Company Report

4Q 2022 revenue increased 16% YoY, while NPAT increased 86% YoY during the last quarter of the year, thanks to strong improvement in EPC/EPCI segment and JV contribution. EPC segment recorded strong results thanks to Dai Nguyet project completion, as well as continuation of large projects such as Gallaf – Batch 3, Shwe Jacket…2022 revenue thus reached VND 16 tn (+ 15.5% YoY), while NPATMI reached VND 772 bn (+28.5% YoY). This is 20% higher than our estimate, with the key upside surprise coming from higher EPC/EPCI profit and profit margin. 2022 EPS was VND 1,212/share, +33% YoY, and translating into a trailing-12 month P/E ratio of 22x.

NPATMI growth is estimated at +47% YoY, driven by the company’s nickel project, as well as a new revenue stream from electricity sales to the Nomura-Haiphong Industrial Zone (NHIZ). The nickel project will generate 23% of the company’s gross profit; whereas 6% is expected to be generated via electricity sales to the IZ since 2023 which could provide another stable cashflow along with PC1’s current hydropower & wind power segment. Additional stable cashflow from power sales to IZ should be useful amid uncertainty risk of borrowing rate. Further, PC1 current interest coverage ratio is 3x which could be still safe per our view. We call for Outperform rating for PC1, with a 1Y TP of VND33,930 offering a 25% upside.

We update NLG to Market Perform, with our 1Y target price of VND 29,200 (+15.6% potential upside). As such, we revised down our 1Y target price by -30% since our last report by revising the discount rate from 12% to 14% as well as extending the presale progress of NLG key projects such as Waterfront, Waterpoint, NLG Can Tho, among others. With a large percentage of real estate second tier city projects in the company land bank, homebuyer demand for these projects will continue to be affected due to high interest rate mortgages, as well as low transactional liquidity in the market. In 2023, sales and handover of multiple projects (including Akari and Mizuki Park, Izumi, and Southgate) will still be the key momentum for NLG business results. As such, we forecast 2023F net revenue of VND 5.5 tn ($234 mil USD, +26% YoY) and NPATMI of VND 930 bn ($39 mil, +7.6% YoY). With a strong backlog of nearly VND 17 tn ($723 million USD) at the end of 2022 (mostly coming from mid-end housing projects), NLG earnings should be gradually allocated over the next upcoming years (2023-2025).

We update KDH rating to Market Perform, with a revised 1Y target price of VND 30,500 (+19.8% potential upside). As such, we revised down our 1Y target price by -26% since our last report, as we revised the cash flow from sales progress of recurring real estate projects and apply a more prudent discount rate for potential projects in the future. Among our coverage, we determine that KDH has some advantages compared to other developers, such as the company’s land plots located in District 2, 9, and Thu Duc area, which usually has a higher absorption rate compared to other second tier areas. Not to mention, KDH project execution has been proved over the years which create a strong believe for home buyers. In addition, KDH clean bank legal status projects and good financial health, can also help the company to withstand difficult market conditions.

During 4Q22, VHC reported a net sales and net profit decline of -7.8% and -58.2% YoY, respectively – falling well short of our estimates as resultant of the accelerating pangasius ASP decline.

Near-term, we still expect exports to China will serve as the growth driver for the sector, while exports to other major markets, such as the US and EU, remain sluggish. During 2023, we expect VHC to post net sales and net profit of VND 11.1 tn (-16% YoY) and VND 1.4 tn (-28% YoY) respectively. Our 1Y target price for the shares is VND 63,000/share (+6% upside). We maintain our MARKET PERFORM rating for the shares of VHC.

Decreasing net debt/equity ratio could save QTP from the risk of rising borrowing costs.  At 2022, the total debt balance dropped significantly to VND 1 tn from VND 2.2 tn at 2021. An estimated -47% YoY decline in interest costs due to a reduced debt load is supportive for solid earnings for 2023. With +3.6% NPAT growth estimate for 2023, QTP has a safe dividend yield of 10%. The first payment of 5% on par will be made in 09-Mar-2023 and the ex-dividend date was 23-Feb-2023. Coupled with a 1Y TP of VND17,900, the shares of QTP offer an upside of 20% allowing us to reiterate our Outperform rating on the shares.

We are downgrading our rating on the shares of VNM from OUTPERFORM to MARKET PERFORM, reflecting only 9% upside potential to our lower PER/DCF-based 12-month target price of VND82,900/share (from VND85,000). VNM’s disappointing 4Q22 results were the result of a net sales and net profit decline of 5% YoY and 16% YoY, respectively, while the gross margin was the lowest recorded since 2015. While the price of raw milk powder has declined significantly YoY, VNM’s relatively high-cost inventory is expected to last through the year. Nevertheless, 2023 is marginally more hopeful, as we forecast net sales and net profit growth of 6.4% and 10.3% YoY, respectively – but still off of a low base. Management expects significant gross margin improvement from 3Q23 due primarily to the recent hedging contract for raw milk powder at lower prices. Meanwhile, we are not as optimistic for domestic sales growth, given the inflationary pressure and intense competition. Upside risk: fall in raw material prices; downside risk: loss of market share.

