Company Report

Given the strength of the recent increase in yellow phosphorus prices and consequent improvement in GPM, we are raising our earnings forecast for DGC by 32% and 49% for 2021 and 2022, respectively, to VND 1,758 bn (+86% YoY) and VND 2,593 bn (+48% YoY). As such, we expect 2H21 net income to increase by 136% YoY, much stronger than 33% YoY in 1H21. We raise target P/E from 12x to 13x thanks to a much higher earnings forecast for both 2021 and 2022. Our price target now increases 62% to VND 177,000 per share (from VND 109,000), and we upgrade the shares of DGC to BUY from OUTPERFORM – representing and ROI of 26% (including 1% dividend yield). The recent rally in yellow phosphorus prices is explained by Yunnan (the key phosphate production region in China) attempting to cut yellow phosphorus production between September – December 2021. For 2022, we expect the prices to continue to rise, as the shortage of semiconductors prompt producers to add capacity - increasing the demand for yellow phosphorus and downstream products. 

We initiate coverage on the shares of TNH with a BUY recommendation, with a 1-year target price of VND 51,800/share. This equates to a total return of 26% from the price as of Sep 1st, 2021. TNH currently possesses the following advantages: (1) a fully-owned favorable location, acquired with low initial investment & run under tight budget control, (2) targeted for capacity expansion and the opening of specialized medical services, (3) the beneficiary of a high growth Vietnamese healthcare market over the next several decades. TNH is one of few listed hospitals in Vietnam, with a good profitable operation and a forward P/E trading at 29% discount compared to regional peers. We expect TNH gross revenue to reach VND 407 bn (+21% YoY) in 2021 and VND 471 bn (+16% YoY) in 2022. For net profit, we expect growth to VND 112 bn (+3% YoY) in 2021 and VND 121 bn (+9% YoY) in 2022. For the next 5 years onwards, we expect TNH gross revenue and net profit CAGR at 22% and 26% respectively. Our forecast has factored in the current pandemic and lockdown impact in relation to the frequency of hospital visits, possible reopening scenario in 2022, and also the company’s upcoming expansion plan.

2Q21 PBT increased strongly by +188% YoY to VND 1.97 tn, thanks to stellar growth of TOI (+87.3% YoY), while CIR decreased & provision expenses also decreased by -41% YoY. 1H 2021 PBT delivered VND 3.12 tn (+220% YoY), fulfilling 95% of the full year plan of VND 3.28 tn.We increase our 2021F PBT forecast by 6% to VND 4.23 tn (+67.8% YoY), while we reduce our 2022F PBT forecast by -9.3% to VND 4.43 tn (+4.6% YoY). Our forecast adjustment is influenced by our downward revision of NIM for both years, given prolonged low lending interest rates. MSB booked about VND 1.6 tn of upfront fee into income in 2Q2021, and we assume that MSB will continue to book VND 400 bn of the bancassurance upfront fee into fee income in 2022F. Provision expenses are revised up +5.8% to VND 1.1 tn (+6.7% YoY) in 2021F. We reduce our 1Y share price target for MSB to VND 29,600 (down from VND 31,400), using an average BVPS of 2021F and 2022F and unchanged P/B ratio of 1.5x. As this implies an upside of 2.4%, we subsequently maintain our Market Perform rating for MSB.

HAH has approved an aggressive expansion plan of their containership fleet between 2021 – 2024, which will increase its fleet capacity 55%. This is a noticeable shift in their strategy, which will emphasize shipping segment expansion to take advantage of increasingly attractive market conditions. Having said that, the success of this plan is a big question for investors. Over the near-term, the 2022-23 outlook is bright, as HAH managed to lock in high rates on time charter contracts. Despite the resurgence of COVID-19 and its huge impact on the Vietnamese economy, HAH has found ways to navigate the storm by sending its fleet to the international market. In light of this, we increase our NPATMI estimates to VND 330 bn (+139% YoY) for 2021 and VND 566 bn (+71% YoY) for 2022, which is 18% and 67% higher than our previous estimates, respectively. We reiterate our BUY rating on the shares of HAH, yet increase our 1Y target price 40% to VND 78,400/share. We base our call on a lower target P/E of 8x to reflect the currently unsustainable level of freight rates.

