Company Report

During its recent analyst meeting, MWG’s management laid out that 4Q22 financial performance will be hit by poor discretionary spending, interest rate hikes and FX losses. For October 2022, total revenue may reach VND 10.9 tn (-11% YoY), of which ICT & CE revenue declined by -18% YoY to VND 8.3 tn, while the grocery revenue rose by 22% YoY to VND 2.37 tn. The management expects 2022 net income to decline by -10% YoY, equivalent to 4Q22 net income growth of -40% YoY. For 2023, the company expects earnings of the ICT & CE business to improve only from 2H. Meanwhile, the profitability of the grocery business is improving, and the segment posted positive EBITDA at the company level in October. Capital raising for BHX is still on track, and expected to be completed in 1Q23. We cut 2022-2023 net income of MWG by 15% and 19% to VND 4.37 tn (-11% YoY) and VND 4.74 tn (+8.4% YoY) respectively. Even though earnings of the ICT & CE segment may decline in 2023, the improvement in profitability of the grocery segment and the absence of one-off restructuring expenses should help MWG to post positive net income growth in 2023. 

ACB posted a pretax profit of VND 4.5 tn (+71.1% YoY) in 3Q22, fueled by solid credit growth (+11.1%), strong interest income growth (+33.4% YoY), robust fee income (+36.4% YoY), and the reduction in loss provisions (-89% YoY). Notably, the NIM kept heading upward without interruption. Despite modestly weaker asset quality having in 3Q22, ACB has maintained a very robust credit buffer which eased pressure for credit provision expenses and facilitated stellar earnings growth momentum. Restructured loans declined -13.9% QoQ (approx. VND 11.2 tn), and a total lack of corporate bond balance enabled ACB to be less impacted by current market condition. Despite major headwinds being included our assumption and a reduction in our 1Y TP to VND 26,300 per share (from VND 34,400), we reiterate our BUY rating on the shares of ACB given the upside of 29.2%.

GMD maintained strong business results through 3Q22, with an 80% YoY growth in PBT. However, downside risks have been building since 4Q22 as shipping demand is deteriorating rapidly due to weak consumption demand and high inventories. Over the next 3-6 months, we are concerned that there would be little upside catalysts for the stock as earnings growth could reduce significantly in 4Q22 and 2023, and new project volume ramp-ups during 2023 will be impacted while depreciation cost burden rises. We estimate 2022 and 2023 PBT to reach VND 1.3 tn (+61% YoY) and VND 1.33 tn (+3% YoY), respectively. Earnings growth is expected to recover from 2024 when demand improves. We combine our DCF valuation model and PE valuation (target PE of 12x) to reflect recent market valuation, we lower our 1Y-TP to VND 45,200/share (from VND 55,600/share). We downgrade the share from OUTPERFORM to MARKET PERFORM.

In 3Q22, VNM posted revenue and net profit of VND16.0tn (-0.7% YoY, +7.7% QoQ) and VND2.3tn (-21.5% YoY, +10.5% QoQ), respectively. For 9M22, the company delivered revenue of VND44.9tn (flat YoY) and NPAT of VND6.7tn (-20.2% YoY). Given the performance over 9M22, we cut our NPAT for 2022F by 4.2% to VND9.0tn (-15.3% YoY) and leave that for 2023F largely unchanged. For 2023F, we expect 6.4% and 15.7% YoY growth for the top and bottom-lines, respectively; with the higher growth on the bottom line due primarily to lower input costs. As a dairy company with management’s prudent style, VNM has limited to no direct risk to the existing headwinds in the property and corporate bond markets. Further, with a net cash position of VND13tn (c.USD52mn) as at end-3Q22, the company should benefit from rising interest rates to a degree. With an improving earnings outlook from 4Q22 onward, VNM should post better performance, as it could exit the period of earnings decline in 2021-2022.

