Company Report

At VND 34,650/share, KBC trades at a 2022 P/E and P/B of 11.8x and 1.6x, respectively, and a 2023 P/E and P/B of 8.9x and 1.4x – prior to accounting for the potential private placement of 150 mn shares. Our target price is VND 43,000/share, representing 24% upside. We reiterate our BUY rating on the shares of KBC. The key downside risk, in our view, is slower than expected land deliveries given the prolonged procedural process for key projects and the global economic uncertainties which may impact FDI.

Investment summary: We reiterate our Market Perform rating for the shares of VIB, along with a 1Y TP of VND 30,900 (+18% upside). Higher funding costs should weigh on VIB’s NIM, while a low credit buffer will remain a challenge given the credit quality deterioration. Over the short-term, we are positive about VIB for an extension of credit limit from SBV, effective 2H22. 

In 2Q22, VIB posted a consolidated pretax profit of VND 2.7 tn (+27.8 YoY) and VND 5 tn (+27% YoY) for 1H22. This growth was driven by strong interest income (+25% YoY), as credit growth was 9.7% YTD. Cost control remained on solid ground. The loss from FX trading and investment securities weighed on core profit. Despite strong earnings growth and contracting restructured loans (-21% QoQ), the NPL ratio still rose 6 bps to 2.45% QoQ in 2Q22. However, loan loss coverage was 54% - the lowest by far in our coverage universe.

MWG posted weaker-than-expected 2Q22 results, with net income declining by 6.8% YoY due to slower-than-expected growth in the ICT & CE segment, coupled with one-off expenses arising from the closure of non-performing grocery stores. We hence reduce our 2022 earnings estimates by 14% to VND 5.48 tn (+12% YoY, lower than company guidance of VND 6.35 tn). With such a forecast, 2H22 earnings growth may still be higher than that of 1H22 (+24% YoY in 2H22 vs flat growth in 1H22), owing to the low base nature of 2H21. After store layout changes, we expect BHX monthly revenue per store to be maintained at VND 1.3 bn in 2H22 (vs. VND 900 mn in 1Q22 and VND 1.1 bn in 2Q22), hence improving the profit margin. We believe that profitability of BHX will be crucial bottom line growth driver for MWG from 2023, while the earnings growth of the ICT & CE segment will likely slow down due to high inflation and current high market share (>50% for mobile phones and >45% for consumer electronics). We project 2023 net income at VND 7.19 tn (+31% YoY).

We derive a new SOTP-based target price for MWG of VND 87,800 (from VND 99,000) after factoring in the stock dividends. With an upside potential of 32% from the current share price, we maintain our BUY recommendation.

FRT posted net sales and net income of VND 6.2 tn (+43% YoY) and VND 47 bn (+55% YoY) in 2Q22. Earnings growth slowed down compared with that of 1Q22 (+448% YoY), as prescription pharmaceutical and laptop sales normalized after the abnormal high set in both 4Q22 and 1Q22. As normalization continues in 2H22, we estimate 2H22 earnings to contract (-12% YoY). Net income in 2022 is hence estimated at VND 549 (+24% YoY). For 2023, we estimate net income to increase by 15% YoY, in which net income of FPT Shop and Long Chau rose by 10% and 43% YoY (PBT of VND 112 bn in 2022 to PBT of VND 160 bn in 2023). In the longer term, FRT earnings growth will be driven by the Long Chau pharmacy chain, while earnings growth of FPT Shop may sustain at low-teen growth. We expect the modern pharmacy chain to continue gaining market share from small drugstores. FRT aims to have 3,000 Long Chau stores in the next 5 years, hence aiding growth further. Our target price for FRT is VND 91,500 based on 2023 financials. With an upside of 6% from the current price, we call for a MARKET PERFORM rating.

Short term view: 2H22 negative earnings growth is expected to be negative, hence triggering profit taking.

We reiterate our Outperform rating on the shares of HDB, with a 1Y TP of VND 32,300/share (vs. VND 31,100/share) - representing potential upside of 28% as we increase our 2022 PBT estimate 4%. HDB posted better-than-expected PBT results in 2Q22 of VND 2.8 tn, up +32.6% YoY. 1H22 pretax profit was VND 5.3 tn, achieving 54% of our current estimate. Growth was driven by vigorous performance in both NII (+31% YoY) and income from fee-based services (+54% YoY). Meanwhile, there was harmonization between balance sheet growth (+14.8% YTD credit growth) and quality. Group 2, NPLs, and restructured loans all declined (to 3.61%, 1.33% and 0.05% respectively), while NPL provision  aggregated 93%.

Recently, HDB has sought shareholder approval to support a weak bank. While details have not yet been made public, we are fairly positive on this plan despite the initial capital contribution of VND 9 tn. Observing recent proposals related to these weak banks, it appears that large enough incentives are needed in each case. With respect to HDB, we are of the view that the net rewards will be backloaded unlike was the case with VCB and MBB.

BMP continued on a strong growth trajectory in Q2, with revenue and net profit of VND 1.6 tn and VND 145 bn, respectively, translating into YoY growth of 9.5% and 27%. As such, we are reiterating our Outperform rating on the shares of BMP, and raising our 1-year target price to VND 71,500/share (from VND 67,000), representing 12.6% upside potential.

The share price in the short term can be supported by strong earnings growth in the second half fueled by the downtrend in input costs. PVC resin prices have dropped by another 20% since July to USD 1,000-1,100/ton, which is 20%-30% lower than the average price in 2Q22. As a result, we expect the net profit in 2H22 to increase by 20% HoH and 270% YoY thanks to the low base in 2H21. Accordingly, we increase our 2022 net profit forecast to VND 599 bn, up 179% YoY.

