Company Report

1Q24 results were within our expectation as volume in the quarter declined 86% YoY, which weighed on NT2’s performance accordingly. We expect this output figure will somehow improve QoQ in 2Q24, supported by the peak power demand season in Vietnam. Nevertheless, due to the limited contracted volume (Qc) (at ~1 bn kWh) (the actual Qc might change, depending on the actual electricity mobilization conditions) planned by the National Load Dispatch Center (NLDC), we are concerned such improvement might not help NT2 to breakeven in 2024. We project a loss of VND 255 bn (nearly unchanged compared to our previous update) for the company in 2024. After our SELL recommendation on 29 Mar 2024, stock price declined by 12%.  With a 12-month target price of VND 23,000 (equivalent to a 5% upside potential) (based on DCF and EV/EBITDA valuation methods), we upgrade our rating to MARKET PERFORM for the stock.

2023 was an impressive and significant year for Viettel Post (VTP), as the company managed to post impressive earnings growth of 48% YoY, partially on top of the low base in earnings in 2022. PBT reached VND 480 bn (+48% YoY), and NI reached VND 381 bn (+48% YoY). 2023 EPS is VND 2,654/share. Key growth drivers: market share +3%, core revenue +12% YoY, gross margin improvement: + 1.9 percentage points.

During 1Q 2024, VTP posted a slowdown in both top line and bottom line growth, with revenue -2.1% YoY and PBT -22.4% YoY, only completing 16% of the company’s 2024 PBT target after the first quarter and in line with our expectations. Key reasons: trading segment cutback by 30% YoY, higher cost from new capex investment, gross margin decline by 2.4 percentage points.

AGM held successfully with some key targets: revenue -33% YoY due to trading segment cutback, PBT 462 bn flat YoY, cash dividend of 15% on par

Viewing 1Q 2024 results going forward, we are confident that PVT can continue its growth path for the core tanker business in 2024 as we have previously forecasted (around 18% YoY). We also notice that the recent time charter market has improved again back to its previous peak for the oil/chemical MR (medium range) tanker segment, so a sudden weakness of the tanker market is not imminent. Thus, we maintain our OUTPERFORM rating for PVT with a 1Y TP of VND 30,000/share, and the stock remains our top pick for the transportation sector in 2024.

As Viettel Group (Viettel) and Vietnam Posts and Telecommunications Group (VNPT) were awarded the usage right of 5G wavebands in March 2024, we believe that CTR will require significant capital for BTS (base transceiver station) sites investment, which means a conservative dividend payout level accordingly should be reasonable to accumulate a strong enough retained earnings balance as a safe equity source. However, we observe that CTR intends to pay out higher cash dividends than before. Specifically, during 2016-2021, CTR had maintained a conservative VND 1,000/share cash dividend despite consistent earnings growth. However, that level then increased to VND 2,919/share in 2022 and was approved at VND 2,720/share in 2023 (during the 2024 AGM) (nearly a threefold increase compared to past years). Therefore, we believe that CTR might have to increase its debt component in the capital structure. Additionally, we witnessed lower-than-expected gross profit margin of construction segment and financial income during 1Q24 and expect that 2024 NPATMI will perform a slower growth of 11.6% YoY growth than that of 2023 (16.5% YoY). Nevertheless, we forecast a solid NPAT growth of 19.8% YoY in 2025, mainly driven by the long-term outlook of 5G rollout, which should support infrastructure leasing segment to continue to improve CTR’s overall profit margin. We call for a MARKET PERFORM rating on CTR, with a 12-month DCF target price of VND 133,200/share (equivalent to 3% upside potential).

MBB held an investor meeting on Friday to address investors’ concern over 1Q24 results. As expected, the burning issue was the deterioration in asset quality during the period. Another issue which also garnered much attention was the NIM trend in the coming quarters. MBB appears confident that asset quality will improve during 2Q24 as the large corporate client which was downgrades during 1Q24 is expected to recover during May 2024. NIM is expected to either be stable, or experience a slight improvement in the next 2 quarters.

We believe that the aforementioned corporate client will return to the normal loan group in 2Q24 via negotiation. As such, we do not adjust our current credit cost assumption of 1.5% for 2024. However, MBB’s NIM may not be as favorable as we had previously anticipated due to inherent credit risk and client loan rate support. Accordingly, we finetune our estimate for MBB to VND 29.1 tn (+10.6% YoY) from VND 30 tn (+13.7% YoY).

MWG released upbeat 1Q24 results, flipping back to solid profitability with net income of VND903bn (+4,143% YoY). This beat our expectation thanks to faster-than-expected profit margin expansion of both the ICT & CE and grocery segments. Although we had initially expected a notable improvement in the profit margin of ICT & CE chains after a period of de-stocking and certain cost-cutting measures by the company, the results came in even better than our expectation due to (1) abnormal sales of air conditioners which generate larger profit margins than mobile phones, and (2) the de-stocking pressure which has been released and lifted profit margins for ICT & CE retailers – we observed a correction in inventory balance of competitor FPT Shop from 1Q24. With better-than-expected 1Q24 results of the both ICT & CE and grocery segment, we revise up our 2024-25F net income to VND3.47tn (+1,968% YoY, from VND2.5tn) and VND4.5tn (+30% YoY, from VND3.4tn). With unchanged target multiples on our revised 2025F financials (from average 2024-25F), we derive our new SOTP-based 12-month target price for MWG at VND65,800 per share (from VND56,200), and maintain our OUTPERFORM rating.

We maintain our Market Perform rating on the shares of HT1. We apply a target P/E of 12x (15x previously) and EV/EBITDA of 6x (7x previously), resulting in a one-year target price of VND 11,600/share (from VND 11,300/share), as we roll forward our price target to mid-2025F. 1Q24 results: HT1 recorded net sales of VND 1.5 tn (-12% YoY, -16% QoQ) and a net loss of VND 25 bn (compared to net loss of VND 86 bn in 1Q23 and net profit of VND 54 bn in 4Q23) on weak cement demand. Sales volume decreased 6% YoY (-22% QoQ) due to seasonal effects and persistent weak demand from 2023. ASP decreased 6% YoY (-6% QoQ), as: (i) higher percentage of bulk cement sales; and (ii) new cheaper cement brand “PowerCement” launched late 2023. GPM has improved to 6.9% during 1Q24 compared to 4.5% during 1Q23 due to 30% YoY lower input coal prices.

2023 performance: Affected by the economic slowdown during the 2022-2023 period, real estate developers, such as DXG, were negatively impacted by project approval delay, and overall was held back as the market was recoiling from the real estate market crunch. Also, the real estate market was suffering from tight liquidity which impacted DXG’s brokerage services segment (DXS) during 2023.

For FY2024 Outlook, as per DXG management, the company is expected to continue to sell units in Gem Skyworld, the landed properties project in Dong Nai province and launch other two projects: DXH Riverside in Thu Duc City, HCMC; and Opal Luxury, Di An, Binh Duong province.  With good progress of these projects, we expect that the company will commence selling at DXH Riverside and Opal Luxury during 2H2024, given that the condo units can meet housing needs. Gems Skyworld, on the other hand, is more for investment with landed units where we expect a sales restart from 2025. Therefore, we estimate DXG presale value during 2024 will reach VND 5.4 tn from two projects: DXH Riverside and Opal Luxury.

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.