Company Report

We reiterate our OUTPERFORM rating on the shares of DCM, as we raise our 1Y target price to VND 40,400 (from VND 31,500) – representing an ROI of 10% (inclusive of a 4% dividend yield). Our improved outlook is predicated on DCM’s 3Q21 pretax profit of VND 393 bn (+257% YoY). This result which well exceeded SSI Research’s estimate of VND 300 bn, as here to stay elevated urea prices drove DCM’s outperformance. We are increasing our 2021 and 2022 pretax profit 53% and 44%, respectively, to VND 1,559 bn (+118% YoY) and VND 1,588 bn (+2% YoY). The current coal shortage coupled with China limiting production should push up urea prices further amid the higher import demand from India. Higher oil/gas prices are also supportive of higher urea prices, although this may negatively impact production costs at DCM. On any short-term weakness in urea pricing, we would accumulate the shares. 

We raise our 1Y TP on the shares of OCB by 16.2% to VND 32,300 (representing upside of 15.3%), and call for a Market Perform rating. OCB enjoyed robust earnings growth during 3Q 2021 of +71.1% YoY. 22% YoY (+10% YTD) credit growth, solid government bond trading gains of VND 463 bn (vs. VND 78 bn in 3Q 2020), and lower credit costs drove OCB’s bottom-line. What distinguished OCB from other banks during quarter was its credit metrics. While the rest of our coverage universe had experienced QoQ surge in past dues, OCB’s Group 2 loans dropped -51% and NPLs remained flat. However, restructured loans doubled to VND 2 tn (2% of total loans), which was in line with what we observed at many banks. We estimate that OCB will be able to post a robust PBT growth of +20% YoY (VND 5.3 tn) in 2021 before retreating to +16.5% YoY (VND 6.2 tn) in 2022. Downside risk: Higher-than-expected rise in government bond yields, which could impede trading gains; and higher than expected NPL formation.Upside surprise: Higher-than-expected pricing of the 70 mn share issuance; and higher-than-expected profitability of the government bond trading activities. 

VCB’s 3Q21 results were better-than-expected, with PBT reaching VND5.7tn (+15% YoY). Solid credit growth (+11.6% YTD, or +19.4% YoY) and a NIM of 3.15% (-35bps QoQ, but +14 bps YoY) buoyed results. Despite the scale of the support package, the pace of QoQ NIM contraction at VCB was on par with other bank results. In 4Q21, we expect the NIM will trend lower still, as the bank continues to maintain low yields for customer support without much room for improvement on the funding front. Nevertheless, we modestly increase our 2021E PBT by 3% to VND25tn (+8.6% YoY). Rolling forward our valuation basis to 2022E (from average 2021-22E) and applying an unchanged 3.0x PBR, we lift our 12-month target price for the shares of VCB to VND117,000/share (from VND111,500 /share), implying 20% upside potential. Despite our more sanguine outlook on VCB’s medium and long-term prospects, we believe earnings growth over the next couple of quarters could disappoint - impeding near-term performance of the shares. We maintain our Market Perform rating, and prefer to see continued execution on earnings delivery before getting more constructive on the shares. 

We are upgrading VNM from Market Perform to Outperform, as we raise our target price to VND 106,000/share (from VND 103,000/share) based on a blended DCF and 21x 2022E PER valuation methodology (previously 21x avg 2021-22E PER) - implying 17% upside potential. Our positive outlook on VNM reflects a return to growth - Q3 sales (+3.7% YoY) and parent-company sales +4.5% YoY, after three consecutive quarters of contraction. Notably, according to management, sales growth accelerated to above +20% YoY in October. In addition, VNM expects Q4 sales growth in the range of 10%-15% YoY, as last year’s result was impacted by heavy floods in the central region. Downside risk: Lower than expected sales/higher than expected raw material prices.