Given the resurgence of the COVID-19 pandemic in Vietnam during 3Q21, we lower our 2021E and 2022E earnings for GAS by 9% and 10%, respectively. Despite our earnings cuts, we are of the opinion that demand for dry gas will return next year, driven by a strong economic recovery and higher gas-fired electricity mobilization. Thus, we reaffirm our Outperform rating for GAS, with a new 12-month target price of VND101,500/share (previously VND105,000/share) based on an unchanged target P/E of 19x and EV/EBITDA of 11x on our 2022E earnings. Our target price implies 14.6% upside potential.  

Despite HT1’s encouraging 2Q21 business result, we are cutting our rating on the shares from Market Perform to Underperform with 1-year target price of VND 17,600/share, as the recent advance in share price seems to over-react to the potential impact of infrastructure investment on future bottom-line performance.  Further, we do anticipate that sales volume to significantly decline by over -40% YoY in 3Q21 due to the strict social distancing measures in southern Vietnam, which pushes us to lower our 2021 revenue and PBT forecast to VND 7.6 tn (-4.4% YoY) and VND 728 bn (-5.1% YoY), respectively.  However, as HT1 earnings are likely to post solid growth of 21% YoY in 2022 on the back of sales volume growth of 11% and falling interest expense, we suggest a re-enty post 3Q21 results when the shares have a more attractive price. 

We rate a rate a strong BUY for TRA shares with the target price of VND 101,000/share – representing 29% upside from the current price on August 20th. Key investment catalysts for TRA are: 1) recent progress in the development of new herbal medicines & health supplements, while benefits from stricter quality control in Vietnam’s health supplement market, (2) lower SG&A expenses on sales with improvements in revenue of new R&D products and more efficient sales strategy, (3) higher utilization on synthetic drug factory with product transfer from Daewoong Pharma in H2 2021. Also, the company’s sales from trading & cosigned goods are expected to grow significantly with new signed distribution agreements with JW, CKD & other supplement brands. We expect TRA total sales to reach VND 2.19 tn (+15% YoY) in 2021 and VND 2.54 (+16% YoY) in 2022. Net income is expected to reach VND 275 bn (+26%) in 2021 & VND 353 bn (+29%) in 2022. As earnings growth has now begun to return from 2021 after going flat during 2015 - 2020, with lesser competition and higher diversification in products, we believe that 29% upside in the shares of TRA is achievable – especially given where industry peers are trading.

Despite the positive revenue growth of 16% in 2Q21, BMP’s net profit fell by 73% YoY to VND42bn due to a sharp contraction in the gross margin, stemming from surging input costs. We believe the company’s business results will hit their lowest level ever in 3Q21, with the capacity utilization rate falling to between 20-50% during the July to September period, due to the social-distancing measures in place in Southern Vietnam. We lower our 2021E sales volume for BMP from 115k tons to 99 k tons (-10% YoY), and our gross margin from 18.2% to 14.0%, which leads to a 52% cut to our net income. Accordingly, we expect 2021E revenue and net profit at VND4.8tn (+3% YoY) and VND202bn (-61% YoY), respectively. Following our earnings cut, we downgrade our rating on the stock from MARKET PERFORM to UNDERPERFORM with a lower 12-month target price of VND51,700/share (previously VND55,000), based on an unchanged target PER of 11x now applied to our 2022E EPS (previously 2021E). We look for the share price to drop in the short-term, and then stabilize as we anticipate a recovery in business results from 4Q21. For 2022E, we expect the company’s results to recover with net profit rebounding to VND391bn (+ 94% YoY), on the back of 13% YoY growth in sales volume and a 5% correction in the plastic resin price. Upside risk: lower-than-expected input costs. 

