Company Report

As large construction deals signed during 2022 begin realizing revenue, we believe that the construction segment will be the main driver of 2023 YoY growth (45% YoY revenue growth with 31% revenue contribution per our estimate).  We expect lower YoY NPATMI growth for 2024 (+13.4% YoY vs +17.2% YoY of 2023) as the YoY growth driver likely will come from operation, integrated solutions, and infrastructure leasing segments. Construction segment growth should normalize. Aiming an auction for between 2,500-2,600 MHz waveband usage rights during December 2023, the Ministry of Information and Communications (MIC) targets a 5G rollout during 2024. We believe that enhancing 3G/4G coverage followed by the continuing 2G shutdown and 5G implementation will require more BTS sites, which should benefit CTR’s infrastructure leasing segment during 2024. We call for an OUTPERFORM rating on CTR’s shares with a 12-month DCF target price of VND 102,400 (equivalent to 14% upside potential).

PNJ posted a decline of -6% YoY in net sales but managed to deliver flat net income YoY in 3Q23 thanks to improved gross profit margin. In October 2023, net sales growth came back to positive territory (+2% YoY) in which retail sales rose by +4% YoY. Of note, October 2022 retail sales was high base (increasing by 47% vs the average in 2020-2021). As such, we view the 4% YoY increase in October 2023 retail sales as encouraging. Meanwhile net income surged by 32% YoY thanks to improved gross profit margin and normalized corporate tax expense from last year high base. While the overall jewelry consumption may still take time to regain growth, retail sales of PNJ has picked up before the market recovery thanks to market share gain supported by various long term strategies, such as targeting younger customer group and pioneering proposal trend in Vietnam. We now forecast 2023-2024 net income at VND 1.85 tn (+2.6% YoY, from VND 1.84 tn) and VND 2.17 tn (+17.2% YoY, from VND 2.04 tn). With unchanged target P/E of 16x on revised 2024 earnings, we increase our 1-year target price to VND 96,200 (from VND 90,200) and maintain OUTPERFORM rating (21% upside). 

We expect that the company's performance in 2024 will show a significant improvement compared to the previous year's low earnings (NPATMI growth in 2023/2024 are estimated at -57.9%/+79.1% respectively). This growth is projected to primarily come from increased investments in national grid projects, particularly benefiting the grid construction sector of PC1. Meanwhile, the minerals segment (started to contribute revenue from 3Q23) is conservatively forecasted at growth rate of 18% in revenue in 2024 due to concern of global economy slowdown impacting nickel demand. Power generation and property are expected to deliver moderate growth in 2024 due to less intense El-Nino weather condition and nearly full utilization of the industrial zone.

PLX’s PBT during 3Q23 was VND 1.18 tn, an increase of 277% YoY and 14.6% QoQ. Cumulatively, the company’s PBT during 9M23 was VND 3.08 tn (+402% YoY), accomplishing 95% of annual guidance. PLX’s petroleum sales volume was well maintained at 2.6 mn m3, an increase of 3.2% YoY, of which the retail channel contributed 1.7 mn m3 (+4.9% YoY). Earnings within the petroleum segment remained flat QoQ at VND 483 bn, but showed significant improvement compared to a loss of -VND 199 bn during 3Q22. However, we note that the parent company has booked an inventory provision of VND 777 bn during the quarter due to the correction in oil price, which can be reversed in the coming quarters if the oil price stabilizes.

MWG recently held an online analyst meeting. During the meeting, the management expressed its belief that earnings of the ICT and CE segments already bottomed out in 2Q23, but re-emphasized that recovery will be slow, as the company may still maintain a competitive pricing policy in the context of high inventories of competitors and weak demand. Over the long-term, while the ICT business seems to face saturated demand, the growth driver for MWG would rely on grocery retail. Regarding the grocery segment, monthly revenue per BHX outlet reached VND1.7bn in October, while the PBT margin in 3Q23 improved significantly to -1.8% (vs -4.2% in 2Q23), excluding one-off expenses of VND90bn which related to restructuring activities back in 2022. Since the beginning of 2023, MWG has standardized operating procedures across stores which helped to eliminate unnecessary tasks, hence saving time and relevant labor costs (the number of employees has dropped by 7% YTD). Besides, increasing gross profit while maintaining logistics costs in absolute terms stable also helps to raise efficiency and hence profit margin. In terms of percentage, logistics costs to sales ratio declined from 6% in 4Q22 to 5% in 3Q23.

