Company Report

We are upgrading the shares of ACB to BUY, while maintaining our 1Y TP at VND 43,000/share - representing 45.8% upside. During 1Q 2022, strong earnings momentum (+33% YoY and +36% QoQ) was the result of solid credit growth, robust non-interest income, and a reversal in provisions due to a recovery in troubled loans. A notable improvement in CASA was another highlight of ACB’s interim results. We believe that 2022 will be quite a favorable year for ACB, given our estimated PBT of VND 16.9 tn, +41% YoY led by solid credit growth (+16% YoY), NIM expansion of 25 bps, and lower provision expenses. Notably, ACB veered away from the corporate bond market, and likely will remain unscathed during this period of market turbulence. 

VIB stands out as the bank with the highest concentration of retail loans, at approx. 86.5% of total loans. Corporate bond balances have been maintained at around 1% of total credit (VND 2.6 tn as of 1Q 2022; less than TPB and OCB). VIB, as a result, has minimized its exposure and was quite conservative with corporate bond issuance, an enviable spot to be in with the current corporate bond crackdown. During 1Q2022, VIB posted a significant pretax profit growth of +26% YoY to approx. VND 2.3 tn, which is backed by an improvement in CIR pf 360 bps YoY to 35.3%, and strong mortgage lending growth of 7.4% YTD to VND 91 tn. However, bancassurance income witnessed a long slide by -36.2% YoY due to acute competition. A close eye needs to kept on asset quality, given the bank’s relatively low credit risk buffer compared to peers (51.8% vs. 148.3% on average). As such, we call for Market Perform rating on the shares of VIB, along with our 1Y TP of 30,700 per share.Downside risk: Higher-than-expected inflation, pressuring the bank to increase its deposit rates. Possible slowing consumer demand. Upside risk: Significant decline in restructured loans.

HPG’s 1Q22 revenue and net profit came in at VND44.1tn and VND8.2bn, respectively, up by 41% and 17% YoY. Construction steel volume hit a company record 1.34mn tons – growing by 57% YoY or 23% QoQ. HRC-type steel sales volume also increased 15% YoY to 763k tons, while volume of finished flat steel (including pipe and galvanized steel) increased by 20% YoY to 313k tons, driven by the recovery in domestic demand. The 15% YTD increase in construction steel prices has enabled HPG to take advantage of its lower-cost stockpiled inventory and aided in the improvement of its gross margin to 22.9% from 21.4% in 4Q21. As 1Q22 net profit for HPG lines up well with our forecast, we largely maintain our 2022E net profit at VND31tn (-10% YoY). We assume 2022E revenue to increase by 18% YoY thanks to the increase in sales volume and steel prices. We reiterate our Outperform rating on the stock, but lower our 12-month TP from VND54,000/share to VND50,600/share based on a target P/E and EV/EBITDA of 7.5x and 5.5x respectively (revised from 8x and 6x respectively due to the decline in regional valuations). Key downside risks to our call would be lower-than-expected steel prices and the possibility of higher costs for iron ore and coking coal compared to our assumptions.

GMD posted strong 1Q22 revenue and PBT of VND 880 bn (+28% YoY) and VND 350 bn (+82% YoY), respectively, which is the highest quarterly core earnings result ever recorded by the company - although Q1 is normally the industry’s low season. We believe that growth momentum can be sustained in 2022 given Gemalink’s contribution and the cost efficiency improvement, which should lead to GMD posting a PBT of VND 1.2 tn (+50.7% YoY) for 2022. Beyond 2022, however, GMD’s growth outlook remains very bright with the contribution of Nam Dinh Vu Phase 2 beginning 2023 and Gemalink’s Phase 2 from 2025. We reiterate OUTPERFORM rating on the shares of GMD with a revised 1Y TP of VND 65,000/share, which implies 16% upside.  Downside risks include: (i) prolonged Covid-19 lockdowns in China to affect shipping volume; (ii) weakened global demand as a result of high inflation and/or economic downturn; and (iii) higher competition in the Northern port system.

We recently attended the MWG AGM, wherein the management guided for 2022 earnings to increase by 30% YoY. As a result, we increase our SOTP-based 12-month target price to VND196,000 (from VND174,000) – for upside potential of 31.4%. While the revenue recovery for its grocery chain (BHX) is slow, 2022 earnings growth should be supported by: (1) a recovery of DMX/TGDD off of a low base in 2021; and (2) improvement to BHX’s bottom line due to cost optimization measures. Our 2022 revenue and net income estimates are now VND138.8tn (+13% YoY) and VND6.7tn (+37% YoY), respectively. The AGM pledged a maximum of 20% toward a capital raise to expand the grocery segment beginning 2023 - a positive catalyst for the shares, in our opinion. We, hence, raise our target PS for the grocery segment from 0.8x to 1.3x, which is decent compared with the PS of 2x based on the most recent stake sale of Wincommerce (a competitor grocery chain). We reiterate our BUY rating on the shares of MWG. Downside risk: possibility of store closures due to renewal of lockdown measures.

