Company Report

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. 

In 1Q21, the group posted revenue of VND20tn (+13.3% YoY) and NPATMI of VND187bn (vs. a loss of VND78bn in 1Q20), which are quite in line with our expectations. Growth was driven by various subsidiaries, such as improved profitability at VCM, higher profit sharing at TCB (+78.9% YoY), decent MCH performance, and a recovery at MML. These positive forces, however, were offset by higher interest expenses and losses at the mining business. In order to finance the previous acquisitions of VCM and TCX, MSN aggressively added leverage resulting in VND56tn of net debt by the end of 1Q21 (vs. just VND22tn at end-2019). The de-leveraging progress will likely be a key focus going forward and serve as a key catalyst for the share price. Post-1Q21, however, we increase our 2021E net sales by 3% and lower our NPATMI by 13.1%. Our revised 2021E revenue and NPATMI now amount to VND100tn (+29.6% YoY) and VND3.3tn (+167% YoY), respectively. We do expect subsidiaries that drove 1Q21 financial results will continue to perform in the coming quarters. We lift our SOTP-based 12-month target price for MSN to VND108,000/share (from VND104,000), using average 2021-22E as our valuation basis. Our new TP implies potential upside of 13%. We maintain our Market Perform rating. 

DCM recently held its Annual General Meeting, wherein the management sought approval to pay a cash dividend of 8% on par (5% dividend yield). For 2021, the company set a revenue and pretax profit of VND 7.8 tn (+2% YoY) and VND 210 bn (-71% YoY), respectively, and attributable to the rise in oil prices   and the commencement of the NPK plant (expected in 2Q21). Despite the uptrend in the urea sales price and expected improvement in net financial income, we forecast 2021 earnings to decline -12% YoY, due the increase in oil prices and an expected loss from the new NPK plant (commercial operation expected by May 2021, running at 36% expected utilization rate, below break even utilization rate of ~70%). At VND 16,150 per share, DCM trades at 2021 P/E, P/B and EV/EBITDA of 17.1x, 1.4x and 3.1x, respectively. DCM still incurs high non-cash depreciation expenses (VND 1.4 tn vs a pretax profit of VND 627 bn for 2021F), explaining its high PE and low EV/EBITDA. We view DCM as a cash rich company, which likely will enjoy huge earnings growth from 2023 once the urea plant is fully depreciated. 

We attended the VNM 2021 AGM held on 26 April. The company set out a conservative 2021 plan, with net sales growth targeted at just 4.1% YoY (not including ASP hikes) and NPAT being flat YoY. We are downgrading our rating on the shares of VNM from Outperform to Market Perform, and lowering our 12-month target price to VND109,000/share (from VND121,000), based on P/E and DCF methodologies – as we trim our 2021E sales and NPAT by 1% and 1.3%, respectively, on the back of the weaker-than-expected 1Q21 results (net sales and NPAT decreases of 6.4% YoY and 6.5% YoY). Our new TP implies upside potential of 13.5%. Strong raw material input increases are also key contributing factors leading to their discouraging plan. Management did explain that the weak demand was the result of complications from the COVID-19 pandemic situation. Given that we expect very low earnings growth in 2021 with a modest growth outlook in the coming years, VNM is now lagging the growth expected at other listed companies. 

Given the weak demand from gas-fired plants in 1Q21, we trim our full-year forecast for dry-gas volume from 9.4bcm to 9.1bcm in 2021E. In contrast, we raise our assumption for fuel-oil prices from USD300/ton to USD330/ton (presently at USD361/ton). Accordingly, we fine-tune down our 2021E net profit by 3%. Our forecasts reveal 18.4% y-y top-line growth and 20.9% y-y growth in NPAT for GAS in 2021E. We trim our 12-month target price for GAS to VND97,500/share (from VND98,000/share), based on an unchanged 2021E PER of 19x, EV/EBITDA of 11x and DCF approach. Our TP implies 12% upside potential from the current market price. We reiterate our Outperform rating on the shares of GAS.