Company Report

HDB shares have risen 21.7% from our latest report, reaching our previous target price of VND 27,700, and might have partially reflected the strong earnings growth & improved fundamentals in 2Q24. For 2H24, we believe the YoY growth in pretax profit of the bank might cool down to +4.3% YoY compared to +49% YoY in 1H24 due to the high base in 2H23 as well as a narrower NIM under a higher CoF environment. We, hence, lower our rating for HDB to MARKET PERFORM (from Outperform) with a revised 1Y TP of VND 29,800 per share (+10.2% upside), equivalent to target PB of 1.4x vs. sector P/B of 1.37x. The higher 1Y TP was a result of removing the discount related to asset quality risk as we notice NPLs amongst retail clients showed improvement in 2Q24.

DBD reported modest revenue growth in 2Q24, with VND 433 billion (+5% YoY). Prescription drugs grew by 7% YoY, while trading products declined by 23% YoY. Net income fell short of expectations, decreasing by 3% YoY. The net profit margin contracted by 130 basis points (from 18% to 16.7%) compared to 2Q23. We revised down its revenue and NPAT estimates by 6% due to weaker performance in 1H24 and expected slight improvement in 2H24. Revised 2024 forecast for revenue is VND 1.74 trillion (+6% YoY) and for NPAT is VND 284 billion (+6% YoY). For 2025, we forecast net revenue of VND 1.9 trillion (+9% YoY) and NPAT of VND 318 billion (+12% YoY), expecting growth in both Rx and OTC channels to exceed 2024 levels. Improved GPM is anticipated, aided by tax waiver for cancer drugs manufactured at the newly opened factory. We increase our target price to VND 45,000/share (from VND 43,500/share post issuance), as we roll forward our valuation to 2025. With only 8% potential upside (no dividend), we maintain our MARKET PERFORM rating on the shares of DBD.

As the 2Q24 earnings are higher than our expectation, we revise up our 2024 PBT estimate 12% to VND 4.95 tn (+25% YoY) mainly due to our profit margin increase. We maintain our forecast of domestic petroleum sales volume at 10.76 mn tons (+4.1% YoY) and retail sales volume at 7.3 mn tons (+4.5% YoY). For 2025, we expect PBT to increase 6% to VND 5.25 tn (+12.7% from previous esimate) on the back of an increase of 4.1% in petroleum sales. Earnings growth may decelerate due to the high base of this year.  We maintain our Market Perform rating for the stock, with 1-year target price of VND 48,000/share (previously VND 40,800/share as we increase earnings and roll our valuation base to 2025). Over the short-term, the correction in petroleum price over -9% between Jul-Aug exert pressure on both the company’s earnings and its share price the third quarter.

Given the stronger than expected 2Q24 (VND503bn in NPATMI vs. our expectation of VND 300- 400bn) thanks to higher financial income and good sales growth at WCM; and with the SK deal’s most recent development, we have slightly increased our estimates. Accordingly, we estimate the group to achieve NPATMI in 2024E of VND1.9tn (+361% YoY), up from VND1.1tn previously, and in 2025E of VND3.1tn (+61% YoY), up from VND2.8tn. Please note that we have not included one-off earnings of USD40m from the HCS divestment for 2024. Earnings growth in 2025 should come from continued improvement across key businesses. Our SOTP-based 12-month TP is now VND90,800/share (previously VND93,400/share) as we assume higher net debt at the holding company level due to the USD200m payment to SK and a lower valuation for MHT on lower estimated revenue and ebitda in 2025. Despite the reduction to our TP, we reiterate our Outperform rating on shares of MSN.

We reiterate our BUY rating for the shares of ACB with 1Y TP of VND 31,200/share, representing a 25.8% upside. At the early stage of the economic recovery when many banks are struggling to clear bad debt and diminish inherent risk, ACB nowadays stands out as possessing top-notch asset quality. Moreover, having low funding costs would also allow ACB to be more proactive in attracting new customers by offering an incentive package, while still leaving room for NIM improvement. With a consistent business philosophy, we believe that earnings growth will not wow in the near-term but rather be profitably sustainable with ROE of above 20% over the medium-term and the foreseeable future.

For the 2H 2024, the prolonged disruption in the Red Sea, which is expected to sustain the shift from sea to air shipping should indirectly benefit SCS. We slightly revise up 4% our estimates, translating to revenue and PBT at VND 949 bn (+34.6% YoY) and VND 760 bn (+33.5% YoY) for 2024. In 2025, we expect volume growth to return to a normalized level and PBT to grow 9.5% YoY, to reach 833 bn VND. However, it is important to note that NPAT growth is expected to be constrained by the expiration of the preferential tax deduction of 50% on liable income from 2025.  In the longer term, the availability of capacity expansion at TSN airport and Long Thanh international airport drives growth potential. SCS is trading at a forward P/E of 12.x, which aligns with the 5-year average level. Our DCF model, reflecting the company's long-term potential, estimates an target price for SCS at VND 91,900 per share, translating to the upside of 11.7%. We maintain a MARKET PERFORM rating for SCS.

We reiterate our Outperform rating on CTG’s shares with an unchanged 1Y TP of VND 38,500/share, representing an upside of 10.5%. CTG has a long-term competitive edge as the third largest bank in Vietnam by assets, credit, and deposit market share with nationwide network and over 20 mn customers. The improvement in fundamentals should continue with improved asset quality and stronger earnings growth through 2025. The bank has also been actively digitizing, on top of implementing initiatives to improve its CASA and CIR over the past several years.

Although CTG ended 2Q24 on a low note (PBT of VND 6.75 tn, up +3% YoY), it was primarily due to the frontloaded provision (VND 7.8 tn, up 21% YoY). This led us to believe that 2H24 will have lower provisioning and better earnings growth (VND 16.2 tn, +29% YoY under our current estimate).

Despite poor July results, we note that 3Q earnings is characteristic of being the low season, and may not affect whole year estimate much (13-14% of 2022-2023 earnings). We believe the gross profit margin of retail sales to improve in Q4 when the high season comes, thereby allowing PNJ to introduce new collection and adjust sticker prices to compensate for the rise in gold input costs. We hence maintain our net income estimate for 2024-2025 at VND 2.2 tn (+13% YoY) and VND 2.57 tn (+16% YoY). We now roll over to 2025 (from average average 2024-2025), and derive a new target price at VND 120,000 per share (from VND 112,000), thereby maintaining an OUTPERFORM rating for PNJ.

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.