From our recent call in November 2021, HAX share price has increased 25% and reached our previous target, with better-than-expected growth in its 2021 earnings result. However, after attending recent 2022 AGM, we saw a possible peak in HAX earnings in Q2 & Q3 2022. We have also seen stricter requirements in terms of Mercedes’ dealer standards, which has pressured the company to raise significant equity for expansion, and dilute earnings growth in the near term. The impact of worsening chip shortage also causes us to lower 2022 and 2023 earnings forecast. Thus, we decided to rerate HAX to UNDERPERFORM, with a revised 1-yr target price at VND 32,000/share after taking into account the dilution impact, which equates to total return of -4% from capital gain of -6% and expected dividend yield of 2%. We expect 2022 total sales and net profit to reach VND 5.8 tn (+5% YoY) and VND 218 bn (+36% YoY), respectively.  Dilution ratio is 21% if the right issue is fully absorbed and recent convertible bonds is fully converted in 1-yr, in our estimate.

We reinitiate another strong BUY rating for TRA. From our recent call in August 2021, TRA share price has increased 28% and reached our previous target, with strong earnings growth confirming our previous forecast. After attending recent 2022 AGM, we saw another buying opportunity as the company: (1) continue to post double-digit sales growth, with increasing number of R&D and transferred products, (2) benefit from strong demand on drug store and hospital channel due to less severe Covid-19 cases and recovery of nationwide hospital visits, (3) persist improvement in profit margin as SG&A expenses on sales continue to decline.  Thus, we upgrade our 1-yr target price for TRA to VND 124,400/share as we roll out our earnings forward for 2022, equal to 24% upside from the current price of April 6^th 2022, plus an expected 3% dividend yield for 2022. We keep our earnings estimate similar to previous report, with total sales and net profit in FY22 to reach VND 2.6 tn (+19% YoY) and VND 343 bn (+29% YoY), respectively, and raise our target P/E from 17.5x to 18.0x to reflect the high-growth period of the company.

We upgrade our recommendation on the shares of BVH from Market Perform to Outperform, along with increasing our 1Y TP to VND 73,300 (from VND 71,000) reflecting our NPAT-MI estimate increase in 2022 of 8% to VND 2.2 tn (+14% YoY). The revision reflects the distinct improvement in the business margin within the life insurance arm, and a more normalized claims ratio at the non-life insurer. Over the past several years, BVH managed through unfavorable periods where life insurance was hampered by a lower interest rate environment and an unprecedented high claims ratio as it aggressively expanded the non-life business in 2017-2018. As interest rates appear to have bottomed and claims expenses gradually normalized, we believe that a more favorable business environment now exists for BVH. From 2018, we have also observed a greater correlation between BVH’s performance and government bond yields.

We reiterate our BUY rating on the shares of FPT and raise our 1Y TP to VND136,900 (vs. previous TP of VND112,500) – implying 28% upside along with a 2% dividend. Our higher target price reflects the strong growth in the technology segment. The 2022 PBT growth for technology is estimated at +30% YoY supported by both global (+29.9%) and domestic IT segments (+32.1%). Further, management believes that a 30% growth for domestic IT can also be achieved over the next three years, which is the same for the education segment. FPT could also likely be shielded from commodity volatility and deliver 20% plus YoY growth for 2022.

We initiate a BUY recommendation for the share of DBD (Binh Dinh Pharmaceutical & Medical Equipment) with the target price of VND 73,000/share, which is equal to a total return of 35% from the current price as of March 23th, 2022. We saw DBD as an attractive investment as the company: (1) capable of manufacturing highly complex products - cancer treatment and dialysis fluid, (2) active in products R&D with significant unused capacity, (3) about to hold one competitive GMP-EU factory, (4) is a potential target for large M&A deal. We expect DBD sales and net profit in 2022 to reach VND 1.78 tn (+9% YoY) and VND 223 tn (+21% YoY) respectively. We also expect DBD sales and net profit CAGR at 9% and 13% respectively during 2023 – 2028, backed with expansion in drug store sales channel, increase in capacity and impact of GMP EU certification to drug bidding activities in hospital. 

