Company Report

Given the decelerating retail sales growth in Vietnam, we downgrade our rating on the shares of VRE from BUY to OUTPERFORM, with a reduced 1Y target price of VND 29,500/share (+37.5% upside) from VND 33,600/share. Our target price reduction reflects lower occupancy over the past three quarters from 3Q23 to 1Q24 and sluggish growth of the Vietnam retail market during the first five months of 2024, which has caused us to lower our 2024 net revenue an NPAT forecasts to VND 9.25 tn (-5.6% YoY, 1.7% lower than our previous estimate of VND 9.4 tn) and VND 4.14 tn (-6.2% YoY, 3.2% lower than our previous estimate of VND 4.27 tn), respectively.

We reiterate our Outperform rating on the shares of HDB and roll our valuation forward to mid-2025 with 1Y TP of VND 29,000/share - representing upside of 22.4%. Our valuation is presented without considering the potential dividend yield of 6.3%. We believe that solid credit growth (higher than 20%) will hold up during 2025, allowing HDB to maintain NIM over 5%, and manage the NPL ratio between 1.8% and 2.0%. This should facilitate HDB to generate robust earnings growth and uphold ROE above 20%. However, credit expansion, particularly in real estate and related sectors, should be properly monitored if the market recovers more slowly than expected.

As we increase our 12-month target price from VND84,800/share to VND93,400/share (20% upside potential) – rolling over our SOTP valuation to mid-2025E and reflecting SSI’s higher valuation for TCB, we also upgrade the shares of MSN to OUTPERFORM (from Market Perform). 2024-25 should be an eventful period for MSN group: Upcoming milestones include the divestment from mineral processing unit H.C. Starck, the plan to list Masan Consumer Corporation (MCH: currently trading on UPCoM) on HOSE, and the possible stake sales. These recent moves/plans suggest that the Group is actively restructuring to focus on its core consumer business. During 2024, we expect a broad-based recovery across all segments. We believe that revenue growth from its consumer retail chain subsidiary, Wincommerce (WCM), will be achieved via rapid new store openings, a payoff from the restructuring during the 2022-23 period, and a recovery in consumer spend. Subsidiary Masan Consumer (MCH) has consistently proven resilience, having outperformed peer since 2019 (CAGR of 10% in revenue and 11% in NPAT). We believe that the company will maintain this momentum through 2024, leveraging synergies of the retail platform (WCM) and other product innovations.

We reiterate our Outperform rating on the shares of ACB and roll forward our valuation to mid-2025 with a 1Y TP of VND 36,000 per share, representing upside of 21%. While we believe that unfavorable market conditions will negatively impact asset quality during 2024 and 2025, ACB’s asset quality remains top-notch due to a healthy customer base, and conservative lending practices. Further, ACB is equipped with competitive funding costs, enabling the bank to stabilize NIM in the longer term. Given that ROE remains above 20% for the medium-term along with healthy NIM and asset quality, we believe that ACB is one of the best choices in this turbulent market.

We believe that POW’s earnings witnessed a low base during 1Q24, unlikely to be replicated in the upcoming quarters. In fact, we observe that the company suffered the lowest volume and NPAT in 1Q24 compared to the same quarter during 2018-2023 as: 1) Nhon Trach 2 plant (NT2: HOSE) was assigned insignificant contracted volume (Qc) (at 1 mn kWh vs 750-1,000 mn kWh for every first quarter during 2018-2023); and 2) the Hua Na (HNA: HOSE) and Dakdrinh plants had to undergo limited operations to reserve adequate water levels for peak power demand season. Specifically, compared to 2018-2023 period, Hua Na’s 1Q24 volume was only higher than that of 1Q20, and this figure for Dakdrinh was higher than that of 1Q19 and 1Q20. Nevertheless, the company’s 1Q24 results were in line with our expectations. Hence, our 2024 earnings forecast remains nearly unchanged. For 2025, due to the successful compensation negotiation related Vung Ang 1’s Generator 1 technical issue, we assume/factor a compensation amount of ~VND 1 tn to be recorded during 2025-2026. Specifically, we expect a 22% YoY decline for 2024 (vs 50% YoY fall for 2023) and 104% YoY recovery for 2025 from 2024 low base for NPATMI. We change our rating for POW to OUTPERFORM (from MARKET PERFORM), with a 12-month target price of VND 13,900/share (equivalent to 14.9% upside potential; based on DCF and EV/EBITDA multiple valuation methods).