Being foreign debt-free could allow NT2 to avoid the impact of rising lending rates and FX risks that competitors are facing. A stable dividend yield play is what we are looking forward to, rather than earnings growth. A price correction could offer a more attractive dividend yield. As of the 10-Feb-2023 closing price, NT2 traded at a 5.2x FY23R EV/EBITDA and a 8.9% dividend yield. Compared to deposit rates offered by banks, it would be attractive if the current dividend yield NT2 pays out could deliver more than 10%. Dividend payment in beginning of 2Q23 could be catalyst after the 2023 AGM decision which could offer an outperformance in short-term. With a 1Y TP of VND 30,880 with a projected 9.9% upside, we call for a Market Perform rating for the stock.

GMD announced the full divestment of the Nam Hai Dinh Vu port, which we view as positive for the shares of GMD, given the significant one-off profit for 2023 and the potential more rapid ramp-up of the Nam Dinh Vu Phase 2 project. Despite a weak outlook for the seaport sector in 2023, GMD could find a way to maintain volume growth, restructure its business in the highly competitive Haiphong port cluster area by giving more focus to Nam Dinh Vu port, and use the sale proceeds for new project investment to reduce its financial burden in the midst of a high interest rate environment. We estimate that 2023 PBT will increase 85% YoY to VND 2.4 tn under our base case. We rate the shares of GMD a BUY, and increase our 1Y-TP of VND 57,400/share (from VND 45,200/share), implying 26% upside.

We upgraded STB to a BUY rating, with our new 1Y TP of VND 29,500 share (+25% upside). Our upgrade reflects enhancement in asset quality via legacy accruals having been fully booked (bringing on NIM to double in 3Q22 to 4.43%), as well as aggressive purge of bad debt and legacy assets. Accordingly, the NPL ratio dropped significantly by 37 bps to 0.9% in 3Q22, as the lowest point after the M&A event. Not to mention, one of the key differences between STB and other commercial banks is that STB had zero exposure to corporate bonds as of Q3 2022, and low loan exposure to real estate developers (2.1% of gross loans).

Viglacera (VGC) is one of the leading enterprises in building materials (glass, tile, and sanitary ware), and a developer of 11 industrial parks with 879 ha remaining to let in northern and central Vietnam. Tenants include Samsung, Accor, amongst others. We expect that VGC, over the long-term, will be able to maintain a stable income from existing industrial parks. VGC trades at a 2022 and 2023 P/E of 11.1x and 15.3x, respectively. Our target price on the shares of VGC is VND 45,500 (6% upside), and we rate the name as MARKET PERFORM.

In 3Q22, ANV reported net sales and NPAT of VND 1.2 tn (+89% YoY, -4% QoQ) and VND 120 bn (-50% QoQ), respectively. Due to the COVID-19, 3Q21 set a low base effect (a net loss of -VND 13 bn). Despite having recorded strong growth off the low base, ANV recorded its lowest quarterly net profit in absolute terms year to date. Weaker-than-expected earnings owing to lower pangasius prices. The average sales price for ANV dropped to USD 2.5 USD/kg (+40% YoY, -11% QoQ). Thus, the gross profit margin dropped from 35% in 2Q22 to 23% in 3Q22. Through 9M22, ANV posted net sales and PBT of VND 3.8 tn (+54% YoY) and VND 647 bn (+708% YoY), fulfilling 72% and 65% of its sales and PBT guidance for the year, respectively. In 2022, we expect ANV net sales and net profit will reach VND 5 tn (+42% YoY) and VND 694 bn (+439% YoY), respectively. We cut our 2022 earnings forecast 20% due to lower 8% pangasius prices forecast for 2022. For 2023, we expect net sales and NPAT to reach VND 5.1 tn (+3% YoY) and VND 534 bn (-23% YoY), respectively. At VND 26,000/share, ANV trades at a 2022 and 2023F P/E of 4.8x and 6.2x, respectively. Our target price for the shares of ANV arrives at VND 25,100/share (-3% upside). We remain Market Perform on the shares of ANV.

The container shipping market (including the spot market, charter market, and second-hand market) had considerably shrunk during 2022. Though the downcycle might continue into 2023 and even 2024 due to increasing supply, we think that further downside risks are limited in scope, especially in the case of the charter market. The potential reopening of the Chinese economy could act as a key supporting factor for shipping demand in 2H 2023 and could reinflate the sector, a time when inventory destocking might reach completion by 1H 2023, of which we could see a promising reflation in output as well. In our view, the HAH stock price has reflected the worst case scenario, as 2022 P/E is only at a shockingly low 2.8x at current price. We thus expect a re-rating for the stock in 2023, when shipping demand starts to recover. Given our expectation that 2024 will be the worst year for HAH earnings, we use our fine-tuned estimated 2024 EPS of VND 8,558 and a P/E ratio of 5x (historical average P/E in the last cycle under normal conditions) to derive a new target price of VND 42,800/share, implying a 30% upside. We upgrade our rating to BUY.

ACB posted a pretax profit of VND 4.5 tn (+71.1% YoY) in 3Q22, fueled by solid credit growth (+11.1%), strong interest income growth (+33.4% YoY), robust fee income (+36.4% YoY), and the reduction in loss provisions (-89% YoY). Notably, the NIM kept heading upward without interruption. Despite modestly weaker asset quality having in 3Q22, ACB has maintained a very robust credit buffer which eased pressure for credit provision expenses and facilitated stellar earnings growth momentum. Restructured loans declined -13.9% QoQ (approx. VND 11.2 tn), and a total lack of corporate bond balance enabled ACB to be less impacted by current market condition. Despite major headwinds being included our assumption and a reduction in our 1Y TP to VND 26,300 per share (from VND 34,400), we reiterate our BUY rating on the shares of ACB given the upside of 29.2%.