Company Report

HT1 recorded a before-tax loss of -51 bn VND in 3Q21, the first time since 2014. Revenue dropped by -48% YoY, as sales volume fell by 46% YoY due to the lockdown in 19 provinces in southern Vietnam from Jul to Sept. In addition, the increase in cost of raw materials, also had a negative impact on the company’s margin. Cumulatively, HT1 revenue and PBT posted at VND 5.04 tn (-12.4%YoY) and 375 bn (-35.9% YoY), respectively accomplishing 62% and 46% of annual guidance. Although we had previously expected and already priced into our estimates a tumble in 3Q21 earnings, we still revise our 2021 PBT forecast from 728 bn to VND 481 bn (-37% YoY), due to the high coal price.   However, we expect that business results will recover in 2022, with revenue and PBT increasing by 13% and 48% to VND 8 tn and 710 bn respectively on the back of the recovery in both sale volume and gross margin. At the current price, HT1 is trading at 2021 and 2022 P/E forwards of 28x and 19x, which is much higher than the historical 5-year average of 10x. We believe that the share price has more than reflected the potential earnings recovery in 2022. As a result, we maintain our Underperform rating for the stock, with a 1-year target of VND 17,500/share based on P/E and EV/EBITDA targets of 13x and 5.5x respectively. 

VPB’s 3Q 2021 PBT took a double hit from a sudden drop in NIM and weaker credit quality. While the latter had been expected, as VPB’s main client segments were heavily impacted by Covid-19, the NIM fell short of expectations due to the combination of a +141% surge in restructured loans, a loan rate cut, and loan mix evolving toward lower-risk loans. Asset quality remains our primary concern, as it should take more time for the mass client segment to fully recover and return to their normal repayment status, in our view. However, we believe that with the gradual improvement in funding costs and NIM rebound over time, the bank will have greater capacity to withstand higher provisioning. Accordingly, pretax profit for 2021 and 2022 are projected to be VND 15.9 tn (+22% YoY) an VND 19.6 tn (+ 23% YoY), respectively. We increase our target PB ratio for the parent bank to 1.7x (from 1.6x) but decrease our target PB ratio for FeCredit to 2x (from 2.2x) reflecting the different recovery pace and prospect between the two entities. Rolling our valuation basis to year-end 2022, we increase our 1Y TP to VND 44,530/share (from VND 39,300), representing potential upside of 13.6%. We call for Market Perform rating on VPB’s shares.

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We maintain our Market Perform rating on the shares of MSN, despite raising our SOTP-based 12-month target price by 12% to VND 172,000/share. Our higher TP reflects subsidiary-related factors, including the: (1) re-rating of WCM due to improved profitability; (2) higher estimates for MML (meat business) and MCH due to improved gross and EBITDA margins; and (3) spin-off and full divestment of its feed business. In 2022, we forecast MSN to maintain strong growth momentum in core NPAT of 65% YoY, as we expect profitability to continue to improve at WCM, MML, and Techcombank. Positive catalysts over time: (1) corporate actions, such as sales of stake in subsidiary/ies or a private placement at the group level or the listing of TCX; and (2) improved performance within its various business units, especially retail and/or mining businesses. 

3Q21 PLX revenue increased 26% due to an increase in petroleum prices; however, PBT was just VND 112 bn – declining -90%YoY as nearly all company segments (especially petroleum, transport, and petrochemicals) were negatively impacted by lockdown measures. However, we expect that PLX is poised to recover in 4Q21 due to both pent-up demand and the increase in oil prices. Our 2021 PBT forecast is VND 4.2 tn (+200% YoY), assuming that domestic petroleum sales volume drops -7% YoY to 8.4 mn m3/tons. For 2022, we expect revenue and PBT to further increase 10% and 30% YoY, respectively, to VND 177 tn and 5.4 tn on the back of 9% growth in petroleum sales volume and the recovery in other segments. We reiterate our Outperform rating on the shares of PLX, as well as our target price of VND 67,000/share.

FMC reported net sales of VND 1.6 tn (+0.3% YoY), and NPATMI of VND 56 bn (-19.6% YoY). NPATMI declined due to a combination of high shipping costs (+148% YoY) and the spin-off off its An San factory into a new subsidiary, Khang An Foods (KAF). As such, FMC completed 81% and 72% of its annual targets for net sales and PBT respectively. The company has reserved adequate materials for 4Q21 production and is unaffected by surging material prices, benefiting from improved ASP. FMC management believes that the company remains on track to meet (and even exceed) annual targets. The proposed private placement to C.P. Vietnam (11.11% of outstanding shares at VND 50k/share) will increase its stake in CP to 24.9% post-deal, and raise VND 327 bn for FMC’s capacity expansion. The shares of FMC have re-rated due to the company’s stable profit, which is quite rare in the volatile fishery industry. Our new target price for the shares of FMC is VND 61k/share (up from VND 41k/share), and implies upside of 22.7%. We reiterate our OUTPERFORM rating.

Credit quality remained a challenge for CTG during 3Q 2021, with provisions remaining quite elevated. As a result, we are lowering our: (a) PBT forecast for 2021 and 2022 by 3% (to VND 17.7 tn, +3.6% YoY) and 14% (VND 21.6 tn, +22% YoY), respectively; (b) Target price on the shares to VND 39,700 (from VND 42,300) – implying 23% upside; and (c) Rating to OUTPERFORM from BUY. All three changes applied to the shares of CTG reflect our belief that the credit quality and restructured loans might be a challenge to profitability for CTG over the next couple of quarters. Downside risk: Higher-than-expected credit costs and NPL-formation. Upside potential: The divestment from Vietinbank Leasing and completion of the exclusive bancassurance contract with Manulife may support the bank’s profitability and its capital buffer.

As we roll forward our valuation basis to 2022, we increase our 1Y target price to VND 49,000/share (from the current VND 46,400/share), intimating just 14% potential upside. With such limited potential upside, we are lowering our rating on the shares of TPB from Buy to Market Perform, as the shares have risen 20% since our most recent upgrade in August. Although we remain positively pre-disposed to the shares of TPB, the shares have already priced-in the recent private placement and above peer earnings momentum. Pretax profit for 2021 and 2022 are projected at VND 5.8 tn (+33% YoY) and VND 7.2 tn (+23% YoY), respectively. Upside surprise: Stronger capitalization after the recent private placement (CAR improved to 14.63%), should be supportive for the bank to gain an even higher credit quota. Downside risk: Higher-than-expected NPL formation.

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).