long term, we now use DCF to value the chain. We derive a new target price for the shares of FRT at VND 211,000 (from VND 139,000), and reiterate our OUTPERFORM rating. Long Chau chain accounts for 98% of FRT valuation and 91% of 2025 earnings (vs only 10% in 2022). As such, we view FRT as a pharmacy retail company.

PC1 announced their strategical priority to the properties and construction segment, while mineral exploration and power generation serve as secondary focal points. For 2024 guidance, the company sets ambitious target, of 38.5% growth in sales and 77% increase in net earnings, to VND 10.8 tn and VND 525 bn. PC1 expected to distribute a stock dividend in 2023, of 15% on its chartered capital. We see effort of the company in maintaining growth, under the challenging circumstances of the industry. The turnaround of properties should have a stronger impact on earnings, thanks to the size and the low base of performance during the 2022-2024 period. However, the possibility of residential properties projects to generate sales from 2025 (expected by the company) might be hard to accomplish, and we incline towards residential projects could contribute to earnings growth from 2026 onwards. We expect FY24 sales and NPATMIO to reach approx. VND 9 tn (+ 15.4% YoY) and VND 220 bn (+124% YoY). Although our estimates are lower than the company’s guidance, they indicate our expectation in 2024 to witness strong growth in earnings performance following two years of contraction. For 2025F, sales and NPATMI are estimated at VND 8,759 bn (+19.7% YoY) and VND266 bn (+20% YoY).

We reduce our rating on the FPT shares to MARKET PERFORM (from OUTPERFORM), with a 12-month SOTP-based TP of VND 141,500/share (equivalent to 7% upside potential). The company’s 5M24 results exhibited double-digit growth in both revenue and earnings. On 23 Apr 2024, FPT formed an AI (artificial intelligence)-related partnership with NVIDIA, which we believe is the first step toward joining the global AI value chain, especially given FPT’s already well-placed background in AI. Further, we expect that the establishment of AseanConnect.One alliance will help improve FPT’s telecom services quality (especially data center) and enhance customer access.

GEX’s 1Q24 PBT arrived at VND 385 bn, soaring by 168% YoY. The gross profit from most segments, especially electrical equipment and construction materials dropped significantly due to weak demand from household channel and higher input cost. However, the gross profit from the industrial park segment increased 34.6% YoY to VND 615 bn during 1Q24, driven by an increase in lease pricing between 7-20% throughout 2023. In addition, GEX recognized a net stock trading profit of VND 111 bn versus a loss of -VND 144 bn for 1Q23 on the back of the positive performance of the stock market during 1Q. We expect GEX’s PBT to increase 67% YoY to VND 2.3 tn, driven by the divestment of renewable projects at an estimated profit of VND 1.1 tn. Management expects the the divestment of most projects can be completed during the second quarter. Excluding the impact of financial income, the PBT would decline by 4% YoY. 

DCM’s net income dropped -75% YoY during 2023 to VND 1.09 tn, owing to a sharp correction in urea ASP (-37% YoY), while the reduction in gas input costs (-3% YoY) was not sufficient enough to shield earnings. Looking forward, we expect global demand for fertilizer to gradually recover after being impacted by El Nino during 2023, enabling fertilizer prices to increase from last year low base. While revenue is projected to grow by 11% YoY to VND 14 tn in 2024, the reduction in depreciation expense should help earnings of DCM to rebound significantly during 2024 (net income of VND 1.84 tn, +69% YoY, from VND 2 tn).

Base case: Meanwhile, 2025 revenue and net income could remain flat at VND 14.3 tn (+2% YoY) and VND 1.85 tn (+1% YoY) as current urea capacity is rather full, while the revenue stream from NPK fertilizer remains quite small. Given this earnings outlook, our 1 year target price for the shares of DCM is VND 38,700/share. We call for MARKET PERFORM rating, as  DCM’s share price rallied 22% since our last OUTPERFORM rating. DCM remains our favorite dividend yield name, offering a 5.3% yield.

Earnings of DPM plunged by 90% YoY in 2023 due to: (1) the sharp correction in urea prices (-39% YoY); (2) an increase in gas input costs (USD10.60/mmbtu, +22% YoY) as DPM had to source natural gas from more expensive sources; and (3) a deterioration in gross margin from trading and NPK fertilizer in the context of the sharp correction in fertilizer prices in 1H23. For 2024-25F, we expect global demand for fertilizer to recover gradually after being hit by severe El Nino in 2023, enabling improved fertilizer prices. This, together with the normalization in profit margin of trading activities and NPK fertilizer from the low base in 2023, should help earnings rebound to VND875bn (+61% YoY, from previous estimate of VND 1.1 tn) and VND1tn (+15% YoY) for 2024F and 2025F, respectively.

We reiterate our Outperform rating on the shares of ACB and roll forward our valuation to mid-2025 with a 1Y TP of VND 36,000 per share, representing upside of 21%. While we believe that unfavorable market conditions will negatively impact asset quality during 2024 and 2025, ACB’s asset quality remains top-notch due to a healthy customer base, and conservative lending practices. Further, ACB is equipped with competitive funding costs, enabling the bank to stabilize NIM in the longer term. Given that ROE remains above 20% for the medium-term along with healthy NIM and asset quality, we believe that ACB is one of the best choices in this turbulent market.