Company Report

MWG’s August net income dropped -32% YoY, as social distancing and lockdown policies tightened. This was well foreseen, and we were not surprised by lower-than-usual results. From September 16th, southern provinces began to relax social distancing/lockdown measures, allowing MWG to serve customers in-store and to provide home delivery services in areas deemed to be of low pandemic threat. This was welcome news, as re-opening prospects in this case were faster than our previous assumption of a re-opening around November. Given the speedier re-opening of MWG outlets, we increase our 2021-2022 net income forecasts by between 1%-2% to VND 4.5 tn (+14% YoY) and VND 6.0 tn (+35% YoY), respectively. By applying unchanged target multiples on 2022 revised-up earnings for the ICT segment and sales for the grocery segment, we derive a new target price on the shares of MWG of VND 143,000 per share (from VND 130,000). With upside potential of 13%, we reiterate our OUTPERFORM rating. Downside risk to our call would be a longer-than-expected duration of the COVID-19 pandemic.

2Q21 PBT increased strongly by +188% YoY to VND 1.97 tn, thanks to stellar growth of TOI (+87.3% YoY), while CIR decreased & provision expenses also decreased by -41% YoY. 1H 2021 PBT delivered VND 3.12 tn (+220% YoY), fulfilling 95% of the full year plan of VND 3.28 tn.We increase our 2021F PBT forecast by 6% to VND 4.23 tn (+67.8% YoY), while we reduce our 2022F PBT forecast by -9.3% to VND 4.43 tn (+4.6% YoY). Our forecast adjustment is influenced by our downward revision of NIM for both years, given prolonged low lending interest rates. MSB booked about VND 1.6 tn of upfront fee into income in 2Q2021, and we assume that MSB will continue to book VND 400 bn of the bancassurance upfront fee into fee income in 2022F. Provision expenses are revised up +5.8% to VND 1.1 tn (+6.7% YoY) in 2021F. We reduce our 1Y share price target for MSB to VND 29,600 (down from VND 31,400), using an average BVPS of 2021F and 2022F and unchanged P/B ratio of 1.5x. As this implies an upside of 2.4%, we subsequently maintain our Market Perform rating for MSB.

Given the resurgence of the COVID-19 pandemic in Vietnam during 3Q21, we lower our 2021E and 2022E earnings for GAS by 9% and 10%, respectively. Despite our earnings cuts, we are of the opinion that demand for dry gas will return next year, driven by a strong economic recovery and higher gas-fired electricity mobilization. Thus, we reaffirm our Outperform rating for GAS, with a new 12-month target price of VND101,500/share (previously VND105,000/share) based on an unchanged target P/E of 19x and EV/EBITDA of 11x on our 2022E earnings. Our target price implies 14.6% upside potential.  

MWG achieved upbeat results for 2Q21, with net sales and net income increasing by 20% YoY and 36% YoY, respectively. Notably, the grocery segment managed to break even in terms of EBITDA. Meanwhile, the resurgence of COVID-19 may leave MWG behind its full-year target of achieving 21% YoY growth in net income. In July, net income dropped by 29% YoY as the government placed restrictions on home delivery for ICT products, whereas the closure of wet markets and wholesale markets allowed BHX stores to post a record high revenue, helping the company to cushion the earnings decline. We hence revise down our 2021E net sales and net income by 10% and 13%, respectively, assuming the retail chains will reopen fully from November 2021. Market consolidation will accelerate amid the resurgence of the pandemic, enabling MWG to post strong earnings growth in 2022. We introduce our 2022 estimates, with net sales and net income respectively increasing by 19% and 33% YoY. We apply a higher target P/S for the grocery segment (from 0.3x to 0.5x as the company already reached EBITDA breakeven in 2Q21) and a higher target P/E for the ICT segment (from 10x to 11x thanks to market-share gains). By rolling over into 2022 financials and assigning higher multiples, we derive a new SOTP-based 12-month target price of VND130,000 per share (from VND110,000, adjusted for stock split). With upside potential of 19% from the current share price, we downgrade our rating to OUTPERFORM rating (from BUY). Downside risk to our call would be a longer-than-expected duration of the COVID-19 pandemic.

We rate a rate a strong BUY for TRA shares with the target price of VND 101,000/share – representing 29% upside from the current price on August 20th. Key investment catalysts for TRA are: 1) recent progress in the development of new herbal medicines & health supplements, while benefits from stricter quality control in Vietnam’s health supplement market, (2) lower SG&A expenses on sales with improvements in revenue of new R&D products and more efficient sales strategy, (3) higher utilization on synthetic drug factory with product transfer from Daewoong Pharma in H2 2021. Also, the company’s sales from trading & cosigned goods are expected to grow significantly with new signed distribution agreements with JW, CKD & other supplement brands. We expect TRA total sales to reach VND 2.19 tn (+15% YoY) in 2021 and VND 2.54 (+16% YoY) in 2022. Net income is expected to reach VND 275 bn (+26%) in 2021 & VND 353 bn (+29%) in 2022. As earnings growth has now begun to return from 2021 after going flat during 2015 - 2020, with lesser competition and higher diversification in products, we believe that 29% upside in the shares of TRA is achievable – especially given where industry peers are trading.