Being foreign debt free could allow NT2 to avoid the impact of FX risks. However, as EVN is facing financial issues, NT2’s cash conversion cycle has surpassed 100 days in 2023 due to Vietnam Electricity Group’s (EVN) deferral in power sale payment. To ensure the adequate working capital for operations, NT2 has raised its short-term debt to VND 926 bn (as of end-September 2023, vs VND 630 bn of 3Q22). Therefore, NT2 might unlikely declare the attractive dividends for 2023 and 2024 as 2022 (VND 2,500/share or 8.7% of dividend yield). We also forecast 2023 NPAT to decline by -52% YoY. However, we anticipate the earnings recovery in 2024 (+37% YoY per our estimate) as NT2’s utilization rate should improve on the back of no major maintenance and less extreme gas shortage as in 2023. NT2’s 4Q23 performance could be a catalyst in the short-term as NT2 has finished the maintenance at the end-October, implying a QoQ profit growth. We estimate a 6.3% YoY growth of 4Q23 NPAT. Usually, the annual power demand is usually solid in November and December. With a 12-month DCF target price of VND 27,620 (equivalent to 12.7% upside potential), we call an Outperform rating for the stock.

We are downgrading our rating on the shares of KBC to MARKET PERFORM (from OUTPERFORM), as we lower target price to VND 33,200/share. Our downgrade reflects both the delay of industrial park (IP) land transferred to tenants and our belief that KBC’s major project development could be further delayed. Both factors have already negatively impacted QoQ revenues and NPAT.  For 3Q23, KBC posted revenue of VND 247.1 bn (+21.6% YoY & -89.4% QoQ) and NPAT of VND 19 bn (-99% YoY & -98.2% QoQ) due to the delay of industrial park (IP) land transferred to tenants and the absence of one-off revaluation gain as of 3Q22 with value of VND 2.18 tn. Between Q1-Q3, net revenue reached VND 4.79 tn (+272% YoY), and total net income reached VND 2.09 tn (-2.3% YoY), fulfilling 53% and 52% of the company’s full year revenue and net profit target, respectively.  The company has achieved 63% and 72% of our previous forecast for FY2023 revenue and net profit, respectively.

In 3Q 2023, GMD posted net sales of VND 998 bn, +1% YoY and +9.4% QoQ, and PBT of VND 397 bn +18% YoY, beating our estimate of VND 360 bn by a comfortable margin, thanks to strong improvement in gross margin of both the Port segment and Logistics segment. Excluding Gemalink, all GMD feeder ports throughput during the quarter reached 281K TEU, +3% YoY and +1% QoQ. Gemalink improved in the quarter, with estimated volume of 260K TEU (excluding barging), +2% QoQ showing quarter-on-quarter improvement of the external demand from US/EU markets, according to VPA data.

Top-line trailed our forecast, but net profit slightly exceeds due to gross-margin expansion. For 3Q23, VNM reported net sales and net profit of VND15.6tn (-2.8% YoY) and VND2.5tn (+9.1% YoY), respectively. Accordingly, gross margin for the quarter was 41.9% (+240bps YoY; +140bps QoQ) on the back of a correction in raw material prices. For 9M23, net sales and net profit reached VND44.8tn (-0.3% YoY) and VND6.7tn (-0.6% YoY), respectively, completing a respective 71% and 77% of management’s full-year target. Management hints that for 2023, while sales would be on track (flat YoY), net income might grow 3% YoY on continued margin improvement in 4Q23. New packaging launch likely to continue across product portfolio through mid-2024. SG&A reached 24.4% of net sales in 3Q23 (+162 bps YoY, +50bps QoQ), as the larger gross profit was reinvested into marketing and promotional activities.

