Company Report

We downgrade our rating to Market Perform (from Outperform) on the shares of QNS, with a target price of VND 53,500/share (from VND 65,000/share), as we lower 2024 earnings 5% and lower P/E target for the sugar segment. We consider that sugar prices may be approaching the top of the cycle and that valuations may be challenged to sustain through FY 2024/25. Our new price target represents a potential upside of 14% (total ROI 22%). We remain positive growth on business results, encouraged by elevated domestic sugar prices and sustainable refined sugar (RS) volume growth. The company also paid a stable cash dividend, with a 2024 dividend yield of 7.5%.

IDC is one of the largest industrial park developers in Vietnam, with 631 ha of leasable land which are available for sales in Long An, Ba Ria Vung Tau, and Thai Binh province. Low compensation and clearance costs should enable IDC to maintain industrial park segment gross profit margin of the at above 42% through 2026.  We reiterate our OUTPERFORM rating on the shares of IDC with 1-year target price of VND 53,200/share, which represents 9% upside. At the end of third quarter 2023, IDC has signed for leasing of 122 ha in form of MOUs or leasing contracts. With payment schedules to be accelerated from a year to 6 months, IDC’s cash inflow will continue to increase.  As such, we believe that IDC will maintain its cash dividend at 40% on par value through 2024, which represents a dividend yield of 8.9%.

We reiterate our OUTPERFORM rating on the shares of FPT, with a higher 12-month SOTP-based TP of VND 100,100 (equivalent to 8% upside potential). FPT trades at an attractive 2024E P/E of 14.1x relative to peers’ average of 14.9x. While the slowing growth of signed revenue, narrowing PBT margins of domestic IT and online advertising need to be monitored, FPT is expected to win more contracts due to its low-cost advantage and long-term benefits from its increased presence in international markets. Further, FPT Education too is expected to remain on a solid growth trajectory for 2024, driven by the gap between education supply and demand in Vietnam and the expectation that FPT University will receive its first batch of students in semiconductors and microelectronics. We also believe there to be limited FX risks associated with FPT’s foreign debt given its robust hedging strategy; FPT also maintains healthy interest coverage and net cash.

Despite the slowdown of the economy and a rattled consumer, VRE continues to take advantage of stable growth and operational efficiencies in its core business of mall leasing. Given the weak growth expectations for 2024 due to management’s postponement of new mall openings and the decline in property sales YoY, reflecting the overall strategy of VRE to focus on Vincom Megamall type development which do not have shophouses for sales component as Vincom Plaza/Vincom Plus projects have, we are lowering our 1Y target price to VND 31,300/share (from VND 38,700/share). Our reduced TP reflects the use of a more conservative capitalization rate of higher 0.25%-1.0% than the previous valuation. Nevertheless, despite the level of stress that the counter is experiencing, we feel much of the bad news is already priced in and are maintaining our BUY rating on the shares given the implied 30.7% upside.

Maintain MARKET PERFORM. We up our 1Y TP for PVT to VND 27,000/share (from VND 24,000) based on P/E target of 9x, equivalent to 11% upside.

Short-term catalyst: we think price catalyst can be higher tanker spot rates in winter season and solid 4Q 2023 earnings growth estimated at 15% YoY.

Long-term catalyst: we would be careful on the reversal of the tanker industry should a demand destruction event were to happen, but we believe PVT earnings trend would be more stable because of its high provision practice to serve as a buffer for hard times.

Investment view: We reiterate our Outperform rating for the shares of FMC. Our one-year price target is VND 55,500/share (+15% upside). We remain bullish on the shares, as the Japanese market has a higher ASP, limited competition, and a higher barrier to entry with the preference for the value-added productscoming from Vietnam.

Solid business acumen has facilitated ACB to run steadily in recent years, and the bank features the most impressive ROE amongst our coverage universe. Further, establishing a high-quality client base as well as a relatively low funding cost should be a key competitive advantage for ACB to sustain its earnings growth trajectory over the medium-term. As such, we reiterate our BUY rating on the shares of ACB, with a 2024 target price of VND 30,100 - representing upside of 32.9%

Given expectations that the provisioning of VAMC bonds will be completed during 2023, we believe that earnings growth during 2024 and 2025 will be promising, and the bank will have a better chance of accomplishing its restructuring plan of the required timeline. Although STB maintains a reasonable level of exposure to the real estate sector and has no interest in corporate bonds, we are concerned about the quality of its loan portfolio, including the Bamboo Airways exposure. Accordingly, we finetune our rating to Outperform from Buy, with a 2024 target price of VND 37,500/share.  Our target price represents an upside of 14.7%.

PTB operates at a higher growth rate than the wood industry due to its large customers (Masterband, and Melissa & Doug). In addition, the company’s stable earnings reflect optimized labor productivity – allowing the wood gross profit margin to range between 3% - 4% higher than industry average.  By our estimate, a 1% increase in interest rates leads to a 2% decrease in PTB’s pre-tax profit. We see PTB's profit bottoming out in 2Q23, however the recovery is not strong in 2024. PTB trades at a 2023 and 2024 forward P/E of 10.2x and 9.05x, respectively, which are lower than peer (11x). Using a blended average P/E for the wood industry of 11x and the stone industry of 10x, we derive a 1Y target price for the shares of PTB of VND 61,600/share (upside 6.6%). We maintain our MARKET PERFORM rating.