Between 2022-2023, the real estate revenue stream was solely supported by the handover of sold units of the Hado Charm Villas. At 1Q24, HDG sold and handed over 420 units (out of 528 units of the project). HDG also targeted to launch the third phase sales of this project to sell the remaining 108 units during H2 2024. We forecast this phase to start realizing revenue during 2025. Meanwhile, we are concerned that legal issues related to Hado Green Lane and Hado Minh Long could take longer to be resolved and expect that these projects will realize revenue from 2026. For the electricity segment, we may not have significant surprises during 2024, as hydropower plants in Vietnam continue to face unfavorable weather. Further, according to HDG, its 7A wind power plant is seeing poorer wind conditions compared to 2023, which has led to a 28% YoY volume decrease during 1Q24. However, we believe that the electricity segment should generate the most stable cash flows and earnings compared to other segments. We also expect lower interest costs due to HDG’s repayment of electricity segment-related debt. 2025 NPAT growth is estimated at 112% YoY, due primarily to the recognition of Hado Charm Villas Phase 3. We arrive at 1-year TP of VND 36,900/share, implying a 12% upside from current market price, and reiterate our OUTPERFORM rating on the shares of HDG.

We reiterate our Outperform rating on the shares of TPB and roll forward our valuation to mid-2025 with 1Y TP of VND 22,700/share, presenting an upside of 23.7%. We expect that bad debt will not increase strongly in the near-term due to the bank's debt restructuring policy and proactive bad debt resolution. This should allow TPB to reduce its provisioning for both 2024 and 2025. Although the NIM will be under pressure during 2024, we believe that the turnaround story will be clearer during 2025 with a higher NIM and lower NPL ratio. For the medium period, we believe that the business environment will be more supportive and enable TPB to improve ROE to around 16%.

We lower our rating to MARKET PERFORM for the shares MSB and roll forward our valuation to mid-2025 with 1Y TP of VND 16,200/share, presenting an upside of 13%. As asset quality remains a key concern (especially from retail loans, including mortgage and credit card), we believe that 2024 and 2025 will afford MSB the opportunity to clear out various bad debt with higher provisions. Therefore, we do not believe that pretax profit will grow strongly during this time, making ROE likely to hover around 15%. However, we believe that the clear recovery signal should start from 2025 due to NIM recovery, a lower NPL ratio, and reduced credit costs.

We maintain our MARKET PERFORM rating on the shares of BMP. We apply a target P/E of 10x (unchanged), as the company maintains a high cash dividend payout and high earnings level. We raise our target price for BMP to VND 115,900/share, as we roll forward our valuation basis to mid-2025F, representing upside potential of 2% (total ROI of 12%, included 10% dividend yield).

1Q24 results were within our expectation as volume in the quarter declined 86% YoY, which weighed on NT2’s performance accordingly. We expect this output figure will somehow improve QoQ in 2Q24, supported by the peak power demand season in Vietnam. Nevertheless, due to the limited contracted volume (Qc) (at ~1 bn kWh) (the actual Qc might change, depending on the actual electricity mobilization conditions) planned by the National Load Dispatch Center (NLDC), we are concerned such improvement might not help NT2 to breakeven in 2024. We project a loss of VND 255 bn (nearly unchanged compared to our previous update) for the company in 2024. After our SELL recommendation on 29 Mar 2024, stock price declined by 12%.  With a 12-month target price of VND 23,000 (equivalent to a 5% upside potential) (based on DCF and EV/EBITDA valuation methods), we upgrade our rating to MARKET PERFORM for the stock.

As Viettel Group (Viettel) and Vietnam Posts and Telecommunications Group (VNPT) were awarded the usage right of 5G wavebands in March 2024, we believe that CTR will require significant capital for BTS (base transceiver station) sites investment, which means a conservative dividend payout level accordingly should be reasonable to accumulate a strong enough retained earnings balance as a safe equity source. However, we observe that CTR intends to pay out higher cash dividends than before. Specifically, during 2016-2021, CTR had maintained a conservative VND 1,000/share cash dividend despite consistent earnings growth. However, that level then increased to VND 2,919/share in 2022 and was approved at VND 2,720/share in 2023 (during the 2024 AGM) (nearly a threefold increase compared to past years). Therefore, we believe that CTR might have to increase its debt component in the capital structure. Additionally, we witnessed lower-than-expected gross profit margin of construction segment and financial income during 1Q24 and expect that 2024 NPATMI will perform a slower growth of 11.6% YoY growth than that of 2023 (16.5% YoY). Nevertheless, we forecast a solid NPAT growth of 19.8% YoY in 2025, mainly driven by the long-term outlook of 5G rollout, which should support infrastructure leasing segment to continue to improve CTR’s overall profit margin. We call for a MARKET PERFORM rating on CTR, with a 12-month DCF target price of VND 133,200/share (equivalent to 3% upside potential).