BID reported a 2021 profit before tax of VND13.6tn, and we raise our 12-month target price on BID to VND42,300 from VND41,100 (adjusted for dividends), based on an unchanged target PBR of 2.2x applied to our 2022E BVPS and assuming 5% in additional share issuance. With better-than expected safety indicators and with NPLs and LLCs at all-time highs of 0.98% and 219%, respectively, the CAR improved to nearly 9%. We believe that high provisioning in 2021 will reduce bad debt and help relax credit growth for 2022. We project pre-tax profit for 2022E at VND19.4tn (+42.4% YoY), primarily fueled by credit and deposit growth of 10% and 10.4% YoY, respectively, a NIM reduction of 12bps YoY, and a lower credit cost of 1.76%.  The capital raise plan set in 2020 is likely to be more favorable this year, when the impact of the COVID-19 pandemic has taken on a milder form. We maintain our MARKET PERFORM rating on the stock.

We are increasing our 1Y TP on the shares of MBB to VND 40,000/share (from VND 35,200), and reiterating our Outperform rating. The price target upgrade reflects our improved outlook for earnings growth in 2022, given the overall improvement in MBB’s now substantial credit risk buffer at the end of 2021. We forecast that MBB will achieve a pretax profit of VND 22.3 tn (+35% YoY) in 2022, fueled by strong credit growth (+25.6%) and reduced provisioning pressure (-22% YoY). If we are correct in our assumptions, MBB’s 2022 ROE will be 26.3% - the second highest in the industry and the highest amongst similar-scale peer. There is also market speculation that MBB will support Oceanbank or a so-called “zero-dong” bank. Although nothing has been confirmed, we think it might not a bad deal for MBB provided the proper SBV support is given and that there is a long runway to get back into Oceanbank into regulatory compliance. We have not accounted for such a deal in our forecast.

We have a BUY rating on the shares of QNS with 1-year target price of VND 61,000/share. We slash our 2022 earnings estimate by 3.6% as we (1) take into account of a continued high soybean price trend that impacts the soymilk margin and (2) lowered sugar volume forecast (mostly Refined Extra type sugar). However, we raise target P/E from 12x to 13x for the shares.  Fundamentally, we keep the view that QNS financial results had turned around since 2021 on the back of strength of the sugar business, while the soymilk segment has posted resilient sales growth despite the Covid-19 pandemic. Soymilk volume growth of 20% in the first 2 months of 2022 encourages us to stay with our view. Down side risk: Lower than expected demand for QNS products, due to a variety of factors such as the complicated pandemic situation/higher than expected soybean price/lower than expected refined extra (RE) sugar volume.

In our view, the supply chain disruption could carry through into 2023 longer than we initially expected, due to a trifecta of factors: (i) the surge in Omicron cases and the potential for new variants; (ii) China’s zero-Covid policy; and (iii) rising tensions between Russia – Ukraine, which will exert more pressure on global trade. Additionally, new vessel deliveries in 2022 are limited to only 3.1% of the current fleet. Thus, we expect both international and domestic container shipping to perform well with favorable conditions through 2023.With six new vessels to be added to the fleet between 2022 – 2024, HAH is ambitiously expanding into the Intra-Asia market to take advantage of the favorable market environment. We believe that the company’s new services will be profitable, given advantages of their low-cost fleet (8 out of 14 vessels having been invested into at low cost). We estimate that HAH will maintain high earnings growth during 2022 and 2023, and revise our NPATMI forecast to VND 744 bn (+67% YoY, +12.7% from our previous forecast) and VND 902 bn (+21% YoY) respectively, translating to an EPS of VND 14,641 in 2022 and VND 17,742 in 2023. We reiterate our BUY rating for HAH, with a revised 1Y TP of VND 106,000/share (unchanged target P/E of 7x), implying a 28% upside.

We are upgrading our rating on the shares of STK from OUTPERFORM to BUY, and our 1Y target price of VND 70,300/share (+26% upside). Our upgrade reflects the improved recycled yarn to total revenue ratio to 54% in 2022, as sales volume has now begun to recover to pre-pandemic levels in 1Q22. In 2022, we expect the company to post net sales and net profit of VND 2.62 tn (+28% YoY) and VND 318 bn (+14.1% YoY) respectively. With respect to 2021, STK recorded a decline in net sales and gross profit margins during 4Q21 due to less recycled yarn in the total sales mix (37% in Q4 vs 57% in 1H21) given the continued labor shortage. Nevertheless, STK still hit its target of 50% of its sales comprised of recycled yarn for 2021.