Company Report

The company held its 2024 AGM on 10 Apr 2024. Approved 2024 guidance for revenue and PBT was VND 61.9 tn (+17.5% YoY) and VND 10.9 tn (+18.2% YoY) respectively. Besides the impressive growth momentum of the global IT segment, FPT targets the continual expansion of its education segment during 2024-2025, as well as the recovery of the online advertising subsegment, with an expected jump from a 2023 low base. FPT also plans to launch its new data center during between late 2024 and early 2025, and expects the improving profit margin of domestic IT through the Made-by-FPT ecosystem. On the other hand, the 2023 cash dividend was also approved at VND 2,000/share (20% of charter capital). According to FPT, the company might maintain this cash dividend level (VND 2,000/share) due to the need to hold onto excess retained earnings to fund for investments to power its long-term growth.

Net profit target for 2024 has been approved at VND10tn, an increase of 46.3% YoY. Management expects 2024 to be a good year after the trough during 2023, but does not expect the steel industry to achieve an impressive recovery, due to the weak state of the property market in China. Profit margin continues to expand for 1Q24, driven by the HRC segment: According to preliminary results, revenue and net profit for 1Q24 came in at VND31tn (+15% YoY) and VND2.8tn (+631% YoY), which has already factored in the forex loss of VND200bn. The net margin was around 9.0%, the highest level since 3Q22 due to sales volume growth and high average HRC prices (+5.5% QoQ). Sales volume of construction steel for 1Q24 was 956k tonnes, an increase of 10.1% YoY driven by 156% YoY growth in export volume, while the domestic sales slid by 15% YoY. HRC volume remained at an historically high level of 805k tonnes, posting solid growth of 67% YoY. Management expects HPG’s profit margin to improve near term as the company has cleared its high-cost inventory during the first quarter.

Bulk sales helped to quell the negative impact of the ebb cycle in the real estate market in 2023. After adoption of a bulk sales strategy in 2019, Vinhomes (VHM: HOSE) has implemented this strategy successfully to develop its megaprojects. During 2023, VHM achieved VND 87 tn (- 32% YoY) in contracted sales value, of which bulk sales accounted for 51% of total contracted sales value, equivalent to VND 44.37 tn (- 7% YoY; US$ 1.8 bn) while retail sales value was hit by the slowdown of the real estate sector with only VND 42.63 tn (-47% YoY; US$1.72 bn). Active bidding for more projects: During 2023 to early 2024, Vinhomes & its subsidiaries applied and received some important legal approvals for several large projects in the second-tier cities, including Haiphong, Long An province, and Tuyen Quang province. If all projects are approved, Vinhomes will increase its land bank by an additional 2,200 ha, adding to current land bank of 19,600 ha as of 31 December 2023, further cementing in its leading position in the real estate market.

4Q23 performance missed estimates. DBD posted 4Q23 revenue and NPAT of VND 444 bn (-4.4% YoY) and VND 59 bn (-25% YoY), respectively, which were 10% and 40% lower than our estimates. The company saw lower sales as consumers skipped OTC drugs/supplements, as well as increased competition from imported brands. For FY23, the company recorded net sales and NPAT of VND 1.65tn (+6% YoY) and VND 269bn (+11% YoY), respectively. This result is 3% and 8% lower than our estimates. The increase is largely credited to the robust performance in the prescription drugs, including antibiotics and cancer drugs. Significant facility upgrades underway mobilizing aggressive growth plan. As DBD aims to reach VND 2.6tn in manufactured drug revenue before 2026 and 4.5tn before 2030 (from current revenue of VND 1.65tn), the company has been investing heavily in its production capabilities. DBD recently broke ground on the construction of a small volume injection drug factory (Nov 2023), focusing on production of new dosage forms/packaging such as sterile injectable and eye drops. Scheduled for completion during 2025, the factory aims to commence production before 2027.

Despite NT2 not targeting any major maintenance schedule in 2024, which implies an opportunity for the company’s volume and earnings recovery, we are concerned that Vietnam Electricity Group (EVN) might reduce its reliance on gas-fired electricity in 2024 (including that of NT2) as 1) the current gas supply issue might not favor EVN to deploy gas-fired power as a stable source to meet the power demand and 2) EVN might very well prioritize cheaper power sources to endeavor to cut losses or at least breakeven in 2024, such as coal-fired electricity, hydropower and renewables. Therefore, we expect that NT2 should face another year of volume decline (-54.4% YoY per our estimate). With such lower utilization compared to 2023, we project a loss of VND 261 bn for the company in 2024. With a 12-month target price of VND 22,900 (equivalent to a 8% downside potential) (based on DCF and EV/EBITDA valuation methods), we issue a SELL rating for the stock.

We upgrade our rating for HDB shares to Outperform with a 1Y TP of VND 27,700/share as we revise upward our forecast for 2024 PBT by 5% to VND 16.4 tn (+25.8% YoY) and apply a higher target P/B of 1.4x (from 1.0x) to reflect the positive impact from strong credit growth (over 20% YoY) that could continue in the medium-term, allowing HDB to (i) improve its market share, (ii) retain NIM at above 5%, and (iii) withhold NPLs at a reasonable level (less than 2%). However, we reckon that the acceleration of loan growth, particularly in the property sector, could pose certain credit risks to asset quality if the market recovers more slowly than expected.  

