Company Report

After DGW’s reporting of record high earnings of VND 327 bn (+234% YoY) for 4Q21, we are upgrading the shares from Market Perform to OUTPERFORM as we increase our 1 YR target price VND 10,000/share (8.3%) to VND 130,000/share -representing 18% upside. We are also upgrading our net income forecast 4% over our previous estimate to VND 806 bn (+22% YOY). We expect earnings growth from the following: (i) the new product line (home appliances); (ii) laptop demand continues to increase, as students have to adapt to a hybrid interchangeable study arrangement; and (iii) a recovery in consumer discretionary spend. We believe that the market is already looking past the news that FPT Synnex became a distributor of Xiaomi products but would be aggressive buyers of the shares on any weakness surrounding this event.  DGW is currently traded at 2022 PE of 12.1x, which is attractive for a company benefiting from the digitalization trend and the recovery in household income, and lower compared with 2-year historical PE of 15x.

We reiterate our Buy rating on the shares of TCB, and our 1Y TP of VND 64,000/share which are supported by solid 2021 performance and a solid growth outlook for 2022. Boasting a 21% ROE for the year and CAR of 15%, TCB remains an attractive investment. The bank delivered VND 23.2 tn (+47% YoY) pre-tax profit in 2021, fueled by the strongest credit growth within the sector (+26.5% YTD), a significant boost in the NIM (+89 bps YoY, as CASA reached a new record high), and solid non-financial income, which includes a performance bonus for bancassurance for 4Q 2021. For 2022, we project that TCB will achieve a pre-tax profit of VND 27.9 tn (+20% YoY). Slower growth compared to 2021 could arise from a less vibrant corporate bond market, and a narrowed NIM of 19 bps. Downside risk: Slower-than-expected growth of the property market; and a higher-than-expected NPL formation rate. Upside surprise: Divestment of subsidiaries; and better-than-expected economic recovery.

We attended SAB’s earnings call on Feb 11th to update on its 4Q21 results and the reopening outlook for the company. In 4Q21, SAB’s results beat expectations with its top-line performance, with sales reaching VNB9tn (+14.5% YoY), the highest quarterly sales since the pandemic. However, net profit was in line with the consensus estimate of -8.7% YoY, due to squeezed GPM (-370 bps) and higher advertising and promotion expenses. SAB gained market share in 2021 thanks to its dominance in the mainstream segment. However, competition will become more aggressive once the economy fully reopens and the mass-premium demand quickly catches up. For 2022, we forecast net sales and net profit to reach VND 32 tn (+21.6% YoY) and VND 4.7 tn (+19.6% YoY), respectively. Our 1Y target price for the shares of SAB is lowered slightly from VNB 190,000 to VND 188,000 (+17.8% upside), and we reiterate our OUTPERFORM rating.

PNJ continued to post solid results in Dec ’21, as net sales and net profit increased 29% and 43% YoY, respectively, due to pent-up demand for jewelry and gold bars. Overall, PNJ recorded net sales and net profit of VND 19.6 tn (+11.9% YoY) and VND 1 tn (-3.7% YoY), respectively, slightly ahead of SSI NPAT estimate of -5% YoY and consensus NPAT estimates of -8% YoY. The gross profit margin was -140 bps lower than the prior year, due to a higher proportion of gold bars as a percentage of sales and a lower GPM within the wholesale segment. For 2022, we forecast net sales and net profit to reach VND 23.6 tn (+20.3% YoY) and VND 1.42 tn (+37.4% YoY), respectively. Strong growth should be supported by new store openings and market share gains. Our 1Y target price for the shares of PNJ is VND 117,300/share (+13.5% upside), and we reiterate our OUTPERFORM rating.

We are upgrading our rating on the shares of GAS from Market Perform to Outperform, reflecting our increased 12-month target price of 134,000/share (from VND 130,000/share) – implying 17% upside potential (based on a target P/E of 22x and DCF approach). Our optimism stems from (1) increasing our 2022E Brent oil price assumption to USD80/bbl (from previous assumption of USD75/bbl) and (2) a dry-gas volume recovery of 18.5% YoY to 8.5bcm, which is expected to be driven by strong demand recovery from power plants and increased gas volume sold to industrial users. As a result, we estimate that GAS’ parent company will report revenue of VND90tn (+17.5% YoY) and NPAT of VND11.6tn (+35.3% YoY) for 2022E.

