Company Report

PVD’s consolidated revenue declined -67% YoY in 1Q 2021. NPATMI was a negative -VND 104 bn compared to a +VND 24 bn profit in 1Q 2020, due to lower JU rigs utilization rate and lower day rate. PVD has VND 107 bn receivables from Kris Energy (KE) Cambodia, whose parent company (KE Singapore) just announced filing for liquidation. KE Cambodia remains solvent at the moment, but there are stills some risk of some provision booking in 2021. As our valuation for PVD rests on DCF valuation, it is not much impacted by this possible provision. We maintain our target price of VND 23,000/share and Market perform rating on the shares of PVD.  PVD trades at a 2021F EV/EBITDA and P/B ratio of 0.56x and 0.67x, respectively.

PLX delivered positive earnings in 1Q21 at 1.013 tn VND, a difference between night and day compared to the loss of -1.702 tn VND in 1Q20. Such impressive recovery is mainly driven by the recovery in the petroleum segment. Despite the emergence of Covid-19 in Jan, PLX domestic sales volume growth maintained a positive level of 4.7% YoY in 1Q21, and even accelerated in the first half of the second quarter as the government is tightening control over petroleum smuggling. Given a better than expected sales volume in the second quarter, we fine-tune our 2021 PBT estimate from VND 5.07 tn to VND 5.15 tn (+268% YoY). At the current price, PLX is trading at 2021 and 2022 P/E forwards of 19.2x and 16.9x respectively. We maintain our Outperform rating for the stock, with an unchanged 1-year target price of VND 67,000 based on a 1-year target P/E of 22x in accordance with regional peers. Besides the earnings recovery, the divestment from non-core businesses and the sales of treasury shares can be supportive catalysts for the stock price in the coming time. 

Improved underwriting profitability. It was well telegraphed that BVH would achieve a substantial profit increase (+292% YoY) for 1Q 2021, achieving VND 590 bn. A great windfall came in the form of a huge provision made on equity investments for same period last year (VND 340 bn). There were, however, improvements in BVH core business. Life insurance premiums grew +13.3% YoY, new business value margins soared to roughly 30%, and non-life insurance underwriting profitability jumped.  Earnings growth could recover from 2022. We believe that the downward trend in interest rates will reverse in 2H 2021. However, this will only impact BVH’s earnings during 2022, as the benchmark rate for mathematical reserves calculation would increase from 1H 2022. Accordingly, NPATMI for 2021 and 2022 are projected to be VND 1.5 tn (-2% YoY) and VND 1.9 tn (+27% YoY), respectively. Reiterate Outperform rating, with increased 1Y target price to VND 71,000/share (from VND 62,700) as we roll our valuation basis to mid-2022 and apply a target P/B ratio of 2.4x (10% lower than the historical average P/B of BVH since listing).

From our previous call in March 2021, HAX share price has increased 28%, given astounding 1Q21 earning results. Demand for Mercedes cars grow strong, aligned with the overall increase in Vietnamese automobile demand, and has been soaring high from the low point set from last year’s pandemic impact. Further, given the prolonged impact of global chip shortage to Mercedes car supply in Vietnam, auto dealers like HAX are gaining significant benefit in terms of higher price bargaining over customers and better margin per car, which could result in a big earnings surprise for FY21. As a result, we upgrade our target price for HAX to VND 40,500/share, which implies 43% upside and equal to a strong BUY rating. We expect HAX total sales and net profit in FY21 to reach VND 6.5 tn (+16% YoY) and VND 215 bn (+75% YoY), respectively. 

After recently attending the IMP AGM on the 22nd of April, we found that the growth driver for both IMP earnings and the share price has been lower in the short to medium term. The target of the EU-GMP approval process for the 4th factory has been seriously delayed to 2023, while the raw pharma material price is rising again amid the complex progress of the global pandemic situation, leading to our decision to lower previous earnings estimate for FY21 and FY22. Also, given that the IMP share price has risen 30% since our last call in January and has reached our previous target price, we decided to rerate IMP from BUY to UNDERPERFORM, lowering the target price to VND 69,000/share. This equates to a slight upside of 1%, plus a dividend yield of 2% from the current share price.