During the final quarter of 2023, PLX’ PBT reached VND 850 bn - a decline of 48.5% from the high base in 4Q22 and 28% QoQ mainly due to the petroleum segment. Domestic petroleum sales volume during 4Q23 dropped 11% YoY to 2.6 mn m3/tons compared to the peak in 4Q22, of which retail sales volume dropped -7.7% YoY to 1.7 mn m3/tons. Earnings from the petroleum segment declined 55% YoY and 33% QoQ to VND 322 bn due to the drop of petroleum prices of over 10% during the quarter which had a negative impact on the company’s trading activities. Cumulatively, 2023 PBT was VND 3.93 tn, recovering 73.2% YoY and exceeding company guidance 22%. The volume from the retail channel increased 6.9 % YoY to 7.02 mn m3/tons, increasing 40% over 2021.

as Viettel Group (Viettel) was awarded the usage right of 2,500-2,600 MHz waveband to commercialize 5G mobile technology on 8 March 2024, we forecast CTR’s total number of BTS (base transceiver station) sites should enjoy a 70% YoY growth in 2024, benefited from 2G gradual shutdown and 5G rollout, which could generate a 53% YoY sales growth of infrastructure leasing segment. In the longer term, we expect the profit contribution from this segment could be higher. In fact, we forecast its gross profit to account for ~27% of total gross profit by 2026 (vs 15% in 2023) despite its minimal improvement of revenue contribution (8% of total revenue from 4% in 2023), which we attribute to is relatively higher gross profit margin (~31% in 2023) than others’ (5%-20%). Furthermore, due to higher-than-expected 4Q23 signed contracted value of residential construction (which accounted for over 40% of contracted value in 2023), we revise up our sales growth estimate for CTR’s construction segment (from 6% YoY to 17% YoY) in 2024. We expect NPATMI will perform well at 16.4% YoY in 2024 (vs 16.6% YoY of 2023), held up by the solid pillars of the construction, operation, and infrastructure leasing segments. We call for an OUTPERFORM rating on CTR, with a 12-month DCF target price of VND 123,000/share (equivalent to 9% upside potential).

4Q 2023 revenue reached VND 1 tn, on par with last year’s fourth quarter, while PBT was VND 253 bn and on par with last year's level. This brings FY2023 revenue to VND 3.8 tn, -1.3% YoY (a bit lower than our estimate of VND 4 tn) and pretax profit to VND 3.1 tn, +140% YoY (exactly in line with our estimates). Excluding the one-off gain from the Nam Hai Dinh Vu port divestment, 2023 core-PBT reached VND 1.3 tn, flat YoY. Total volume of GMD during 4Q 2023 reached 857k TEU (+37% YoY), and is the highest quarterly volume level for GMD historically.

Jan-Feb 2024 volume exhibited a strong sign of recovery: According to Vinamarine, total Vietnam container throughput during this time reached 4 mn TEU, +27% YoY. International throughput growth is 20% YoY, but this is a an early sign for a recovery year for Vietnamese exports/imports and seaport volume.

While other retailer earnings lost their luster during 2023, PNJ managed to outshine with net income of VND 1.97 tn (+9% YoY) for the year. This was made possible by market share gains associated with new outlets and tapping a new customer demographic, along with gross profit margin improvement. During 2024, we expect that the macroeconomic headwinds to subside, which should further boost jewelry purchases. We expect PNJ’s retail sales growth to increase at a faster pace (+17% YoY) than the jewelry industry’s expected recovery during 2024 due to market share gains. PNJ’s net income during 2024 is estimated at VND 2.3 tn (+17% YoY, from VND 2.17 tn). During  2024, we expect PNJ to open 35 new gold stores (increasing store count 9%). 

HAH is trading at 2024F forward P/E forward of 12x, which is relatively high compared to its historical P/E range of between 6x-9x. We believe that the current valuation is justified by the improvement in the industry fundamentals due to Red Sea and geopolitical tensions increasing TEU-mile demand for the whole industry, as well as long-term contribution of the new capacity from 2024.

We utilize the DCF method to fully reflect the potential of HAH (while our previous valuation applies the P/E method). Considering the earnings outlook from 2024, our forecast results in a target price of VND 45,100 per share (reflecting 7.5% upside), and assign a MARKET PERFORM rating. The stock price has partially priced this that we would recommend buying on dips. 

For 2024E, we expect net sales and net profit to reach VND63.7tn (+5.6% YoY) and VND10.1tn (+12.1% YoY), respectively. This is 2% and 3% lower than our previous net sales and net profit forecasts. We are still optimistic about a 2H24 recovery but reduce our forecasted gross margin improvement from 250bps to 160bps, as well as assuming no price increase during 2024. The selling expenses/sales ratio is expected to stay at c.21.5%, while financial income is expected to decrease given the lower interest rate environment. VNM is trading at a 2024E P/E of 17x. Our new 12-month target price is VND82,000/share (from VND87,400/share), based on our unchanged DCF and P/E methodology. With upside potential of 15% to our new TP, we reiterate our OUTPERFORM rating.

4Q 2023 revenue of VND 1.7 tn, +19.8% YoY and +26.5% QoQ due to higher day and utilization rates of rigs. 4Q 2023 NPATMI: VND 195 bn, +261% YoY (due to low base) and 29.6% QoQ due to a higher day rate. This brings 2023 NPATMI to VND 575 bn (compared to a loss of VND 96 bn for 2022) and 10% higher than our estimate of VND 507 bn due to earlier than expected improvements in the 4Q23 day rate. On investment: The company turned its attention from a newer USD 130 mn rig to an older USD 90 mn rig (15 years old), which can be put into operation at year-end 2024 if the company proceeds with this purchase