Company Report

We are upgrading the rating on the shares of VRE from Outperform to Buy, as well as our 1Y TP of VND 35,200/share (previously VND 33,900/share), representing 28% upside after we roll forward our estimates to 2023E. We believe that earnings have bottomed out and are on a recovery path given the minimal rent waivers. Valuations (2022E & 2023E EV/EBITDA of 12.5x and 10.2x, both below historical average) also remain attractive in our view.

Key downside risks to the shares of VRE may include: (i) delays in development of Vinhomes mega projects which could impact the Company’s expansion; and (ii) inflationary concerns which may cause weaker-than-expected consumption recovery.  

Despite the marginal YoY revenue improvement of 5.6%, HT1’s PBT fell -45.4% to 164 bn VN in 2Q22 due to a surge in coal prices. We expect that the increase in coal prices should exert additional pressure on the company’s 2H22 margin, as it will be difficult for cement companies to increase cement price further, challenged by weaker domestic demand and stagnant export markets. Accordingly, we forecast HT1’s 2022 revenue to increase 20.6% YoY to VND 8.5 tn on the back of an 8% rebound in cement sales volume. However, we do forecast PBT to decline -28% YoY to VND 379 bn. We believe that HT1 earnings will bottom in 2022 and rebound to VND 527 bn (+40% YoY) in 2023 due to sales volume growth of 5%, and the assumption that coal will correct 5% from the 2022 peak.   

We maintain our Market Perform rating on the shares of HT1, along with our 1-year target price of VND 16,000/share. We think the share price in the short-term can be supported by the strong YoY earnings growth of around 70% in 2H22 off the low base in 2H21. There would be more supportive catalysts in 2023, including softening coal prices, or an acceleration in public investment.

Investment summary

We ae upgrading the shares of VTP to BUY from MARKET PERFORM, as we increase our 1-year target price to VND 85,500/share (up 14%) – representing 35% upside. VTP is trading at a heavy 33% P/E discount to regional peer.

Reasons for upgrade:

Delivery tariffs increase by 10-15% signals market competition easing

Gross margin slightly improved from trough, signaling better cost control from a new team of management

Quality improvement effort should resolve market share loss problem

Strong earnings growth expected in 2022-2023F

Downside risk: Competition remains intense as expected, or service improvements are not enough to capture market share.

At VND 34,650/share, KBC trades at a 2022 P/E and P/B of 11.8x and 1.6x, respectively, and a 2023 P/E and P/B of 8.9x and 1.4x – prior to accounting for the potential private placement of 150 mn shares. Our target price is VND 43,000/share, representing 24% upside. We reiterate our BUY rating on the shares of KBC. The key downside risk, in our view, is slower than expected land deliveries given the prolonged procedural process for key projects and the global economic uncertainties which may impact FDI.

1H 2022 net income did not deliver as expected. Instead the company reported a loss of -149 bn VND, due to a lower than expected day rate and utilization rate of JU rigs. However, we still expect a positive improvement from the 2021 situation, and this improving trend should continue into 2H 2022.

The regional drilling market is warming up quickly since our last update. Large demand from Saudi Aramco has brought about a higher regional day rate and utilization rate, especially when we look into contracts set to start in 2023F.

Revised 1Y TP of VND 23,800/share (from VND 29,500/share) based on combination of DCF and P/B methods, with a lower 2022F forecast and Block B timeline pushed to 2024F. We reiterate our Market Perform rating for the stock. The stock is trading at P/B 2023F of 0.9x and 2023F P/E forward of 21x.

MWG posted weaker-than-expected 2Q22 results, with net income declining by 6.8% YoY due to slower-than-expected growth in the ICT & CE segment, coupled with one-off expenses arising from the closure of non-performing grocery stores. We hence reduce our 2022 earnings estimates by 14% to VND 5.48 tn (+12% YoY, lower than company guidance of VND 6.35 tn). With such a forecast, 2H22 earnings growth may still be higher than that of 1H22 (+24% YoY in 2H22 vs flat growth in 1H22), owing to the low base nature of 2H21. After store layout changes, we expect BHX monthly revenue per store to be maintained at VND 1.3 bn in 2H22 (vs. VND 900 mn in 1Q22 and VND 1.1 bn in 2Q22), hence improving the profit margin. We believe that profitability of BHX will be crucial bottom line growth driver for MWG from 2023, while the earnings growth of the ICT & CE segment will likely slow down due to high inflation and current high market share (>50% for mobile phones and >45% for consumer electronics). We project 2023 net income at VND 7.19 tn (+31% YoY).

