Company Report

Over the short term, we see improving market sentiment as a result of recent interest rate declines. However, we anticipate that market liquidity would improve gradually, possibly from 2H23 when multiple supporting measures and declining interest rates should exhibit a more visible impact on the market.  Meanwhile, medium- and long-term prospects for the sector remain positive, underpinned by population growth, on-going urbanization, and strong underlying housing demand. At current price of VND 56,500/share, VHM trades at a 2023 and 2024 PE of 8.4x and 7.8x, respectively, and 2023 and 2024 PB of 1.4x and 1.2x - lower than historical averages and relatively attractive compared to peers.

VNM reported 1Q23 net sales and net profit of VND13.9tn (+0.3% YoY, -7.6% QoQ) and VND1.9tn (-16.5% YoY, +2% QoQ), respectively, trailing our expectations. Domestic sales continued to struggle, given weak consumer sentiment and aggressive competition in the market. For 2023, the company has set an annual sales and net profit target of VND63.4tn (+5.5% YoY) and VND8.6tn (+0.5% YoY), respectively, which we believe to be rather conservative. We also lower our 2023E earnings to reflect challenging overall market conditions. We expect 2023E net sales and net profit to reach VND63.8tn (+6.4% YoY) and VND9.2tn (+7.3% YoY), respectively. Our new earnings are 3% lower than our previous net profit estimates. For 2024E, we expect net sales and net profit to reach VND67.8tn (+6.3% YoY) and VND10.2tn (+11.3% YoY), respectively. We lower our DCF/PER-based 12-month target price for VNM to VND74,700/share (from VND82,900/share) as we now use a lower target PER of 16x (from 18x) to reflect the gradual loss of market share. Our new TP implies 13.5% upside potential. We maintain our Market Perform rating on the shares of VNM. 

We roll-forward our valuation to mid-2024 and adjust our 1Y TP to VND 24,300 (from VND 22,800). Given the high exposure to real estate developers (12%), mortgage loans (18%), and corporate bonds (10.7%), we are concerned that TPB’s asset quality weakness will last longer than expected - impeding the NIM recovery. As such, we believe that an additional provisions will be the best consideration for TPB. With such difficulties, earnings growth fragility and narrowed ROE are what we expected to happen for both 2023 and 2024. Therefore, we maintain our Market Perform rating on the shares of TPB. For 2023, we project that TPB’s pretax profit will achieve VND 8.2 tn (+4.8% YoY). We believe that NIM contraction (-30 bps YoY) and provisioning burden (+22% YoY) will impede 2023 core profit growth. Against a modest showing of PBT during 2023, we project that 2024 pretax profit will be VND 9 tn (+9.8% YoY), driven by NII and NFI growth of 11.9% and 24.4% YoY, respectively.

From our last report, Vietnamese trade in general has not improved by a great degree, with Jan-May tracked 2023 total trade value declining by -14.7% YoY, but slightly up by +5% MoM for May. Especially, imports by value is still declining by -18% YoY in May, and this is a bad signal for export in 2H because a large part of Vietnamese import value is materials for manufacturing. Thus, we have grown more concerned and are watching closely export recovery prospects for 2H 2023. The recent 5% MoM growth in May exports is a positive sign. So we maintain our estimates for GMD as-is for now, but might revise down our estimates if exports do not improve further in the coming months of 2023. Specifically, we maintain our total port volume assumption for GMD of 2.7 mn TEU, -10% YoY in 2023F and 3.4 mn TEU, +22% YoY in 2024F. Tariffs are expected to maintain stable in this period. Thus, we maintain our forecast for 2023F-2024F.

Contracting loan balances and NIM pressures during 1Q23 did not prevent ACB from achieving record core profit growth of 25.3% YoY to VND 5.2 tn (26% of the annual plan). The main driver was interest income (+14.2% YoY), strong earnings from both forex trading (+44.4% YoY), improved bad debt collection (+53.6% YoY), and OPEX control. Asset quality was affected by an increase in both bad debt and the troubled Group 2 loans. As a result, the NPL ratio increased 23 bps QoQ to 0.97% at 1Q23. For 2023, we expect that ACB will achieve a PBT of VND 20 tn, which is lowered -1.7% due primarily to lower-than-expected credit growth of 12% YTD (from 14%). We extend our valuation to mid-2024, and arrive at a 1Y TP of VND 32,200 (up from VND 30,900). We like bank’s conservative approach to risk management with lending, and that there appeared to be no corporate bond investments with minor exposure to real estate projects. We reiterate our BUY rating on the shares of ACB.

We find VCB’s 1Q23 results solid, with decent profitability and well-controlled credit quality. Its NPL formation and ‘Group 2’ tier of other orbiting loans were amongst the lowest in the industry in 1Q 2023. During April, the base NPL ratio increased just 4 bps to 0.89%, while the satellite Group 2 loan ratio remained flat MoM, without any further write-offs. This proved the bank’s capability in risk management. Despite the bank considering another rate cut package with an impact on NII of between VND 600-700 bn, the impact on the 2023 PBT should be offset by the curtailment of credit cost. Therefore, our PBT estimate for 2023 remains broadly unchanged at VND 44.5 tn (+19% YoY) and we introduce our 2024 forecasts. However, we are rolling forward our valuation basis to mid-2024 which results in a new 1Y TP of VND 109,400/share (from VND 103,750/share). This is equivalent to a 2024F P/B ratio of 2.4x (from 2023F P/B ratio of 2.6x). We reiterate our Outperform rating.