We had initially anticipated a double digit decline in revenue and earnings for both 2Q23 and 3Q23. However, 2Q23 results surprised, with revenue declining by -17% YoY and net income by -8% YoY. In July, the decrease in revenue eased to -4% YoY, while net income increased by 10% YoY. This is explained by: (1) more rapid new store opening pace and (2) better-than-expected gross profit margins on product mix changes. Taking recent developments into account, we increase our 2023 and 2024 net income forecasts to VND 1.84 tn (+2% YoY, from VND 1.74 tn) and VND 2.04 tn (+11% YoY, from VND 1.96 tn), respectively. As such, 2H23 earnings may post YoY growth (+4% YoY).  Our higher EPS forecasts prompt us to increase our target price for the shares of PNJ to VND 90,200 per share (previously VND 86,000/share), representing 13.5% upside. We reiterate our OUTPERFORM rating on the shares. 

We reiterate our Outperform rating on the shares FMC. Our updated one-year price target for FMC is VND 56,200/share (from VND 50,600/share), as we roll forward our price target to 2024F EPS - representing +21% upside. FMC exports reached USD 87 mn (-26% YoY) and outperformed the Vietnamese shrimp export market (-32% YoY) during 1H23 due to FMC’s key market in Japan which remain stable YoY.  During 2Q23, FMC reported net sales and NPATMI of VND 1 tn (-27% YoY, +2% QoQ) and VND 71 bn (-59% YoY, +53% QoQ), respectively as 2Q22 was the earnings peak of FMC. 

July preliminary results: total revenue VND 9.8 tn (-11% YoY, +4% QoQ), in which ICT &CE and grocery revenue were VND 6.7 tn (-21% YoY, flat MoM) and VND 2.8 tn (+17% YoY, +11% MoM), respectively. With worse-than-expected 2Q23 results, we revise down our 2023 net income estimate to VND 1.27 tn (-69% YoY, from VND 3 tn). 2024 net income is estimated at VND 4.99 tn (+294% YoY, from VND 4.6 tn). We believe that MWG’s earnings passed the trough in 2Q23 and is on a recovery trajectory. Hence we raise our target multiples and derive a new SOTP-based target price of VND 61,500 per share (from VND 59,400). Since our last BUY call on July 12^th, the MWG share price has increased by 10%. As our new target price offers 14.1% upside, we rate the stock as OUTPERFORM (from BUY).

We are maintaining our OUTPERFORM rating on the shares of VCB with a 2024 target price of VND 105,900/share (from VND 92,633/share after adjusting for the stock dividend) - representing an upside of 18.7%, as we roll forward our valuation basis, assuming that the company’s private placements will be successful, and increase our target PB to 2.7x (from 2.4x) due to the lower interest rate environment. VCB posted VND 9.3 tn pretax profit (+25% YoY) vs. our estimate of VND 10 tn (+35% YoY), as the bank booked more provisions than we had anticipated. Nevertheless, we continue to view the 2Q23 results as strong and the 1H23 provisions as pre-emptive and will likely enable future provisions to be reduced from 2H23. During the period, VCB also bucked the trend in both NIM (+2 bps QoQ) and asset quality (flat NPL ratio of 0.8%, and further fortified its provision coverage at 386%). The only drawback for the quarter, in our view, was that CASA nudged -43 bps lower to 30%, as the peer average CASA improved 45 bps. We however do not consider this as significant, as VCB continues to possess the lowest funding cost in the sector due in large part to its stable depositor base. CASA should further improve over the near term as deposit rates remain at a low level.

DGC delivered net income of VND 882 bn (-54% YoY) for 2Q23, which exceeded company guidance of VND 630 bn. Compared to the latest quarter, net income increased 7% QoQ, due primarily to higher usage of in-house phosphate rock, as ASP continued its downtrend. We expect that earnings for 2H23 will rise 11% vs. 1H23 as the price of yellow phosphorus and related products recover - along with the rebound in demand from fertilizer and semiconductor producers. The price of DAP-type fertilizer has increased between 12%-15% from the trough of July due to higher agro-commodity prices. Meanwhile, we expect that demand for yellow phosphorus from semiconductors to recover during late 2023, helping DGC to post double digit net income growth for 2024. We estimate 2023 and 2024 net income of VND 3.59 tn (-41% YoY, from VND 3.8 tn) and VND 4.34 tn (+21% YoY), respectively. We derive a target price for the shares of DGC of VND 84,000 per share – representing upside of 14.4%. We call for OUTPERFORM rating on the shares.

For 2023, we expect that the company will post net sales and net profit of VND 63.4 tn (+5.7% YoY) and VND 9.1 tn (+5.9% YoY), respectively. This is -1.3% lower than our previous net profit forecast. Such an outlook translates into 2H23 net sales and net income growth of +10% and +18% YoY, respectively. For 2024, we expect net sales and net profit to reach VND 67.4 tn (+6.3% YoY) and VND 10.7 tn (+17.2% YoY), respectively. Our 2024 net profit forecast is 4.4% higher than our previous estimate. We raise our GPM assumption for 2024 from 42.1% to 43% to reflect the declining trend of imported milk powder. Our updated 1Y target price for the shares of VNM is raised to VND 86,600/share (from VND 82,000/share), based on our 2024E EPS and DCF methodology. With upside of 19%, we reiterate our OUTPERFORM rating on the shares of VNM.