We reiterate our OUTPERFORM rating on the shares of KDH, while raising our 1Y target price 51% to VND 57,000 (+18% upside). In addition to land price revaluation for KDH’s key projects of KDH, the company’s strategic landbank in the center of HCMC is superior to other developers in southern Vietnam. Between 2022-2025, we believe that company’s key assets will continue to be re-rated given the lack of quality new land bank for upcoming projects in HCMC. While we remain quite optimistic about KDH outlook, 3Q21 results (revenue of VND 1.2 tn [-32% YoY] and net profit of VND 317 bn [-12.4% YoY] were uninspiring relative to 2020’s high base. As such, KDH revenue was mostly related to the deliveries of 580 units at the Lovera Vista high-rise project pre-lockdown. In 4Q21, the company will continue to focus on the handover of the remaining units in this project. Cumulativley, 9M 21 net profit was VND 788 bn (+2.4% YoY), with revenue of VND 3.2 tn (-2.9%  YoY), achieving 69% and 67% of our FY21 forecasts, respectively.

We maintain our Market Perform rating on the shares of BVH and increase slightly our 1Y TP to VND 71,900/share (from VND 71,000). 3Q 2021 results were positive with improved underwriting profit. This was driven by an unprecedented low claim ratio given the higher level of non-reported incidents (lack of filing formal claims during the lockdown). BVH’s performance was in line with sector trends, as direct written premium decreased -4% YoY (to VND 9.3 tn) and PBT surged +85.4% YoY (to VND 543 bn). The claims and combined ratio improved to 26% and 102% (vs. 53% and 105% during 3Q 2020), respectively. We do expect a pullback in the shares for 4Q 2021 profit when the claim ratio returns to normal, and mathematical reserve expenses rise in-line with a recovery in NBP. As we anticipate a growth recovery in 2022, with pretax profit projected at VND 2.5 tn (+21.9% YoY), we would be buyers post-4Q 2021 result. Downside risk: A larger-than-expected decline in interest rates and VN government bond yields.Upside surprise: A stronger-than-expected uptick in VN government bond yields; SCIC divestment from BVH could create short-term positive sentiment.

CTD has moved beyond restructuring, and the current backlog rebound is a supportive factor. For 2021, CTD has already reached approx VND 25 tn in new orders – 3.6x full year 2020 of just VND 7 tn. That such strong backlog should solidify revenue and earnings in 2022. We call for Outperform rating in the shares of CTD with a 1Y TP of VND 103,000 (18% upside vs. 09-Dec-2021 closing price) on back of 2021 strong backlog to secure 2022 sales (+115% YoY) & earnings turnaround (+167% YoY).  

Historically, PVT normally trades in a forward P/E range between 7x to 10x, depending on oil price and profit growth prospects of the company. The company has been in an investment cycle from 2021 by renewing and expanding its fleet in a quite low vessel price environment and has started seeing the results from those investments. With the current oil price ranging above $70 USD/barrel, we expect PVT can start to benefit from a better tanker chartering market from 2022F, when oil demand from the global market resumes gradually. Coupled with good growth prospects for 2022, we apply a new target P/E ratio of 12x for PVT (from 10x), and arrive at our 2022F-end target price of VND 26,200/share (+11% upside from the current market price).  We upgrade our rating for the stock to OUTPERFORM (from MARKET PERFORM), and recommend to accumulate the stock at points of price weakness. A short-term catalyst might come from the liquidation of PVT Athena in 1Q 2022, which might result in a strong one-off profit for the company. Downside risks from our call remain, including lower global oil demand than expected due to COVID-19 new variants, leading to lower chartering price in 2022F.

VPB’s 3Q 2021 PBT took a double hit from a sudden drop in NIM and weaker credit quality. While the latter had been expected, as VPB’s main client segments were heavily impacted by Covid-19, the NIM fell short of expectations due to the combination of a +141% surge in restructured loans, a loan rate cut, and loan mix evolving toward lower-risk loans. Asset quality remains our primary concern, as it should take more time for the mass client segment to fully recover and return to their normal repayment status, in our view. However, we believe that with the gradual improvement in funding costs and NIM rebound over time, the bank will have greater capacity to withstand higher provisioning. Accordingly, pretax profit for 2021 and 2022 are projected to be VND 15.9 tn (+22% YoY) an VND 19.6 tn (+ 23% YoY), respectively. We increase our target PB ratio for the parent bank to 1.7x (from 1.6x) but decrease our target PB ratio for FeCredit to 2x (from 2.2x) reflecting the different recovery pace and prospect between the two entities. Rolling our valuation basis to year-end 2022, we increase our 1Y TP to VND 44,530/share (from VND 39,300), representing potential upside of 13.6%. We call for Market Perform rating on VPB’s shares.

