Company Report

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.

We reiterate our Outperform rating on the shares of VCB, with a new 12-month TP of VND103,750 (from VND89,600), based on a 2023E P/B of 2.6x (from 2.3x), as we increase our 2023E PBT by 15% to VND44.6tn (+19.4% YoY). With a historical prudence in lending, VCB is much less prone than peers to be impacted by the elevated risk in the real estate and corporate bond market.

With a critical position in the Vietnamese banking system, a solid and recognizable brand name, and stronger-than-peer earnings growth, we see VCB’s business being protected by a moat. Hence, VCB’s valuation gap relative to the private banks should further widen, assuming continued strong execution.

4Q 2022 revenue increased 16% YoY, while NPAT increased 86% YoY during the last quarter of the year, thanks to strong improvement in EPC/EPCI segment and JV contribution. EPC segment recorded strong results thanks to Dai Nguyet project completion, as well as continuation of large projects such as Gallaf – Batch 3, Shwe Jacket…2022 revenue thus reached VND 16 tn (+ 15.5% YoY), while NPATMI reached VND 772 bn (+28.5% YoY). This is 20% higher than our estimate, with the key upside surprise coming from higher EPC/EPCI profit and profit margin. 2022 EPS was VND 1,212/share, +33% YoY, and translating into a trailing-12 month P/E ratio of 22x.

After a strong earnings expansion of 84% YoY in the first 3 quarters of 2022, GMD earnings growth significantly slowed down to +9% YoY in 4Q22, as negatively impacted by weak exports sectors. We expect that economic headwinds will continue to exert pressure on the company’s core earnings in 2023. However, we expect the sale of Nam Hai Dinh Vu port (NHDV) will be a positive factor that support earnings growth, as well as using proceeds to reduce financial burden and invest in new projects. GMD might restructure its business in the highly competitive Haiphong port cluster area, by concentrating volume to the newly built Nam Dinh Vu port (NDV).

MWG’s financial performance was worse-than-expected during 4Q22, with net income declining by 60% YoY due to: (i) lackluster demand in the context of macroeconomic headwinds; (ii) the 4Q21 high base when the company experienced pent-up consumer demand; (iii) slow delivery of the iPhone 14; and (iv) a sharp increase in interest expense. On the bright side, we estimate 4Q22 PBT margin at BHX to have improved by 0.9pp vs. that in 3Q22 and 2pp vs. that in 1H22. The improved profitability of the grocery segment and the absence of one-off expenses relating to grocery store closures should be the main earnings growth driver for 2023, while the ICT & CE segment should be impacted by rising inflation and unemployment. We forecast 2023E net income at VND4.4tn (+9% YoY, from VND4.7tn), as we factor in larger-than-expected losses from the pharmacy segment. With our revised 2023 financials, we derive a new SOTP-based 12-month target price of VND44,600 (from VND43,500) for the shares of MWG, and maintain our MARKET PERFORM rating.

Both HSG and NKG posted losses during 4Q22 of -VND 680 bn and -VND 356 bn, which were lower compared to 3Q22 losses due to reduced inventory provision pressure. However, the losses remained huge by historical standards resulting from low utilization rate of between 60%-65%, and a between 15%-18% QoQ decrease in ASP.

For 2023, we expect a decline in demand of finished-flat steel products due primarily to the export channel given the high base during the first half of 2022. The margin of steel companies can improve due to the recovery in HRC prices which should lead to a reversal in inventory losses. Nonetheless, weak demand could make it more difficult for steel companies to pass along the increase in input costs to output prices, like over the 2020-2021 period. 

For 2022, MSN reported a net revenue and NPATMI of VND 76.2 tn (-14% YoY) and VND 3.6 tn (-58.3% YoY). If we exclude the one-off sale of MML’s feed business to DeHeus during 2021, core NPATMI would have remained flat YoY. In our view, all business lines will remain impacted by weak macro conditions. During Q4, MCH revenue declined -16.5% YoY due to tight consumer spend and the high base effect of Q4 2021 (as the company aggressively pushed sales to distributors during Q4 2021). WCM’s revenue during Q4 was also lower QoQ, despite the early Tet holiday (part of Tet sales were recorded during Q4 2022). On the cost front, financial expenses increased 11% YoY during 2022 (Q4 standalone financial expense rose 16.7% YoY) due to a higher debt balance and interest rates. Given the high gearing ratio (D/E of 1.9x by 2022-end), we expect high interest costs to be a theme throughout 2023 should the group fail to de-lever.

We are downgrading our rating on the shares of VNM from OUTPERFORM to MARKET PERFORM, reflecting only 9% upside potential to our lower PER/DCF-based 12-month target price of VND82,900/share (from VND85,000). VNM’s disappointing 4Q22 results were the result of a net sales and net profit decline of 5% YoY and 16% YoY, respectively, while the gross margin was the lowest recorded since 2015. While the price of raw milk powder has declined significantly YoY, VNM’s relatively high-cost inventory is expected to last through the year. Nevertheless, 2023 is marginally more hopeful, as we forecast net sales and net profit growth of 6.4% and 10.3% YoY, respectively – but still off of a low base. Management expects significant gross margin improvement from 3Q23 due primarily to the recent hedging contract for raw milk powder at lower prices. Meanwhile, we are not as optimistic for domestic sales growth, given the inflationary pressure and intense competition. Upside risk: fall in raw material prices; downside risk: loss of market share.