MWG reported revenue of VND32tn (+32% YoY, -7% QoQ) and net income of VND907bn (+15% YoY, -20% QoQ) for 3Q22. Given the 3Q21 low base when the company suffered from lockdown activities in provinces within Southern Vietnam, 3Q22 net income growth of 15% YoY was below our expectations. This could be attributed to the increase in financial and one-off expenses related to the closing of non-performing BHX stores. We expect financial expenses to rise in 4Q22 due to the: (1) trend of higher interest rates, (2) debt restructuring to longer maturity, and (3) VND depreciation. We forecast 4Q22F net income at VND1.67tn (+7% YoY). As such, we reduce our 2022F net income by 6% to VND5.16tn (+5% YoY, from VND5.48tn) and that for 2023F by 18% to VND5.86 (+14% YoY, from VND7.19tn). While earnings of the ICT & CE segments will likely be hurt next year, improvement in the grocery segment (due to the increase in sales and absence of one-off expenses) and smaller FX losses should secure decent earnings growth for 2023F. Despite rolling over our basis to 2023F (from average 2022-23F), we lower our SOTP-based 12-month TP to VND61,000 (from VND87,800) to reflect the cuts to our earnings and target multiples. With 44% upside potential to our new TP, we recommend investors to accumulate the stock despite possible periods of price weakness.  

FPT trades at an attractive FY22E and FY23E P/E of 15x and 12.7x, respectively, on the back of 22%  and 18%  EPS growth under our base case. Meanwhile, peers with an average of 6%  and 15%  EPS growth in 2022 and 2023, respectively, are trading at an average FY22E and FY23E P/E of 17x and 15x. While the IT spending weakness need to be monitored, in light of FPT’s low cost advantage, having the lowest exposure to the EU market compared to peers, a healthy interest coverage ratio, and an abundant net cash position, we remain positive on the stock. We call for Outperform rating on FPT with 12-month SOTP-based TP of VND95,400 representing 31% upside potential. Key risks: extreme recession could negatively impact the domestic & global IT services sector, as well as digital advertising segments.

The container shipping market has reverted to a down cycle after an unprecedented boom, and earnings levels of shipping companies are set to normalize. HAH may not escape this negative trend, as we expect NPATMI to slide through 2024. However, we estimate that the normalized earnings could be 5x higher than pre-Covid levels given the significant capacity expansion. The recent price correction has sent the shares of HAH to below its book value, which we believe to be an interesting entry point for a long-term investment. However, near-term upside would appear to be capped with few catalysts for the shares over the short term. As such, we lower our rating on the shares of HAH to MARKET PERFORM, with a 1Y-TP of VND 38,500/share (target P/E of 4x), implying only 16.8% upside.

According to the most recent update, sales volume of HPG’s construction steel during October dropped significantly to 210k tonnes, the lowest level since March 2021, whereby export and domestic volumes for the month dropped by 73% and 44% YoY, respectively. The volume of billet, pipe, and galvanized steel also dropped by 92%, 21%, and 40% YoY, respectively, to a respective 15k, 57k, and 27k tonnes for October. On the other hand, HRC volume for October remains strong at 269k tonnes (+30% YoY) but it could decrease near-term given the weak consumption of finished flat-steel products. Accordingly, the utilization rate of HPG blast furnaces during October was likely closer to 70%, based on sales volume. Given the rapid deterioration in the overall market, we revise down our 2022F net profit by 16% to VND10.2tn, implying a net loss of VND270bn in 4Q22F. In 2023F, we lower our net profit by 14% to VND10.88tn, which calls for 6.6% YoY growth thanks to a lower forex loss and the drop in coking coal price. 

PVD recently held its 3Q 2022 earnings call, and provided an outlook for the industry in 2023. Global and Vietnamese macroeconomic conditions have greatly evolved, with a higher interest rates and significant economic risks. With our changes in forecasts and discount rates, we arrive at a lower 1Y target price of VND 18,200/share (from VND 23,800/share), reflecting a 2022 and 2023 earnings revision and higher discount rate. We do, however, maintain our MARKET PERFORM rating on the shares of PVD.