We maintain our Market Perform rating for the shares of BID, despite the increase in our 12-month TP to VND50,000 (from VND48,000). 3Q21 results exceeded expectations from a credit growth, NIM sustainability (at 2.97%), and bad debt perspective. The bank wrote off VND5.4tn in bad debt during 3Q21, on top of providing an additional VND7.5tn against problem loans. This caused PBT to inch lower by 1% YoY to VND2.7tn, although asset quality metrics have clearly stabilized. Through 9M21, pretax profit for BID reached VND10.7tn (+52% YoY), completing 79% of our in-house full-year estimate. As restructured loans have more than doubled in 3Q21, we still see some pressure on credit costs going forward which likely will impact the bottom line. We maintain our PBT estimates for 2021E and 2022E at VND13.5tn (+50% YoY), and VND15.5tn (+14% YoY), respectively. An upside risk to our call would be a better-than-expected recovery in restructured loans, as well as any firm progress in its new share issuance of 8.5% pre-money charter capital. Improved capital would enable the bank better growth potential. We also expect that the stock dividend will be finalized by December. Downside risks include macroeconomic weakness.

SAB reported 3Q21 net sales and net profit of VND 4.3 tn (-47% YoY) and VND 472 bn (-68% YoY), respectively, the lowest level since 2014. Depressed results were due to the prolonged lockdown restrictions which caused distribution to be grounded for the majority of Q3. The company, however, is guiding for an improved outlook and is confident of GPM expansion in 2022. Positive forward-looking factors include a rebound in production volumes, a marginal increase in ASPs, and effective hedging of raw materials. After the recent share price run up of +9%, we downgrade our rating on the shares of SAB from BUY to OUTPERFORM, with an unchanged 1Y target price of VND 190,000/share (+10% upside potential). 

Despite the credit contraction (- 1.5% QoQ) during 3Q 2021 due to the pandemic, income streams at ACB remained robust (+27% YoY). This allowed ACB to accrue bonuses in advance for 4Q 2021, and provide an additional VND 820 bn (+406% YoY) against bad debt while maintaining relatively flat bottom-line YoY at VND 2.6 tn. Throughout 9M 2021, PBT was VND 9 tn (+40% YoY) - completing 85% of the AGM plan and 75% of our in-house estimate. With its prudent stance toward risk management, ACB’s credit cost are likely to remain elevated for the remainder of 2021 and 2022. However, we believe that the bank could be able to maintain its NIM at 4%, given gradual improvement in CASA, and the room to optimize liquidity ratios. Accordingly, PBT for 2021 and 2022 are projected at VND 11.8 tn (+23% YoY) and VND 14.7 tn (+24% YoY), respectively. Our rating for the shares of ACB is BUY, and our 1Y target price is VND 41,750/share.

VHC reported strong growth for 3Q21, with net sales of VND 2.2 tn (+24% YoY) and NPATMI of VND 255 bn (+46% YoY), respectively. Cumulatively, the company accomplished 74% and 93% of annual targets for net sales and PAT. VHC was the most profitable fishery exporter out of Q3 lockdown, benefited from strong demand from the US market coupled with a higher ASP. The company has been running at between 85%-90% capacity while implementing “three-on-the-spot” work-live on-site production and keeping administrative expense stable. As VHC has proven its position as a market leader from time to time, we believe that the shares deserve their re-rating over the past two years. We raise our target P/E for the key segments of VHC – 13x for wellness segment and SGC, and 10x for pangasius segment (previously 10x and 7.5x, respectively) and use mid-2022 TTM EPS as our base. Our new price target is VND 70.2k/share (up from VND 47k/share), implying an upside of 13.4% and a total ROI of 16.6%. We upgrade our rating for the shares from Market Perform to Outperform.

Viconship announced impressive prelim 3Q 2021 PBT results of VND 149.3 bn (+73.4% YoY), supported by superior volume growth relative to peers and enhanced profit margins post-management reshuffle. We observe marked improvement in company profit margins in 2Q21 and 3Q21. As a result, we increase our PBT forecasts to VND 474 bn (+41% YoY) and VND 604 bn (+27% YoY) in 2021 and 2022, respectively. We reiterate BUY rating on the shares of VSC on the back of higher earnings outlook and the potential strategy change into a growth company after several years of stable earnings, leading to our re-rating to 2022F target P/E ratio of 12x. Pre-money 1-year target price is VND 80,800/share (+26% upside), while post-money target price is VND 46,500/share (after 1:1 rights issuance in the coming time). VSC offers 1:1 rights issuance to all shareholders (ex-rights date on Oct 25), and short-term selling pressure could increase with some large shareholders registering to sell 1.5 mn shares over the near-term. Over the longer term, increased risks come from the new project pipeline which will require large capex with profit uncertanties. However, this also presents Viconship an opportunity to become more of a growth company.

