Company Report

As we roll forward our valuation basis to 2022, we increase our 1Y target price to VND 49,000/share (from the current VND 46,400/share), intimating just 14% potential upside. With such limited potential upside, we are lowering our rating on the shares of TPB from Buy to Market Perform, as the shares have risen 20% since our most recent upgrade in August. Although we remain positively pre-disposed to the shares of TPB, the shares have already priced-in the recent private placement and above peer earnings momentum. Pretax profit for 2021 and 2022 are projected at VND 5.8 tn (+33% YoY) and VND 7.2 tn (+23% YoY), respectively. Upside surprise: Stronger capitalization after the recent private placement (CAR improved to 14.63%), should be supportive for the bank to gain an even higher credit quota. Downside risk: Higher-than-expected NPL formation.

In 3Q21, PNJ posted net sales of VND 877 bn (-77% YoY) and a loss of -VND 159.5 bn (Q3’20 net profit of VND 202 bn), in line with our forecast. Although sales have been slow for the first two weeks of October, they did accelerate during the last half of the month, especially with its Vietnamese Women’s Day promotion on 20/10 when sales were at an all-time high. As a result, PNJ’s sales over recent weeks have surpassed management’s expectations despite slow recovery (total retail sales in October declined -19.5% YoY per GSO). We increase our 4Q21 and 2022 estimates by 5.6% and 7%, respectively, to VND 416 bn and VND 1.44 tn. As such, we increase our 1Y target price on the shares of PNJ from VND 101,300 to VND 117,300 (+13.9% upside) and reiterate our OUTPERFORM rating. 

We raise our 1Y TP on the shares of OCB by 16.2% to VND 32,300 (representing upside of 15.3%), and call for a Market Perform rating. OCB enjoyed robust earnings growth during 3Q 2021 of +71.1% YoY. 22% YoY (+10% YTD) credit growth, solid government bond trading gains of VND 463 bn (vs. VND 78 bn in 3Q 2020), and lower credit costs drove OCB’s bottom-line. What distinguished OCB from other banks during quarter was its credit metrics. While the rest of our coverage universe had experienced QoQ surge in past dues, OCB’s Group 2 loans dropped -51% and NPLs remained flat. However, restructured loans doubled to VND 2 tn (2% of total loans), which was in line with what we observed at many banks. We estimate that OCB will be able to post a robust PBT growth of +20% YoY (VND 5.3 tn) in 2021 before retreating to +16.5% YoY (VND 6.2 tn) in 2022. Downside risk: Higher-than-expected rise in government bond yields, which could impede trading gains; and higher than expected NPL formation.Upside surprise: Higher-than-expected pricing of the 70 mn share issuance; and higher-than-expected profitability of the government bond trading activities. 

VCB’s 3Q21 results were better-than-expected, with PBT reaching VND5.7tn (+15% YoY). Solid credit growth (+11.6% YTD, or +19.4% YoY) and a NIM of 3.15% (-35bps QoQ, but +14 bps YoY) buoyed results. Despite the scale of the support package, the pace of QoQ NIM contraction at VCB was on par with other bank results. In 4Q21, we expect the NIM will trend lower still, as the bank continues to maintain low yields for customer support without much room for improvement on the funding front. Nevertheless, we modestly increase our 2021E PBT by 3% to VND25tn (+8.6% YoY). Rolling forward our valuation basis to 2022E (from average 2021-22E) and applying an unchanged 3.0x PBR, we lift our 12-month target price for the shares of VCB to VND117,000/share (from VND111,500 /share), implying 20% upside potential. Despite our more sanguine outlook on VCB’s medium and long-term prospects, we believe earnings growth over the next couple of quarters could disappoint - impeding near-term performance of the shares. We maintain our Market Perform rating, and prefer to see continued execution on earnings delivery before getting more constructive on the shares. 