In 2023, despite the expectation of a 7% YoY growth in sales volume, we forecast net profit to decline slightly by 4.4% to VND 572 bn from the likely high base in 2022, under the assumption that the ASP will drop by 4% YoY.

Estimates and investment view: Given H1 results, we trim our forecasts for 2022 and 2023. Our new estimates foresee a -11.6% decline in NPAT in 2022 before the bottom line increases 11% next year. Next year, the situation could be rosier, with expectations of 7.8% sales growth and margin expansion. Based on our updated estimates, sales growth in H2 2022 is 8.2% with NPAT being flat YoY.

Our new target price is VND 80,000/share based on 2023 EPS (targeted P/E of 18x) and DCF valuation. Given the 10% potential upside, we downgrade our rating to Market Perform on the shares of VNM.

Investment highlights: Following the SAB 2Q22 analyst call, we are increasing our 1Y target price for the shares of SAB to VND 213,000/share (from VND 188,000) – representing 18.2% upside. We are also reiterating our OUTPERFORM rating on the shares. In 2Q22, SAB recorded impressive net sales and net profit of VND 9 tn (+25% YoY) and VND 1.8 tn (+67% YoY), respectively. ASP hikes, a better product mix, and improved production efficiency translated into SAB’s highest ever quarterly net profit expansion. Management continues to focus on the mainstream segment, which resulted in market share gains through 1H22. In light of the encouraging 2Q22 results in 2Q22, we revise up our estimates for SAB. For 2022, we expect net sales and net income to reach VND 33.3 tn (+26.2% YoY) and VND 5.3 tn (+35.4% YoY), respectively, which are 4% and 13% higher than our previous forecasts. In 2023, we expect net sales and net income to reach VND 38.8 tn (+16.5% YoY) and VND 5.95 tn (+12% YoY), respectively.

We are downgrading KDH from Buy to Outperform, with a revised 1Y target price to VND 47,000 (+19% potential upside). As such, we revise down our 1Y target price by -26% since our last report, as explained by the change in our valuation method. Not only did we use RNAV methodology to calculate for KDH future expected value, we also incorporate the P/E and P/B method to factor in market sentiment toward real estate stocks during what has been a complex environment in the real estate market.

Among our coverage, we still 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 higher absorption rate compared other second tier areas. Not to mention, KDH is also a reputable developer with clean legal status projects and good financial health, which can help the company to withstand during difficult times.

We continue to expect KDH earnings in the next 2 years should remain solid, as the company is focusing on developing low-rise and mid-end condominium products, which usually take a short time to absorb. With a strong balance sheet, KDH can seize the opportunity to acquire more land bank and seeking for additional funding for its project pipeline. However, we will continue to keep a close watch on company presales - as the property market is cooling down at the moment.

MBB achieved VND 6 tn (+76% YoY) in pretax profit during 2Q 2022 driven by NIM expansion, robust interest income, and lower provisions. Fee income, however underperformed both for brokerage and insurance activities. As for asset quality, other than rising Group 2 loans at MCredit which need to be monitored, ratios in general remained solid. Despite concerns over MBB exposure to construction and real estate & corporate bonds (17% of total credit), we expect that it should be manageable given the solid collateral backing. Pretax profit in 2022 and 2023 is projected to achieve VND 22.3 tn (+35% YoY) and VND 26.6 tn (+19% YoY), respectively. There is some optionality to our figures, provided that MBB receives credit limit expansion beyond peer. Our 1Y TP for MBB is VND 34,400/share, implying upside of 27.6%. We reiterate our Outperform rating on the shares of MBB.

Investment View: We maintain our BUY rating in place for TNH, with a revised target price of VND 53,800/share, representing a 23% upside from the current price on August 4^th.

We note that growth in 2022 is being affected by previous lockdowns in Q1 due to the Omicron outbreak, as well as last year’s high base set in Q3 and Q4. No significant COVID testing revenue is expected to roll in this year. Long-term outlook to 2023 and onwards is looking solid via: (1) additional healthcare workers shifting in from public to private hospitals, while 2022 - 2023 FDI investment could surprise in Thai Nguyen & Bac Giang province, (2) increasing incentive of Vietnamese government for private investors to build more hospitals to increase urbanization rate, and (3) increasing number and valuation of recent hospital M&A deals in Vietnam.

We expect the company gross revenue to reach VND 478 bn (+13% YoY) in 2022 and VND 574 bn (+18% YoY) in 2023. For net profit, we expect it to reach VND 156 bn (+10% YoY) in 2022 and VND 190 bn (+22% YoY) in 2023. During recent market turmoil, we witnessed small downward pressure in global & local healthcare peers’ valuation, standing at forward P/E of 20.3x and forward EV/EBITDA of 14.4x. We also roll our valuation towards H1 2023 and reflect in our new target price.

Investment highlights: In 2Q22, VHC recorded net sales and net profit of VND 4.2 tn (+80.4% YoY) and VND 788 bn (+202% YoY), respectively. VHC recorded earnings growth of 242% YoY in 1H22 - a record high level – which we believe to be the peak. Pangasius fillet US export growth has begun decelerating, while China exports began accelerating. Our 1Y target price for the shares of VHC is VND 82,400/share (+0.2% upside), and we maintain our MARKET PERFORM rating given the likely earnings deceleration through 2023.