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We reinitiate another BUY rating for HAX. From our recent call in May 2021, HAX share price has increased 45% and reached our previous target. Although there was an unexpected trough in 3Q21 due to nationwide lockdown during fourth wave pandemic, demand for Mercedes cars remains strong, and is quickly recovering in 4Q21. Regardless of short-term risk of another pandemic outbreak, we believe that HAX outlook is getting brighter with: (1) big outlet expansion in Mekong Delta region to spark new demand for Mercedes, (2) automobile demand to boom from 2021 trough, boosted by government incentive, (3) prolonged chip shortage in 2022 to continue benefit auto dealers. Thus, we upgrade our 1-yr target price for HAX to VND 37,500/share, equal to 30% upside from the current price on Nov 26th, plus an expected 5% dividend yield for 2022. We expected HAX total sales and net profit in FY22 to reach VND 6.9 tn (+24% YoY) and VND 228 bn (+138% YoY), respectively.

Net profits for HSG and NKG in the recent quarter fell from the peaks in 2Q21, but still posted tremendous growth on an YoY basis, at 108% for HSG and 634% for NKG. Revenue for both HSG and NKG increased dramatically by 89% and 123% YoY respectively, driven by strong export volume and increase in ASP. We expect the earnings of the companies can maintain solid in the coming quarter and post substantial growth on a YoY basis, as both HSG and NKG have secured large export orders for the next 3 months at high price. However, the profit in 2022 can post negative growth of 30-37% from the peak in 2021 due to the normalization in gross margin following the correction in global steel price. Since our last report, the stock price of HSG and NKG has increased by 34% and 85% to their twin peaks in Oct, before correcting back by around -24% due to profit taking of investors and concern of falling global steel price. The current valuation for both stocks is quite fair in our view, taking into account the potential earnings correction in the coming year. Based on 2022 EPS forecasts and the PE target of 7x, our 1-year target prices for HSG for NKG arrive at VND 41,100/share and 45,800/share respectively, reflecting an upside of 7% and 7.8% from the current price. Accordingly, we downgrade the rating for NKG and HSG to Market Perform from Buy and Outperform respectively. However, given solid earnings in the coming quarter on an YoY basis, there can be trading opportunity for short-term investors with high risk tolerance if the stock price experiences a further correction. 

FMC reported net sales of VND 1.6 tn (+0.3% YoY), and NPATMI of VND 56 bn (-19.6% YoY). NPATMI declined due to a combination of high shipping costs (+148% YoY) and the spin-off off its An San factory into a new subsidiary, Khang An Foods (KAF). As such, FMC completed 81% and 72% of its annual targets for net sales and PBT respectively. The company has reserved adequate materials for 4Q21 production and is unaffected by surging material prices, benefiting from improved ASP. FMC management believes that the company remains on track to meet (and even exceed) annual targets. The proposed private placement to C.P. Vietnam (11.11% of outstanding shares at VND 50k/share) will increase its stake in CP to 24.9% post-deal, and raise VND 327 bn for FMC’s capacity expansion. The shares of FMC have re-rated due to the company’s stable profit, which is quite rare in the volatile fishery industry. Our new target price for the shares of FMC is VND 61k/share (up from VND 41k/share), and implies upside of 22.7%. We reiterate our OUTPERFORM rating.

We continue to issue a strong BUY for TNH shares, with revised target price of VND 84,000/share, representing 60% upside from the current price on November 19th. We continue to set an upbeat outlook for TNH, as this year’s earnings have trounced our previous expectations, irrespective of the nationwide pandemic outbreak. Also, with a safer bet in the ability to control pandemic outbreaks of Thai Nguyen province, faster progress of new hospital facilities in 2022 and sustained growth in hospital visits, we decided to raise our earnings forecast for TNH. We now expect the company net revenue to reach VND 430 bn (+28% YoY) in 2021 and VND 525 bn (+22% YoY) in 2022. For net profit, we expect it to reach VND 153 bn (+40% YoY) in 2021 and VND 180 bn (+18% YoY) in 2022. 

Credit quality remained a challenge for CTG during 3Q 2021, with provisions remaining quite elevated. As a result, we are lowering our: (a) PBT forecast for 2021 and 2022 by 3% (to VND 17.7 tn, +3.6% YoY) and 14% (VND 21.6 tn, +22% YoY), respectively; (b) Target price on the shares to VND 39,700 (from VND 42,300) – implying 23% upside; and (c) Rating to OUTPERFORM from BUY. All three changes applied to the shares of CTG reflect our belief that the credit quality and restructured loans might be a challenge to profitability for CTG over the next couple of quarters. Downside risk: Higher-than-expected credit costs and NPL-formation. Upside potential: The divestment from Vietinbank Leasing and completion of the exclusive bancassurance contract with Manulife may support the bank’s profitability and its capital buffer.