We are upgrading VNM from Market Perform to Outperform, as we raise our target price to VND 106,000/share (from VND 103,000/share) based on a blended DCF and 21x 2022E PER valuation methodology (previously 21x avg 2021-22E PER) - implying 17% upside potential. Our positive outlook on VNM reflects a return to growth - Q3 sales (+3.7% YoY) and parent-company sales +4.5% YoY, after three consecutive quarters of contraction. Notably, according to management, sales growth accelerated to above +20% YoY in October. In addition, VNM expects Q4 sales growth in the range of 10%-15% YoY, as last year’s result was impacted by heavy floods in the central region. Downside risk: Lower than expected sales/higher than expected raw material prices.

We upgrade our rating on the shares of MSB from Market Perform to Outperform, and raise our 1Y TP to VND 28,400/share (from VND 23,000/share) - representing upside of 13%. Our upgrade reflects our 2021E and 2022E PBT increase of 16% and 19% vs. previous estimates, respectively. Specifically, we forecast that MSB will post +95% YoY PBT growth in 2021 - fueled by robust credit growth and NIM expansion. Meanwhile, 2022 PBT is expected to increase +25.8% YoY. Even when we exclude the one-off income for 2021 (bancassurance upfront fee) and 2022 (divestment of FCCom and bancassurance upfront fee), core PBT growth is projected at 43% and 20% YoY, respectively. Downside risk: Higher-than-expected NPL formation rate.

We maintain our Market Perform rating for the shares of BID, despite the increase in our 12-month TP to VND50,000 (from VND48,000). 3Q21 results exceeded expectations from a credit growth, NIM sustainability (at 2.97%), and bad debt perspective. The bank wrote off VND5.4tn in bad debt during 3Q21, on top of providing an additional VND7.5tn against problem loans. This caused PBT to inch lower by 1% YoY to VND2.7tn, although asset quality metrics have clearly stabilized. Through 9M21, pretax profit for BID reached VND10.7tn (+52% YoY), completing 79% of our in-house full-year estimate. As restructured loans have more than doubled in 3Q21, we still see some pressure on credit costs going forward which likely will impact the bottom line. We maintain our PBT estimates for 2021E and 2022E at VND13.5tn (+50% YoY), and VND15.5tn (+14% YoY), respectively. An upside risk to our call would be a better-than-expected recovery in restructured loans, as well as any firm progress in its new share issuance of 8.5% pre-money charter capital. Improved capital would enable the bank better growth potential. We also expect that the stock dividend will be finalized by December. Downside risks include macroeconomic weakness.

SAB reported 3Q21 net sales and net profit of VND 4.3 tn (-47% YoY) and VND 472 bn (-68% YoY), respectively, the lowest level since 2014. Depressed results were due to the prolonged lockdown restrictions which caused distribution to be grounded for the majority of Q3. The company, however, is guiding for an improved outlook and is confident of GPM expansion in 2022. Positive forward-looking factors include a rebound in production volumes, a marginal increase in ASPs, and effective hedging of raw materials. After the recent share price run up of +9%, we downgrade our rating on the shares of SAB from BUY to OUTPERFORM, with an unchanged 1Y target price of VND 190,000/share (+10% upside potential). 

STK reported 3Q net profit results of VND 62.4 bn, increasing 210% YoY from the low base of prior year, thanks to the uptrend in polyester prices. The company also provided a window into 4Q21 and beyond. Apart from benefiting from the global increase in yarn prices, the recent conclusion of both anti-dumping natters should allow STK to expand sales volume domestically and in the US market. Over the longer term, we expect capacity expansion from Unitex starting from 2023, which should provide sustainable growth. As a result, we increase our 1Y target price from VND 43,300/share to VND 69,400/share (+14.7% upside). We reiterate our OUTPERFORM rating on the shares of STK.

With a FY21-25 CAGR of 12.3% YoY, we believe that the shares of REE remain attractive given the current growth momentum in hydropower, wind projects, and other long-term projects (E-Town 6 office building) and public investment which will drive M&E (Long Thanh airport-terminal). As a result, we raise our 1Y TP for the shares of REE to VND86,400 (from VND64,000), which represents 14% upside. We call our OUTPERFORM rating on the shares. 