We derive a new SOTP-based target price for MWG of VND 87,800 (from VND 99,000) after factoring in the stock dividends. With an upside potential of 32% from the current share price, we maintain our BUY recommendation.

We reiterate our Outperform rating on the shares of CTG, despite lowering our target price to VND 35,300 per share (from VND 39,700), as we cut our target P/B to 1.6x (vs. 1.8x) resultant of the rising interest rate environment. Despite limited space to issue additional credit in 2Q22, CTG was able to maximize its paltry SBV credit allocation to achieve stellar results. Earnings grew +107% YoY on the back of moderate TOI expansion, improved CIR, and lower provisioning. PBT during 1H22 was VND 11.6 tn (+7% YoY), equivalent to 51% of SSI Research's earnings forecast. However, balance sheet quality underperformed, as both Group 2 loans and other NPLs rose to 1.25% and 1.35% (vs. 1.1% and 1.25% at the end of 1Q22), respectively, intimating that loss provisions could weigh on CTG’s earnings going forward.

Investment summary: We maintain our Outperform rating on the shares MSB. However, we are lowering our 1Y TP to VND 23,000 (from VND 28,400). Our reduced TP reflects: (1) excluding the FCCOM divestment in our forecast; and (2) the reduction of our target P/B to 1.3x (from 1.5x), reflecting the bank’s relatively high exposure to real estate developers. In short-term, we hold a positive view for MSB with strong PBT growth in 2H22 from low base level (+48% YoY), 30% stock dividend in 2H22, and a potential credit extension. During 1H22, MSB posted a pretax profit of VND 3.3 tn (+6.9% YoY), despite declining -6.6% YoY in 2Q22 to VND 1.8 tn. Excluding the one-off bancassurance fees in 2Q21, core profit grew 395% YoY during 2Q22. NII growth jumped +39.5% YoY as credit growth was robust at +8.5% YTD, whilst earnings from FX and securities trading activities were strong. Asset quality improvement exceeded our expectation (NPLs dropped 29 bps to 1.5%), causing a credit provision reversal of VND 115 bn in 2Q22. However, unfavorable results of foreclosed assets liquidation somewhat offset MSB’s earnings during 1H22.

BID delivered a solid set of results in 2Q 2022, with PBT exceeding our expectations and achieving VND 6.6 tn (+41% YoY). Strong credit expansion, a robust NIM recovery, and a lower provisioning more than offset the decline in fee income and writebacks, allowing BID to enjoy robust growth for the period.

We are bullish on BID’s short- and medium-term outlook, as we expect the bank to post over 80% YoY PBT growth in 2H 2022, and a solid +24% PBT growth for 2023. However, we are concerned that long-term growth could be constrained by BID’s limited capitalization.

We maintain our Market Perform rating for the shares of BID, although we increase our 1Y TP to VND 44,180/share (from VND 41,200/share). The target price change reflects the increase in our 2022 and 2023 earnings by 2.8% and 8.5%, respectively, and valuation rollover impact to mid-2023.

Investment highlights: Following the SAB 2Q22 analyst call, we are increasing our 1Y target price for the shares of SAB to VND 213,000/share (from VND 188,000) – representing 18.2% upside. We are also reiterating our OUTPERFORM rating on the shares. In 2Q22, SAB recorded impressive net sales and net profit of VND 9 tn (+25% YoY) and VND 1.8 tn (+67% YoY), respectively. ASP hikes, a better product mix, and improved production efficiency translated into SAB’s highest ever quarterly net profit expansion. Management continues to focus on the mainstream segment, which resulted in market share gains through 1H22. In light of the encouraging 2Q22 results in 2Q22, we revise up our estimates for SAB. For 2022, we expect net sales and net income to reach VND 33.3 tn (+26.2% YoY) and VND 5.3 tn (+35.4% YoY), respectively, which are 4% and 13% higher than our previous forecasts. In 2023, we expect net sales and net income to reach VND 38.8 tn (+16.5% YoY) and VND 5.95 tn (+12% YoY), respectively.