At the current price of 108,100 VND, VHM is trading at 2021 P/E and P/B forward metrics of 12.4x and 3.7x respectively. We maintain our 1-year Target price at VND 130,000 (upside 20%). For this year, with the solid backlog from sold projects such as Vinhomes Grand Park, Ocean Park, Smart City…, we expect the revenue and NPAT to achieve VND 94 tn (+31 YoY) and VND 33.4 tn (+20 YoY) respectively.  As the fundamental operations of VHM has no significant change, the share price fluctuation might be temporary in nature.

We call for MARKET PERFORM rating on the shares of BVH in 2H 2021 even though we keep our 1Y TP unchanged at VND 71,000/share. We consider the company as a gateway to the under-penetrated life insurance market in Vietnam. BVH trades at a discount to its historical average due to the current low interest rate environment, which we consider an opportunity for long-term investors. According to our estimates, 2H 2021 earnings growth might be negative at -33% YoY before bouncing back by +27% YoY in 2022. Hence, we believe investors could consider accumulating BVH in 2H 2021 at price weakness. Downside risk: Larger-than-expected decline in interest rates and VN government bond yields, and a qualified audit opinion for FY 2020 and 1H 2021. Upside surprise: A stronger-than-expected uptick in VN government bond yields.

Despite the positive revenue growth of 16% in 2Q21, BMP’s net profit fell by 73% YoY to VND42bn due to a sharp contraction in the gross margin, stemming from surging input costs. We believe the company’s business results will hit their lowest level ever in 3Q21, with the capacity utilization rate falling to between 20-50% during the July to September period, due to the social-distancing measures in place in Southern Vietnam. We lower our 2021E sales volume for BMP from 115k tons to 99 k tons (-10% YoY), and our gross margin from 18.2% to 14.0%, which leads to a 52% cut to our net income. Accordingly, we expect 2021E revenue and net profit at VND4.8tn (+3% YoY) and VND202bn (-61% YoY), respectively. Following our earnings cut, we downgrade our rating on the stock from MARKET PERFORM to UNDERPERFORM with a lower 12-month target price of VND51,700/share (previously VND55,000), based on an unchanged target PER of 11x now applied to our 2022E EPS (previously 2021E). We look for the share price to drop in the short-term, and then stabilize as we anticipate a recovery in business results from 4Q21. For 2022E, we expect the company’s results to recover with net profit rebounding to VND391bn (+ 94% YoY), on the back of 13% YoY growth in sales volume and a 5% correction in the plastic resin price. Upside risk: lower-than-expected input costs. 

We maintain a positive outlook on the shares of Gemadept. On the demand side, we expect strong growth for GMD volume in 2021 and 2022. On the supply side, however, Vietnamese production could face some challenges in 2H2021 given the resurgence of Covid-19 in the southern provinces. We believe that the company’s prospects are brighter in 2022, as the pandemic should be better controlled globally. We believe that Gemadept is a good proxy for the Vietnamese logistics industry due to its fully integrated nationwide network. We reiterate our 1Y TP of VND 56,200/share (which implies a 14.7% upside), and our OUTPERFORM rating on the shares of GMD. Our rating does not reflect the possible impact of a new potential floor price for port tariffs, nor the impact of the divestment of real estate/ rubber/ port projects which are positive catalysts for the shares of GMD.

Given the recent resurgence of COVID-19, VCB has announced a preferential lending package to impacted customers starting from 15 July 2021. This should cause net interest income to decline to VND1.8tn for 2H21E. As a result, we reduce our 2021E PBT by 8% to VND26.4tn (+14.7% YoY). We also look for 2022E PBT to reach VND33.7tn (+27% YoY), assuming credit and deposit growth of 14% YoY and 10.9% YoY, respectively, along with a NIM of 3.05%. We assume that VCB will issue a 6.5% pre-money stake during 2022. As a result, we trim our 12-month target price for the shares of VCB to VND113,500 (from VND114,200), which implies potential upside of 14%. We reiterate our Outperform rating on the shares of VCB.  

VHC held an analyst meeting on Aug 9th to discuss Q2’21 financial results and production status during the 4th Covid-resurgence in Vietnam. In 2Q’21, VHC recorded impressive Q2’21 results, wherein net sales and net profit grew by 41.3% YoY and 16.3% YoY respectively, bouncing off a low base in Q2’20. This was mostly thanks to the reopening of the US economy (60% of total VHC pangasius exports). With the current disruption experienced during this instance of viral resurgence, management is not very positive about 2H21. While the problem lies neither on the demand nor the supply side (production applying the “3 at the spot” work/live on-site practices in place), disruption in the transportation of goods due to container shortages is causing difficulty when it comes to managing costs, as many orders are stuck at seaports. We updated our estimates to reflect uncertainties in 2H21 (cutting NPAT estimates by 4% and 6% in 2021 and 2022 respectively). However, we still expect a good recovery from VHC in 2022, assuming that global shipping costs will wind down (-15% YoY and 2.9% of sales). We also rolled forward our 2022E EPS to derive an updated target price of VND 47,000/share (+12% upside). As such, our rating for the stock is MARKET PERFORM.