We recently attended MWG’s online analyst meeting and annual general meeting, where 2020 earnings distribution and ESOP was approved. At the meeting, management also discussed its 1Q21 financial results and provided updates on new developments, including the wholesale distribution business, a new product type (bicycles), and labor cost optimization. Although 1Q21 net income growth was modest (+18% YoY compared with Company guidance of 21% YoY), we believe that: 1) the expected gross profit margin expansion (from April 2021); 2) labor cost cutting measures for BHX (from July 2021); and (3) new store openings will enable better net income growth for the remainder of the year for MWG. As a result, we hold our 2021 net sales and net income estimates at VND 126 tn (+16% YoY) and VND 5.1 tn (+30% YoY), respectively, and maintain our target price of VND 165,000 per share. With a 16% potential upside, we reiterate our BUY recommendation with an unchanged SOTP-based target price of VND165,000. Key risks to our call include, longer-than-expected duration of COVID-19 impacting spending on discretionary products and possible lockdown at the national level.

For 2021, FRT management sets a 320% YoY pretax profit growth target. We believe that this is achievable given 2020 low base, and provided FRT strictly applies cost cutting measures to offset poor mobile phone sales. We estimate 2021 revenue and pretax profit to grow by 7% and 360% YoY, respectively, driven by cost cutting. Between 2022-2023, FRT will continue to aggressively open pharmacies at ~150 new stores per year. Given the massive pharmacy opening campaign (130 new stores) in 2020 without improvement in gross profit margin, it is unclear when the business will break even. As such, we believe it will be difficult for FRT to achieve earnings growth over the 2022-2023 period. We derive a target price for FRT of VND 28,000 per share, and rate the shares MARKETPERFORM.     

We maintain our Market Perform rating on the shares of VNM, but marginally lower our 1-year target price to VND 107,000/share (from VND 109,000/share) as we lower our target P/E multiple – implying 17% potential upside. Given the lack of expected growth for 2021 and the weak growth outlook for 2020-2024 (NPAT CAGR of 4%), VNM’s growth metrics are now lagging other local listed companies. In 2021, VNM faces dual headwinds: a) Covid-19 impact on demand; and b) a surge in raw material input prices. As such, we apply a lower target P/E of 21x (versus 23x, using VNM’s average 2018-present forward P/E) on average 2021-22F EPS. For 2021, we modestly lower our sales forecast by 1.4% to reflect lower than expected revenue from the school milk program.  Our updated estimates suggest 5.3% YoY and 1.3% YoY revenue and NPATMI growth, respectively, for VNM in 2021. In the short-term, we don’t see any rerating catalysts for the company, and we will monitor the monthly sales closely. 

The Bank has been delivering strong earnings results over the past several years, backed by robust credit growth, improved NIM, and lower CIR, thanks to digitalization. The 2021 business plan is ambitious but feasible, reinforced by 1Q 2021 business results and the prolonged low-rate environment which lowers overall funding costs. However, a capital raise (equivalent to 9.3% of the Bank’s pre-money charter capital) could register a minor dilutive impact. We raise our PBT forecast +6% for TPB 2021F to VND 5.8 tn (+32% YoY). 2022F PBT is forecast at VND 7.1 tn (+21.9% YoY). We roll forward our valuation to June 2022, and raise our 1Y target price for TPB to VND 37,600/share, which implies 17.7% upside. We reiterate our Outperform rating on the shares of TPB. 

We are upgrading our rating on the shares of BID to Outperform (from Market Perform) given its improving fundamentals and as we roll forward of our valuation to June 22. We lift our 12M target price for BID to VND 48,000/share (previously VND 46,430/share), implying 14% upside potential. For 1Q21, BID posted a pretax profit of VND 3.4 tn (+87.2% YoY, completing 26% of the AGM plan), which was driven by a 1.8% YTD credit growth, a 179% YoY increase in writebacks, and an improvement in CIR. The Bank also accelerated provisioning to improve its asset quality, with NPL ratio remaining at 1.76%, and LLC ratio increasing to its highest level, at 107.6%.  

ACB delivered robust earnings growth of +61.3% YoY during 1Q 2021, in line with our expectation. Growth sprouted from various sources - most notably improvement of the NIM (+63 bps YoY to 4.22%). We believe that the upfront fee from SunLife (USD 370 mn) helped ACB to lower its funding cost during the period. Ratios unfortunately reveal asset quality became somewhat challenged. NPL and provision coverage worsened to 0.9% and 120%, respectively, compared to 0.6% and 160% at year-end 2020. According to management, the surge in NPLs has come from more proactive loan classification with credit quality stabilization some quarters out.  We maintain our estimate of VND 11.8 tn (+22.8% YoY) for 2021, and introduce our PBT forecast of VND 13.9 tn (+18% YoY) for 2022. As we roll forward our valuation to mid-2022, our 1Y target price increases to VND 41,900/share (from the current VND 37,300/share), translating into potential 19% upside. We reiterate our Outperform rating on the shares of ACB.