Company Report

We are maintaining our OUTPERFORM rating on the shares of VCB with a 2024 target price of VND 105,900/share (from VND 92,633/share after adjusting for the stock dividend) - representing an upside of 18.7%, as we roll forward our valuation basis, assuming that the company’s private placements will be successful, and increase our target PB to 2.7x (from 2.4x) due to the lower interest rate environment. VCB posted VND 9.3 tn pretax profit (+25% YoY) vs. our estimate of VND 10 tn (+35% YoY), as the bank booked more provisions than we had anticipated. Nevertheless, we continue to view the 2Q23 results as strong and the 1H23 provisions as pre-emptive and will likely enable future provisions to be reduced from 2H23. During the period, VCB also bucked the trend in both NIM (+2 bps QoQ) and asset quality (flat NPL ratio of 0.8%, and further fortified its provision coverage at 386%). The only drawback for the quarter, in our view, was that CASA nudged -43 bps lower to 30%, as the peer average CASA improved 45 bps. We however do not consider this as significant, as VCB continues to possess the lowest funding cost in the sector due in large part to its stable depositor base. CASA should further improve over the near term as deposit rates remain at a low level.

For 2023, we expect that the company will post net sales and net profit of VND 63.4 tn (+5.7% YoY) and VND 9.1 tn (+5.9% YoY), respectively. This is -1.3% lower than our previous net profit forecast. Such an outlook translates into 2H23 net sales and net income growth of +10% and +18% YoY, respectively. For 2024, we expect net sales and net profit to reach VND 67.4 tn (+6.3% YoY) and VND 10.7 tn (+17.2% YoY), respectively. Our 2024 net profit forecast is 4.4% higher than our previous estimate. We raise our GPM assumption for 2024 from 42.1% to 43% to reflect the declining trend of imported milk powder. Our updated 1Y target price for the shares of VNM is raised to VND 86,600/share (from VND 82,000/share), based on our 2024E EPS and DCF methodology. With upside of 19%, we reiterate our OUTPERFORM rating on the shares of VNM.  

IDC is one of the largest industrial park developers in Vietnam, with 727 ha of available lettable land in Long An, Ba Ria Vung Tau, and Thai Binh provinces. Low compensation and clearance costs should enable IDC to maintain its gross profit margin of IP segment at above 50% between 2023 to 2026.  IDC trades at a 2023 P/E of 10.2x and P/B of 2.5x, and 2024 P/E and PB of 8.9x and 2.4x - lower than industry average of 14.8x and 3x, respectively. We have OUTPERFORM rating for the shares of IDC, wherein our 1-year target price is adjusted to VND 53,200/share (from VND 51,400/share), representing an upside of 8.8% from current market price. With 101.76 ha new signings and a payment schedule to be accelerated from one year to six months, as we observed amongst large clients, IDC’s cash flow should continue to improve.  We believe that IDC can maintain its cash dividend at 40% of par value during 2023 and 2024, with the dividend yield of 8.3%.

Reflecting positive performance on YoY basis and stable growth outlook of VRE’s core business of mall leasing, we reiterate our BUY rating on the shares of VRE with 1Y target price of VND 38,700/share (28.8% upside), a slight decline of 4% compared with our previous TP due to the rescheduling of new mall openings. Valuation (2023E EV/EBITDA of 8.8x, both below historical and regional peer average of 15x) is also attractive, in our view. Key downside risks to the shares of VRE include: (i) delay in development of Vinhomes mega projects which could impact the company’s expansion; and (ii) weaker-than-expected consumption which may lead to a slowdown of tenant expansion plans.

We maintain our Market Perform rating on the shares of TCB, with a 1Y TP of VND 38,700/share as we roll our valuation basis to 2024. We undoubtedly believe in the long-term prospects of the property and the corporate bond markets in Vietnam, and that a key market player, like TCB would eventually reap the rewards. Over the short-term, however, we continue to foresee challenges which is not likely to be resolved in its entirety over the short-term, but instead could take at least 2-3 years to resolve. During this time, the absorption rate in the property market may not be desirable and may adversely affect the cash flow of developers/landowners. Accordingly, TCB’s earnings growth may not match the impressive years (2014-2021) near-term. We project that the bank’s pretax profit for 2023 and 2024 will reach VND 23.3 tn (-8.5% YoY) and VND 27.2 tn (+16.1% YoY), respectively. Hence, ROE is projected to remain around 15% vs. the industry average of 16.2%.

KBC Q2 reported revenue and NPAT was VND 2 tn (+421% YoY) and VND 747 bn (vs. losses of -VND 323 bn in 2Q22), respectively. The strong growth during Q2 was primarily attributed to revenue from industrial land lease increasing 625% YoY, accounting for 95% of total revenue. Cumulatively, during the first six months of 2023, total revenue reached VND 4.27 tn (+294% YoY) and net income achieved VND 1.8 tn (+800.3% YoY), fulfilling 47% and 45% of full year revenue and net profit target, respectively.  By end of Q2, KBC had 185 ha committed to lease to several clients, of which KBC handed over 128 ha during the first six months. During 2H 2023, KBC management expects to deliver up to 100 ha in Quang Chau, Tan Phu Trung and NSHL IP. Meanwhile, the company also expects to hand over residential land in Phuc Ninh UA once the LUF payment to the State is complete. Should this be the case, KBC may achieve its challenging target of VND 9 tn (+840% YoY) in revenue and VND 4 tn (+151% YoY) in NPAT this year.