For the first two months of 2024, VHC’s net sales reached VND 1.7 tn (+40% YoY), with pangasius sales increasing 25% YoY, outperforming the sector due to the US market recovery. Pangasius sales growth reflects domestic market sales of VND 535 bn (+64% YoY), which accounted for 31% of sales (from 27% during 2M23). US and EU market sales reached VND 407 bn (+30% YoY) and VND 292 bn (+16% YoY), respectively. The Wellness segment witnessed a recovery with sales reaching VND 130 bn (+26% YoY). According to VASEP, Vietnamese pangasius exports during 1Q24 reached 424 mn USD (+0.4% YoY). We maintain our Market Perform rating on the shares of VHC, with a target price of VND 78,500/share (from VND 64,500/share), as we roll our forecast to mid-2015. We increase our target P/E for VHC to 12x (10x previously), as we believe that earnings have bottomed out during 2023, coupled with a low-interest rate environment. Thus, our new target price represents an upside of 2.3% and VHC currently trades at a 2024 P/E of 14x and 2025 P/E of 10x, which is at the 10-year historical average range of between 6x-19x.

Within the aim to keep gaining new clients, PNJ did not raise prices amid rising gold input costs during the period, hence the gross profit margin was compressed in the short term. However, we believe the company may eventually adjust its prices in tune with the increase in gold prices, and we believe it is able to do so given its leading position in jewelry retail business, not to mention that the Vietnamese public appreciates gold’s property as a store of value. In addition, PNJ frequently releases new jewelry collections, whereby the company will likely increase sticker prices to offset the increase in the price of gold. We hence maintain 2024 revenue and net income estimates of VND 37.7 tn (+14% YoY) and VND 2.3 tn (+17% YoY). We introduce 2025 estimates with revenue and net income at VND 41.5 tn (+10% YoY) and VND 2.57 tn (+12% YoY). Earnings growth in 2025 is driven by full year operation of stores opened in 2024 (+9%), on top of the expected increase in overall jewelry consumption (+5% YoY). With an unchanged target P/E of 17x on average 2024F-2025F financials (from 2024F), we derive a new target price at VND 114,000 per share (from VND 107,500). With 16% upside potential, we maintain an OUTPERFORM rating for PNJ.

On 18 Mar 2024, Vingroup Jsc, the parent company of VRE decided to fully divest from SDI Trading Development and Investment Company Limited (“SDI”). SDI owns more than 99% of charter capital of Sado Trading Commercial Jsc (“Sado”) – which in turn is a significantly large shareholder of VRE with a 40.5% stake (41.5% effective holding due to VRE having 56.5 million treasury shares). The transaction is expected to be completed in the third quarter this year. With the new major shareholders, we expect VRE will operate more effectively when having more contributions from upcoming shareholders who have consumer retail experience. Also, VRE still works with Vingroup and its ecosystem as the strategic partner. We reiterate our BUY rating for VRE, while bumping up our target price to VND 33,600/share (+29% upside), which is slightly higher than our previous target price of VND 31,300/share as we roll forward our valuation.

We upgrade our rating on the shares of QNS to Outperform (from Market Perform) with a target price of VND 57,400/share, representing +19% upside (total ROI 23%). We believe that QNS is capable of maintaining single-digit earnings growth through 2025, as the sugar business maintains its profit level, the soymilk segment returns to normal, and the company’s financial income grows due to its substantial net cash balance (24% of market capitalization). Further, QNS's unforeseen earnings surge during 2023 resulted in a 50% net profit distribution. We note that QNS paid between 60-80% of net profit between 2020 and 2022. Thus, given the strong earnings level, we anticipate that QNS likely will increase cash dividends for 2025, which is expected at between VND 4,500-5,000/share (10-11% dividend yield for 2025).