MBB achieved VND 6 tn (+76% YoY) in pretax profit during 2Q 2022 driven by NIM expansion, robust interest income, and lower provisions. Fee income, however underperformed both for brokerage and insurance activities. As for asset quality, other than rising Group 2 loans at MCredit which need to be monitored, ratios in general remained solid. Despite concerns over MBB exposure to construction and real estate & corporate bonds (17% of total credit), we expect that it should be manageable given the solid collateral backing. Pretax profit in 2022 and 2023 is projected to achieve VND 22.3 tn (+35% YoY) and VND 26.6 tn (+19% YoY), respectively. There is some optionality to our figures, provided that MBB receives credit limit expansion beyond peer. Our 1Y TP for MBB is VND 34,400/share, implying upside of 27.6%. We reiterate our Outperform rating on the shares of MBB.

We attended PNJ Analyst meeting on July 21^st to update on the 2Q22 results and management view’s on the demand outlook going forward. Given inflationary pressure already affected some consumer discretionary sectors, PNJ management has not found significant impact on jewelry sales given June and July sales remained strong. In 2Q22, PNJ recorded net sales and net profit of VND 8.1 tn (+81.1% YoY) and VND 367 bn (+64.8% YoY), respectively. In 2022, we expect net sales and net profit to reach VND 29.1 tn (+49% YoY) and VND 1.7 tn (+66% YoY), respectively. This translates to 2H22 NPAT growth of 107% YoY since PNJ made losses in 3Q21. In 2023, we expect PNJ to post net sales and net profit of VND 33.4 tn (+14.5% YoY) and VND 2.0 tn (+15% YoY), respectively. Our updated 1Y target price for the shares of PNJ is VND 136,800/share (from VND 142,300/share), which is equivalent to a 20% upside. We lower our target P/E from 20x to 19x, reflecting the demand slowdown attributed to inflationary pressure which is expected to occur from 4Q22. We reiterate our OUTPERFORM rating for the shares of PNJ, given that 3Q22 is the strongest earnings growth quarter.

AST has turned a profit since May 2022. PBT is estimated to reach VND 10 bn in 2Q22, and YTD losses could be reduced to VND 10 bn. The FY2022 PBT target is set at VND 23.5 bn (vs a loss of VND 128.4 bn in 2021), which should be achievable. We estimate that AST’s PBT could reach VND 224 bn (+486% YoY and -15% vs 2019) in 2023, and VND 322 bn (+43% YoY and +22% vs 2019) in 2024 when the market fully recovers. We have an Outperform rating for the shares of AST with a 1Y TP of VND 69,000/share (based on a target 2023 P/E of 20x), implying 19% upside from the current market price, reflecting our positive view on AST strong turnaround along with the recovery of the aviation industry.

PAN posted strong performance in 2021, with consolidated net sales increasing 19.7% YoY to VND 10.0 tn, while net income and NPATMI jumped to VND 510 bn (+53% YoY) and VND 295 bn (+57% YoY), respectively. Such strong performance enabled PAN to achieve 99% and 122% of its respective 2021 revenue and profit targets. Subsidiaries which produce and sell staple goods posted resilient revenue growth, including: seeds (NSC; +18% YoY), shrimp, (FMC; +18% YoY), fish sauce (584 NT; +12% YoY), nuts & dried fruit (LAF; +2% YoY), and clam & pangasius (ABT; +7% YoY).  Meanwhile, confectionery revenue (BBC) declined -10% YoY, as confectionery consumption was hard hit by the pandemic. In terms of profitability, ABT, BBC, 584 NT and LAF gross profit margin improved due to: (1) strong rebound in pangasius & clam sales prices; and (2) higher sales from high margin products, such as cakes, premium fish sauce, and value-added nuts & dried fruits.