VHC posted 2Q23 results, wherein net profit reached VND 412 bn, declining -48% YoY but improving +88% QoQ due to gross margin expansion and lower selling expenses. While sales were in line with our expectation, 2Q23 NPAT was better than expected. For 2023, we expect net sales and net profit to reach VND 11 tn (-16.9% YoY) and VND 1.46 tn (-26% YoY). This is 11.4% higher than our previous net profit forecast. For 2024, we expect net sales and net profit to reach VND 12.4 tn (+12.6% YoY) and VND 1.7 tn (+17.8% YoY), respectively.  Our 1Y target price for VHC is VND 80,500/share (from 71,500/share), representing an upside of 3.9%. We maintain our MARKET PERFORM rating on the shares of VHC.

Our last rating on DRC was MARKET PERFORM, as we believe that 2023 earnings will likely decline due to weak demand, which forced DRC to reduce prices charged to its customers in order to protect sales volume, hence effectively squeezing the profit margin. Q2 earnings (-39% YoY) came out even worse than company guidance (pretax profit of VND 63 bn vs company guidance of VND 80 bn). Earnings may start to recover in 2H23 (+57% HoH, -28% YoY) thanks to (i) the second half of the year traditionally being the high season and (ii) a gradual recovery in demand in both the domestic and export market.

We reiterate our Outperform rating on the shares of QNS, citing our improved outlook on the company. We revise up estimated 2023 NPAT by 35% compared to our previous forecast, encouraged by higher domestic sugar prices and higher refined sugar (RS) production volume. Our target price for QNS is VND 65,000/share (from VND 58,000/share), representing a +22% upside (total ROI 27%).

During 2Q23, STK reported net sales and net profit of VND 407 bn (-23% YoY; +41% QoQ) and VND 38 bn (-47% YoY) respectively, beating our estimates. Going forward, the company is confident that orders will continue to improve in terms of volume during 3Q23 and 4Q23 on QoQ basis. The declining trend of average PET chip prices should continue to help widen the price gap, and lead to a higher GPM during 2H23. During 2023, we expect net sales and net profit to reach VND 1.8 tn (-14.7% YoY) and VND 167 bn (-31% YoY), respectively. During 2024, net sales and net profit are estimated to reach VND 2.2 tn (+19.7% YoY) and VND 225 bn (+34.4% YoY), respectively. We applied the  historical average P/E of 14x to 2024 EPS to reach our new target price for the shares of VND 33,400/share (up from VND 26,800/share), indicating upside of 5%. We reiterate our MARKET PERFORM rating. As STK operates in the upper stream of the sector value chain, we expect sales results to be the first sign of a sector recovery, followed by other garment manufacturers. 

ACB announced a prelim PBT of VND 4.83 tn (-1.7% YoY) for 2Q23 which turned into 1H23 PBT of VND 10 tn, exceeding our expectations and accomplishing 50% of the AGM’s profit plan. This earnings growth slowdown was caused by NIM shrinkage, the provision burden, and weak fee-based earnings. Whilst credit growth rebounded during 2Q23 at 4.6% YTD (vs. -0.6% YTD for 1Q23), total deposit growth was 4.2% YTD. The NPL ratio increased to 1.07% (vs. 0.96% for 1Q23). Given that the LDR (79%) and short-term funding for medium- and long-term loans (19%) were well below the cap, we believe that funding pressure will not be the primary impediment for ACB to stimulate credit growth during 2H23.    

Although we are not raising our earnings forecasts for 2023-2024, we are now more positive on VNM versus the overall market given the impact of lower input costs as well as a lower WACC in our DCF valuation. Therefore, we are upgrading the shares of VNM from Market Perform to Outperform, and increasing our target price to VND 82,000/share (from VND 74,700/share), which represents an upside of 14%. We are of the opinion that the share price has already priced in previous difficulties, and therefore might have bottomed out. Looking ahead, a likely return to profit growth in coming quarters and demand recovery in 2024 support our view on VNM.

Reiterate OUTPERFORM, with new 1Y TP of VND 52,900/share. Raise 2024F NPATMI estimates to VND 554 bn, flat YoY given the recent positive development and expectation of further reocvery of freight rates, leading to a possible re-rating for the industry. AGM set target for NPATMI 2023F of VND 490 bn, - 40% YoY, 10% lower than our estimates. Industry see some positive developments on charter rates (+15-20% from trough) so we expect inventory de-stocking to end around 3Q2023 and industry fundamental to improve from that point on.