Company Report

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.

Despite the 4Q 2021 earnings underperformance, we are maintaining our Outperform rating on the shares of VPB with our 1Y TP of VND 44,500. With the upcoming private placement and gradual economic recovery, we believe that bank fundamentals will undergo a sea change in 2022. Pretax profit for 2022 is projected at VND 18.9 tn (+30% YoY), of which VND 16.7 tn (+18.9% YoY) is expected to be attributed to the parent bank with the remainder from FeCredit. Despite the expected 300%+ YoY PBT growth at FeCredit in 2022, the subsidiary’s returns will lower than pre-Covid levels (of over VND 4 tn). Our model has not been adjusted for the bank’s investment in a brokerage company, ASC, and its potential 2022 profit. While a PBT of VND 630 bn may be feasible considering capital of VND 8.7 tn, we do not reflect such in our model and will only do so if management provides clarity on their long-term vision for this investment. For the time being, we assume VND 8.7 tn for bank lending activities at an average asset yield of 8.2%.

We attended the MWG online analyst meeting, where management provided 2022 guidance of a 30% YoY increase in net income. As a result, we revise our 2022E revenue and net income to VND141.6tn (+15% YoY) and VND6.9tn (+40% YoY, -3.4% lower than our previous estimate). While we lower our SOTP-based 12-month target price to VND174,000 (from VND176,000), we are reiterating our BUY rating on the shares of MWG. The company did decide not to open BHX stores in 2022 and has instead opted to focus on improving the revenue of existing stores with the addition of SKUs and improving the quality of fresh food. Coupled with cost optimization measures, the grocery segment should break even sometime in late 2022. With respect to DMX and TGDD, a recovery in household income and market share gains should improve growth prospects. Downside risks: Possibility of store closures due to lockdown measures; the post-pandemic recovery in household income taking longer than expected.

We are initiating coverage on the shares of pre-IPO (February 2022) Nova Consumer Group Joint Stock Company (NCG) with our 1Y target price for the shares of NCG is VND 53,200/share, implying a 22% upside relative to the IPO starting price. NCG is a leader in the animal health, feed, and farm market segment, having long-established customer relationships with the ability to create a full “3F” supply chain. It also has the advantage of being a part of the Nova Group ecosystem (including Novaland, Nova Consumer Services and six other members), which should allow potential future synergies and sharing resources. There is also the potential for strong growth in the FMCG business, from both organic growth and M&A perspective (on-going transactions:  Anco Family Food, a well-established beverage company, and a nutrition company). From 2022, NCG is widely anticipated to consolidate the consumer business, including Anco Family Food (sausage), milk, energy drink and coffee. Excluding one-off items in 2021, NCG should post strong core profit growth of 109% YoY in 2022. Through 2021-2026, however, we estimate that NCG will continue to post a net profit CAGR of 26.8%.

We are upgrading our rating on BMP from Market Perform to Outperform, with a higher 1-year target price of VND 67,000/share (previously VND 52,700/share). Our upgrade reflects an improved earnings outlook for 2022, which we revise up by 27% to VND 439 bn (+105% YoY) on the back a 15% recovery in sales volume and a 9% increase in ASP. The company’s business recovered in 4Q21 with net profit arriving at VND 114 bn, significantly recovering from the VND 26 bn loss in 3Q21 driven by higher selling price and a correction in input prices between December and January.

4Q 2021 results exhibited a recovery, with rebounding credit growth and fee income of 7.6% (or +16.2% YTD) and +17.5% QoQ (or +84.1% YoY), respectively. As such, we are reiterating our Outperform rating on the shares of ACB, however, we finetune of our 1Y TP to VND 42,100 (from VND 41,750). Further, while Covid-impacted loans rose 27% QoQ to VND 17 tn (~ 4.7% of total loans), ACB has already fully provided for restructured loans in 2021 – leaving a wide berth for 2022 earnings growth.  For 2022, we expect ACB to achieve a VND 14.8 tn in pretax profit (+24% YoY), fueled by credit and deposit growth of 16% and 7%, respectively, NIM expansion of 14 bps, and a lower credit cost of 0.75%. Over the longer-term, ACB’s aggressive expansion in digitalization, new strategic client segments, and expansion to cities in northern Vietnam should also bear fruit.

We are upgrading our rating on the shares of GAS from Market Perform to Outperform, reflecting our increased 12-month target price of 134,000/share (from VND 130,000/share) – implying 17% upside potential (based on a target P/E of 22x and DCF approach). Our optimism stems from (1) increasing our 2022E Brent oil price assumption to USD80/bbl (from previous assumption of USD75/bbl) and (2) a dry-gas volume recovery of 18.5% YoY to 8.5bcm, which is expected to be driven by strong demand recovery from power plants and increased gas volume sold to industrial users. As a result, we estimate that GAS’ parent company will report revenue of VND90tn (+17.5% YoY) and NPAT of VND11.6tn (+35.3% YoY) for 2022E.

We maintain our Market Perform rating on the shares of BVH and increase slightly our 1Y TP to VND 71,900/share (from VND 71,000). 3Q 2021 results were positive with improved underwriting profit. This was driven by an unprecedented low claim ratio given the higher level of non-reported incidents (lack of filing formal claims during the lockdown). BVH’s performance was in line with sector trends, as direct written premium decreased -4% YoY (to VND 9.3 tn) and PBT surged +85.4% YoY (to VND 543 bn). The claims and combined ratio improved to 26% and 102% (vs. 53% and 105% during 3Q 2020), respectively. We do expect a pullback in the shares for 4Q 2021 profit when the claim ratio returns to normal, and mathematical reserve expenses rise in-line with a recovery in NBP. As we anticipate a growth recovery in 2022, with pretax profit projected at VND 2.5 tn (+21.9% YoY), we would be buyers post-4Q 2021 result. Downside risk: A larger-than-expected decline in interest rates and VN government bond yields.Upside surprise: A stronger-than-expected uptick in VN government bond yields; SCIC divestment from BVH could create short-term positive sentiment.