We maintain a positive outlook on the shares of Gemadept. On the demand side, we expect strong growth for GMD volume in 2021 and 2022. On the supply side, however, Vietnamese production could face some challenges in 2H2021 given the resurgence of Covid-19 in the southern provinces. We believe that the company’s prospects are brighter in 2022, as the pandemic should be better controlled globally. We believe that Gemadept is a good proxy for the Vietnamese logistics industry due to its fully integrated nationwide network. We reiterate our 1Y TP of VND 56,200/share (which implies a 14.7% upside), and our OUTPERFORM rating on the shares of GMD. Our rating does not reflect the possible impact of a new potential floor price for port tariffs, nor the impact of the divestment of real estate/ rubber/ port projects which are positive catalysts for the shares of GMD.

We believe that SZC's gross profit margin can remain above 60% as a result of low compensation and clearance costs in Chau Duc IP. In addition, demand for leased land will increase due to the shift of production from China to Vietnam and the development of infrastructure in Ba Ria - Vung Tau, where leased land demand is expected to rise by 5- 8% YoY from 2021 to 2025. However, in the short term, Covid’s impact has reduced the number of new investors in 3Q2021. We lower our recommendation from BUY to MARKET PERFORM after the stock price has increased by 35.3% since July 2021, for which target price is 42,700 VND per share.

We maintain our MARKET PERFORM rating on the shares of MSN, despite raising our SOTP-based 12-month target price to VND153,000/share (from VND116,500/share). Our higher TP is based on (1) rolling forward our valuation basis from average 2021-22E to 2022E; (2) a re-rating for TCB’s valuation with our target P/E rising from 1.8x to 2x; and (3) our higher estimates for MML and VCM given their better-than-expected operating performance in 1H21. We also remove the 10% conglomerate discount from our SOTP valuation as we see initial synergies being achieved amongst members in the group, especially the consumer, retail and 3F businesses. Fundamentally, we believe that positive financial performance for MSN in 2021E and 2022E has largely been factored in the valuation. In 2022, we forecast MSN to continue the strong growth momentum in its NPAT of 67% YoY, as we expect continuous profit improvement at both VCM and MML, as well as a strong performance at Techcombank. This prompts us to raise our 2021-22E NPATMI by 11-27%. Over time, positive catalysts should include: (1) corporate actions, such as a stake sales (TCX, MHT, and MML [feed business]), a private placement at the group level, or the listing of TCX; and (2) improved performance within the retail and/or mining businesses. 

Given the recent resurgence of COVID-19, VCB has announced a preferential lending package to impacted customers starting from 15 July 2021. This should cause net interest income to decline to VND1.8tn for 2H21E. As a result, we reduce our 2021E PBT by 8% to VND26.4tn (+14.7% YoY). We also look for 2022E PBT to reach VND33.7tn (+27% YoY), assuming credit and deposit growth of 14% YoY and 10.9% YoY, respectively, along with a NIM of 3.05%. We assume that VCB will issue a 6.5% pre-money stake during 2022. As a result, we trim our 12-month target price for the shares of VCB to VND113,500 (from VND114,200), which implies potential upside of 14%. We reiterate our Outperform rating on the shares of VCB.  

VHC held an analyst meeting on Aug 9th to discuss Q2’21 financial results and production status during the 4th Covid-resurgence in Vietnam. In 2Q’21, VHC recorded impressive Q2’21 results, wherein net sales and net profit grew by 41.3% YoY and 16.3% YoY respectively, bouncing off a low base in Q2’20. This was mostly thanks to the reopening of the US economy (60% of total VHC pangasius exports). With the current disruption experienced during this instance of viral resurgence, management is not very positive about 2H21. While the problem lies neither on the demand nor the supply side (production applying the “3 at the spot” work/live on-site practices in place), disruption in the transportation of goods due to container shortages is causing difficulty when it comes to managing costs, as many orders are stuck at seaports. We updated our estimates to reflect uncertainties in 2H21 (cutting NPAT estimates by 4% and 6% in 2021 and 2022 respectively). However, we still expect a good recovery from VHC in 2022, assuming that global shipping costs will wind down (-15% YoY and 2.9% of sales). We also rolled forward our 2022E EPS to derive an updated target price of VND 47,000/share (+12% upside). As such, our rating for the stock is MARKET PERFORM.