Reflecting our revised estimates, we derive a new 12-month target price of VND 190,000 (previously VND 183,000), which is predicated on an equally weighted target P/E of 28x (from 25x) and our DCF. As SAB gained back market share temporarily during the lockdown period, which is a special circumstance, it is early to conclude that it can sustain its market leader position. However, we think it still deserves a re-rating due to the following: (i) we believe that there will be a strong demand recovery from November post-Covid-19 lockdown; and (ii) SAB can rely on the strength of its on-trade channels and distribution network in order to capture sales volume growth more quickly, as folks begin dining out again. At the current price of VND 159,900/share, SAB is trading at 2021 and 2022 P/E of 26.7x and 23.2x respectively, which is rather attractive compared to its historical average P/E of 34x. With 19% potential upside from the current levels, we upgrade SAB to BUY (from Market Perform). Key downside risks to our call are softer-than-expected sales volume due to the stiffer-than-expected competition, and further lockdowns.

In our estimates, excluding the one-off, non-cash gain from the revaluation of Tan Phat JSC in 2Q 2021, PC1 could still offer an approx. NPATMI of 16% YoY in FY22 (VND 559 bn) - led by three wind power projects (Lien Lap, Phong Nguyen, and Phong Huy). PC1 should also enjoy attractive long-term growth in 2023 NPATMI (+40% YoY), driven by Vinh Hung & Bac Tu Liem projects and Tan Phat’s new nickel project. We call for Outperform rating and 1Y TP of VND 46,800 (+18% upside) on the shares of PC1. An additional 81MW hydropower plants could come on line since 2024 - 2026, lifting total hydropower capacity to 283MW by 2026  - up from 168MW in 2021.  

VHC reported strong growth for 3Q21, with net sales of VND 2.2 tn (+24% YoY) and NPATMI of VND 255 bn (+46% YoY), respectively. Cumulatively, the company accomplished 74% and 93% of annual targets for net sales and PAT. VHC was the most profitable fishery exporter out of Q3 lockdown, benefited from strong demand from the US market coupled with a higher ASP. The company has been running at between 85%-90% capacity while implementing “three-on-the-spot” work-live on-site production and keeping administrative expense stable. As VHC has proven its position as a market leader from time to time, we believe that the shares deserve their re-rating over the past two years. We raise our target P/E for the key segments of VHC – 13x for wellness segment and SGC, and 10x for pangasius segment (previously 10x and 7.5x, respectively) and use mid-2022 TTM EPS as our base. Our new price target is VND 70.2k/share (up from VND 47k/share), implying an upside of 13.4% and a total ROI of 16.6%. We upgrade our rating for the shares from Market Perform to Outperform.

Viconship announced impressive prelim 3Q 2021 PBT results of VND 149.3 bn (+73.4% YoY), supported by superior volume growth relative to peers and enhanced profit margins post-management reshuffle. We observe marked improvement in company profit margins in 2Q21 and 3Q21. As a result, we increase our PBT forecasts to VND 474 bn (+41% YoY) and VND 604 bn (+27% YoY) in 2021 and 2022, respectively. We reiterate BUY rating on the shares of VSC on the back of higher earnings outlook and the potential strategy change into a growth company after several years of stable earnings, leading to our re-rating to 2022F target P/E ratio of 12x. Pre-money 1-year target price is VND 80,800/share (+26% upside), while post-money target price is VND 46,500/share (after 1:1 rights issuance in the coming time). VSC offers 1:1 rights issuance to all shareholders (ex-rights date on Oct 25), and short-term selling pressure could increase with some large shareholders registering to sell 1.5 mn shares over the near-term. Over the longer term, increased risks come from the new project pipeline which will require large capex with profit uncertanties. However, this also presents Viconship an opportunity to become more of a growth company.