We believe that NIM will recover in 4Q23 and improve modestly in 2024 because deposit rate decline will be factored in coming quarters and the bank concentration in medium and long-term loans has stabilized lending rates. However, the cash flow needed to settle debts, particularly for mortgage, consumer, and developer loans, has been negatively impacted by the economic downturn, that will still pressure on the asset quality of the bank in our view. As a result, we maintain our MARKET PERFORM rating for the shares of HDB, with a 1Y TP of VND 20,100/share.

Despite the slowdown of the economy and a rattled consumer, VRE continues to take advantage of stable growth and operational efficiencies in its core business of mall leasing. Given the weak growth expectations for 2024 due to management’s postponement of new mall openings and the decline in property sales YoY, reflecting the overall strategy of VRE to focus on Vincom Megamall type development which do not have shophouses for sales component as Vincom Plaza/Vincom Plus projects have, we are lowering our 1Y target price to VND 31,300/share (from VND 38,700/share). Our reduced TP reflects the use of a more conservative capitalization rate of higher 0.25%-1.0% than the previous valuation. Nevertheless, despite the level of stress that the counter is experiencing, we feel much of the bad news is already priced in and are maintaining our BUY rating on the shares given the implied 30.7% upside.

For 4Q 2023 and 2024, HHV continues to be benefited from the upcycle of infrastructure investment that resulting in construction as the growth driven factor for sales and earnings during this period. Meanwhile, we assume BOT segment sales growth in 2024 to converge to a natural rate, at 3-5% variable amongst projects. Overall, net earnings for 4Q 2023 and 2024 are respectively forecasted at VND 117 bn (+55% YoY) and VND 477 bn (+12.2% YoY). The lower earnings growth in 2024 net income is due to the high-based performance in 2023. Based on the forecasts for 2024 (which has yet to consider the impact of share placements to 2024F EPS), the P/E forward ratio is around 11.x and the TTM P/E ratio stands at 14.x, which are relatively lower than the three-year average P/E ratio of 16.x. 

We upgrade the shares of HSG from Market Perform to Outperform, and increase our 1-year target price to VND 22,600/share (from VND 19,900/share). In addition to HSG’s significant profit beat for the quarter, the recovery in steel prices and increase in export demand from North America should be catalysts for the shares over the near-term.

MWG delivered disappointed results in 3Q23 with net sales and net income of VND30.3tn (-5% YoY, +2.8% QoQ) and VND38.8bn (-96% YoY, vs VND17.4bn in 2Q23). The gross profit margin inched up marginally, from 18.5% in 2Q23 to 18.7% in 3Q23, aiding the QoQ recovery in earnings. Excluding the financial income, we estimate the PBT margin of the ICT & CE segment improved from 0.8% in 2Q23 to 1.6% in 3Q23. Net sales and net income tracked for 9M23 totaled VND86.9tn (-16% YoY) and VND77.5bn (-98% YoY), respectively, having accomplished only 64% and a mere 2% of management’s 2023 guidance. As such, we believe earnings have bottomed out in 2Q23 and are on the recovery path, though the pace is lower than our expectations.

NPAT in 3Q23 was lower than expectations. PTB in Q3 2023 recorded total net revenue and net income of VND 1.18 tn (-23% YoY) and VND 78 bn (-36% YoY, -24% QoQ) respectively, a miss vs. the company’s Q3 target. Wood production (of which 65%-70% of revenue is from the US market) declined by -19.8% YoY, given the fact that consumer demand for indoor and outdoor wood products in the US market declined due to inflationary pressure. Stone production (mainly granite, quartz accounting for 35% total revenue) in 3Q23 posted revenue of VND 418 bn (-8.3% YoY), due to demand for home construction and the domestic real estate market having dropped sharply.