We maintain our Outperform rating on QNS, citing our improved outlook on the company. We revise up 2023 NPAT by 8% compared to our previous forecast due to (i) higher sugar prices and (ii) higher refined extra type (RE) production volume. Our target price for QNS is VND 48,500/share (from VND 46,000/share), representing a +14% upside (total ROI 21%). At the April 1^st 2023 QNS AGM, net revenue and net profit guidance for 2023 was set at VND 8.4 tn (+1% YoY) and VND 1 tn (-16% YoY), respectively. We note that the company has a tradition of setting a conservative financial plan.

DHC’s NPATMI declined YoY in 2022, the first time since 2018. Net sales reached VND 3.9 tn (-5.3% YoY) due to a decrease in paper consumption demand. Such a decrease in demand was witnessed by export company customers and packaging companies. DHC has also doubled raw material inventory during 4Q22, compared to the same period last year, as the company accumulated raw materials when the OCC paper price dropped -40% YoY. We estimate that the current inventory should help to improve the gross profit margin during 1Q23.

Earnings continued to normalize from the brief upcycle with NPATMI declining -21% QoQ and -16% YoY, leading to our lowering of 2023 earnings forecast by 24%. Lingering high inflation and overstocked inventories issue needs some time to correct and shipping volumes are expected to remain weak within 1H 2023, before improvement can be expected from 2H 2023.We change our rating for the stock to OUTPERFORM (from BUY) with a revised 1Y P/E target of 6x and a revised 1Y TP of VND 40,500/share (~16.9% upside). We believe even though earnings outlook might be negative in short-term, the industry dynamics have passed its worst time, as evidence in the recent recovery of charter rate. We expect 2H 2023 industry dynamics to improve, which can lay a good foundation for market re-rating for the sector.

We downgrade our rating on STB shares to Outperform from Buy with a 1Y TP of VND 29,000 share (+11.5% upside). During 2023, we expect that strong growth momentum will continue, with PBT growth of 65.4% YoY or to approx. VND 10.5 tn. Such stellar growth is expected to be supported by a significant 4.4% improvement in NIM (+96 bps YoY), and the clearance of legacy assets. As the bank has a different growth cycle than other banks due to M&A back in 2016, we expect that 2023 will be the last chapter of its restructuring plan, with full VAMC bond provisioning - a milestone that is likely to unbridle the bank from its previous burden, and free it towards more promising earnings growth ahead.

Our current rating on the shares of HPG is Market Perform with a 1-year TP of VND 20,000/share, predicated on a 2023 net profit forecast of VND 9.7 tn (+14.6% YoY). We expect that the company’s earnings will improve during the second quarter thanks to higher steel prices. However, the company can still post substantial negative earnings growth during 1H23 compared to 1H22.  YoY growth could resume from 2H23 compared to last year’s low base.

We reiterate our BUY rating on the shares of VRE reflecting our belief of a stronger recovery in mall leasing this year and upgrade our 1Y TP to VND 40,400/share (previously VND 35,200/share) - representing 37.9% upside. We believe that VRE, as the largest mall operator nationwide, should continue to benefit from the rising middle-class incomes and the continuous expansion of both international and domestic retail brands in Vietnam. Further, we do not exclude the possibility of potential asset sales that could act as a catalyst for the shares. Key downside risks to VRE may include: (i) delay in development of Vinhomes mega projects could impact the Company’s expansion; and (ii) weaker-than-expected consumption could decelerate tenants’ expansion plans.

We upgrade our rating on the shares of ANV from Market Perform to Outperform given our improved outlook on the company. We expect that ANV will outperform other fishery companies in terms of profit growth with expected 5% YoY NPAT growth. We revise up 2023 NPAT by 33% compared to our previous forecast, mostly due to (1) higher ASP to China market and (2) higher new order from the US market. Our target price for the shares of ANV is now at VND 33,300/share (+11% upside), up from VND 25,100/share.

We lower our rating on the shares from Outperform to Market Perform, despite increasing our 1-year target price to VND 40,000 /share (from VND 35,800/share) on the back of our net income revision by 10%. We expect PLX’s 2023 PBT to achieve strong growth of 76%YoY, reaching VND 4 tn.  While we expect total domestic volume can increase 4%, the margin can be supported by the full-year impact of the adjustment in petroleum retail price formula. PLX’s 4Q22 PBT reached VND 1.65 tn, the highest level since 3Q21 and accelerating 426% QoQ due to both an adjustment in retail petrol pricing and favorable exchange rate movements. The development value-added services at petroleum stations, in our view, is supportive of long-term growth, as we anticipate that PLX will provide truck stop-related services such as food, motel, car-washing, laundry service, at its large petrol stations (around 10% of PLX’s retail stations over the long-term). PLX expects to pilot the new model in between 10-20 large stations prior to mass roll-out, with the first set being launched in 2023.  While we also believe that the full 40% divestment from its stake in PGB on Apr 7^th could serve as a short-term catalyst for the shares (potential VND 700 bn gain), our valuation and earnings do not take this factor into account.