With coal prices rising at a more accelerated pace than that of oil/gas, gas-based urea producers in Vietnam like DPM are key beneficiaries of this trend as they do not bear high coal prices while taking advantage high urea sales prices. NPK sales volume also have improved significantly over 2Q21. Combined with one-off items of VND 329 bn (recognized in 2Q21 and 3Q21), we increase our 2021 pretax profit to VND 2.099 tn (+148% YoY), while 2H21 pretax profit growth is estimated to increase 200% YoY. We believe that 2022 core earnings could increase another 9% YoY, but without the one-off income as prior, total pretax profit is estimated at VND 1.929 tn (-8% YoY). As the company benefits from the recent urea price uptrend, we increase target multiples and derive a new target price at VND 42,200 (from VND 32,000). With an ROI of 5% (dividend yield of 6%), we call for an MARKET PERFORM rating for DPM.  In the short term, DPM share price momentum may still be strong on the back of solid 2H21 earnings. 

For 2021, we lower our gas volume estimate from 8.15 bcm to 7.75 bcm to reflect the impact of the strict Q3 lockdown on dry gas consumption by industrial and power plant users. Any recovery in Q4 will be gradual in nature.  Nevertheless, higher oil prices likely will offset this volume cut. Our 2021 revenue and NPAT forecast of VND 73.7 tn (+19.5% YoY) and VND 8.8 tn (+8.6% YoY), respectively, remains largely unchanged from our previous estimates. For 2022, we are looking top and bottom line growth of 23.6% and 25.2% YoY, respectively, driven by a strong gas volume recovery (25% YoY to 9.6 bcm, about 3% lower compared to post-Covid-19 levels) on the back of more robust business activity.  On our higher 2022E EPS, we raise our 12-month TP price for GAS to VND118,500/share (from VND101,500), based on an equal blend of a target PER of 19x and EV/EBITDA of 11x, and 2022E earnings. We reaffirm our Outperform call on GAS. Downside risks: weaker-than-expected dry-gas volumes and lower-than-expected fuel-oil prices.

We are upgrading the shares of DCM to OUTPERFORM from MARKET PERFORM, as we increase our one-year target price 26% to VND 31,500. As gas-based urea producers are well positioned to benefit from the rise in coal prices and the coal shortage in China associated with decarbonization target, heavily flood and coal mine accidents, we are also increasing our 2021 and 2022 earnings estimates by 0.5% and 7%, respectively. As DCM is a gas-based urea producer its profit margin will benefit when coal prices rise at a more accelerated pace than that of oil/gas, as DCM does not bear the increase in coal price - enjoying the benefit of higher urea sales prices. Also, as DCM’s net cash balance continues to improve (net cash per share of VND 6,921 at 2Q21 vs VND 1,645 at 2Q20), we expect that DCM will increase its 2021-2022 dividend to 12% on par value (vs 2020 dividend of 8% on par value), equivalent to 2021-2022 payout ratio of 82%-76% (vs 2020 payout ratio of 79%). The urea plant of DCM will be fully depreciated around 2023 year end, raising net income and hence dividend payment significantly afterwards.

Investment summary: We are upgrading the shares of FPT from Market Perform to BUY, as we roll over our valuation to reflect 2022 estimates. This pushes our 1Y TP for the shares to VND 112,500 (vs. previous TP of VND 93,000) - implying a 23% ROI. Our upgrade of FPT’s shares is supported by strong growth in the Technology segment. We estimate YoY PBT growth of +26.9% in 2022 within the Technology segment, driven by both global and domestic IT services, and exceeding the global IT peer average of +15% (Bloomberg).  Further, despite a forecasted FY22 earnings growth rate of 22% YoY (global IT peers of 15% YoY), FPT (FY22E P/E 17.5x) trades at a 1.7x P/E multiple discount to global IT peers – further supporting our upgrade.