Company Report

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

Net profit during 1Q24 came in at a sterling VND 103 bn, turning the tables on the prev. loss of VND 680 bn at 1Q23. However, it declined -76% QoQ from the high base of the previous quarter due to a drop in export price and higher SG&A expenses. The company’s sales volume increased 16.3% QoQ and 33.7% YoY to 454k tons during 1Q24, the highest level since 2Q22, in which domestic sales volume increased 18.6% QoQ and 24.8% YoY to 250k tons, while export also increased 45.7% YoY and 13.1% QoQ to 202k tons. We maintain our FY2024 earnings forecast for HSG at VND 775 bn (+24.8x YoY). We expect the company’s sales volume to increase 14.6% YoY to 1.6 mn tons for FY 2024, whereby export and domestic volume are expected to increase 16% and 13% YoY to 891k tons and 711k tons, respectively. The FY2024 gross margin to improve to 11.3% from 9.7% during FY2023 due to: (1) the low base of 1Q23 with a loss of VND 680 bn, as mentioned earlier; (2) improvement in the capacity utilization rate from 58% to 67%; and (3) a slight increase in the contribution of the domestic channel from 55% during FY2023 to 56% for FY2024.

We maintain our 2024 net profit forecast at VND 11.2 tn, implying an increase of 64% YoY and driven by the recovery in both sales volume and steel prices. We assume that the company’s construction steel and HRC volume will reach 4.5 mn tons (+17.8% YoY) and 3 mn tons (+8.3% YoY), respectively, for 2024. Over the longer-term, we expect that the company’s earnings will achieve average growth of over 30%/year between 2025 to 2027. This should be driven by the commencement of Dung Quat 2 project, which would allow HRC sales volume to more than double from 2.8 mn tons during 2023 to 7.5 mn tons for 2027. The current domestic supply shortage between 4-5 mn tons/year, along with the more recent growth in exports should enable the company to boost its HRC segment after the project commences operation.

For 2024, we estimate revenue at VND 5.2 tn (+12% YoY, from VND 5.08 tn) and net income at VND 281 bn (+15% YoY, from VND 250 bn). While we expect the demand in export market to be warmer in 2024, the gross profit margin may not improve much as the depreciation expense from the new radial production line kicks in. Our new 2024 earnings estimates are 12% higher than the previous as we take into account the recent increase in sales order from the US market (from 22K units/month to 25K units/month, accounting for 33% of the total radial tire sales volume), while the sales order from the Brazil market is to be remained unchanged (35K units/month, accounting for 47% of the total radial tire sales volume). With an unchanged target P/E of 12x on 2024F revised financials, we derive a new target price for DRC at VND 28,400 per share (from VND 25,300). We maintain MARKET PERFORM rating on DRC.

Highly leveraged position has been the main concern for FRT, especially in the rising interest rate environment (4Q22 and 1Q23). The funding pressure of FRT has eased with borrowing costs in 3Q23 declined by 200 bps from the peak and improved profitability from the pharmacy chain. With lower borrowing costs, FRT can speed up new openings for Long Chau chain to gain market share in the context that competitor An Khang and Pharmacity are still struggling with their business model. Larger scale should eventually help to enlarge the profit margin for Long Chau over the long term. As such, the reduction in borrowing costs is meaningful for a highly levered company like FRT, we hence raise P/S target multiple for the pharmacy chain from 0.8x to 1x. We hence lift our 1-year target price to VND 117,000/share (from VND 105,000). As FRT share price has increased by 35% since our last BUY call, we now call for OUTPERFORM rating on FRT shares with 13.5% upside.

NKG’s Q3 net profit was VND 24 bn, improving from the record loss of VND 419 bn for 3Q22, but a decline of -81% QoQ due to the drop in sales volume and the average steel prices. Cumulative, total net profit in 9M23 declined -65.5% YoY to VND 100 bn, accomplishing 25% of annual guidance. NKG sales volume for 3Q23 was 208k tons, improving 18.9% YoY off of the three year bottom of 3Q22, but fell -12.1% QoQ due to the -19.2% QoQ drop in exports. 9M23 sales volume dropped by -7.9% to 638k tons, in which export and domestic volume dropped by -6.1% and -10.3% YoY respectively. The gross margin also contracted to 4.8% from 9% in 2Q23 due to the steel price correction especially in export markets.

We believe that gradual recovery in credit demand and NIM improvement during 2024 will paint a brighter picture for TPB, as the economy starts regaining its composure and high yield customer deposits expire . However, we are still concerned about credit risk derived from corporate bonds, real estate, and the construction sector (22.4% of total credit) which will still weigh heavy on credit costs during 2024 (1.65% vs. 1.86% in 2023). We maintain our Market Perform rating on the shares of TPB, along with our 1-year target price of VND 18,000/share.

3Q23 NPAT lower than expected due to weak consumption. VEA recorded VND 884 bn (-28% YoY) and VND 136 bn (-14% YoY) in net sales and gross profit respectively, as demand for its trucks and farm tractors remained weak. Income from JVs was VND 1.2 tn (-25% YoY, -18% QoQ) compared to the high base last year. VEA recorded 3Q23 and Q1-Q3 NPAT of VND 1.5 tn (-20% YoY) and 4.7 tn (-8% YoY) respectively, which is lower than our estimates due to weaker consumption from Honda and Toyota. Outlook should improve for cars and trucks. The 50% registration fee cut will end on Dec 31^st, giving more support for sales to achieve better QoQ results (4Q22 was a high base, so we are likely to witness a YoY decrease). We estimate total volume for cars during 2023 to decline 26% YoY and total volume for Honda motorbikes to decline 13% YoY.