We attended the NVL analyst meeting on Oct 28-2022 and came away with the following key takeaway. While net revenue stayed flat in Q3, NPAT dropped significantly by -56% YoY as the bottom line was negatively impacted by high financial expenses. Due to high leverage of approx. 160% D/E  at the end of Q3 2022 compared to other developers, the company also has a comparatively high amount of USD-denominated debt obligations (24% of its debt being USD-denominated vs. total debt), the financial burden for NVL will be heavier until the end of this year, due to the tightening conditions in the funding market as well as generally unfavorable market conditions.

For 3Q22, VHC reported net sales and net profit of VND 3.3 tn (+46.2% YoY) and VND 460 bn (+80% YoY), respectively. Although having achieved strong growth from the prior year’s low base, VHC recorded its lowest quarterly net profit since 4Q21 in terms of both absolute value and growth in 3Q22. This is due to the US (VHC’s most important export market) exhibiting declining sales of -41% QoQ, reflecting high inventories and persistent inflation. Going forward, we expect that demand will continue to decelerate, while ASP has reached its peak. For 2023, we expect net sales and net income to reach VND 12.9 tn (-8% YoY) and VND 1.7 tn (-27% YoY), respectively. At VND 73,000/share, VHC trades at a 2022 and 2023 P/E of 5.8x and 7.9x, respectively. Our rating for the shares of VHC is MARKET PERFORM, and our 1Y target price is VND 76,400 (+5% upside).

HPG posted a 3Q22 loss of VND 1.79 tn – the first such loss since 4Q18 was driven by a steel business line loss of VND 2.56 tn, due to falling steel prices, higher-cost inventory, and the impact of forex loss. Although steel price volatility can be mitigated, weak demand in both global and domestic markets could remain a challenge for HPG, going forward. As such, we downgrade HPG to Market Perform from Outperform reflecting our significantly reduced 1-year target price of VND 18,000/share (from VND 27,600/share). We cut our 2022 net profit forecast to VND 12.2 tn, a drop of 65% YoY from the peak in 2021. 2023 net profit is expected to be flattish at VND 12.6 tn (+3.3% YoY). While the impact of high-cost inventory could fade over the near-term, we believe the decline in steel prices along with weak demand is likely to cause a negative earnings growth on an YoY basis until the first half of 2023.

In 3Q 2022, PVT revenue grew impressively by 38.7% YoY to VND 2.33 tn while PBT growth is even more impressive at 143% YoY to reach VND 481 bn, including an one-off gain from PVT Athena’s disposal of VND 211 bn. This result has been in line with our expectation so far, benefiting from the higher charter rate of its vessels in the international market, while domestic market is stable. From our discussion with the company, we expect this favorable condition for tanker owners to continue into upcoming quarters, since we do not see any improvement from the Russia-Ukraine conflict in the short-term and the tanker market is still in uptrend. There might be some impact on forex loss in 4Q 2022, but that should be offset by higher earnings from better charter market condition. Thus we maintain our previous forecast for PVT as in our previous report (here), while we revise down our 1Y target price to VND 24,000/share (from VND 26,200/share) based on a lower P/E target of 10x (from 11x) to reflect our overall market lower rating. We maintain our OUTPERFORM rating for the stock on the base of stock price upside and positive outlook into 2023.

In 3-6 months, we see core earnings of 4Q 2022 to improve further when more charter contracts are renewed at a more favorable price, which should be the main catalyst for the stock price in the coming time. Also, there should be further gain on asset disposals from 2 vessels (PVT Eagle, PVT Dragon) in the upcoming quarters, which should be another catalyst to watch.

SCS is trading at P/E 2022 and 2023 forward of 11.5x and 10.8x respectively, which is at the lowest level in its historical range. This de-rating reflects slower growth prospects in the coming time, coupled with a high dependence of the company on the currently weak external demand side, which is reasonable in our view. On the good side, SCS stands out as a beneficiary of USD appreciation as most of its revenue is denominated in USD terms, while its costs are all in VND. Our DCF model points to a 1-year target price of VND 71,900/share (~1.4% upside), meaning an UNDERPERFORM rating for the stock.  In the short term, 4Q 2022 earnings would be muted compared to high base last year, as this year high retailer’s inventory level coupled with lower demand leads to no high season for the year end.