Company Report

Given the 20% run in the shares since our previous call on June 24^th, 2020, we believe that the shares of PVS are fairly valued and have downgraded the shares to Market Perform from Outperform. This, despite increasing our 1-yr target price to VND 16,200 (from VND 15,300/share) [representing an ROI of 16%, including a dividend yield of 6.6%], as we roll valuations over to 2021and raise target P/E to 12x from 11x combing with DCF method . For Q3, PVS posted a strong set of results, as net sales reached VND 6.0 tn (+28.4% YoY) and net profit reached VND 223 bn (+165% YoY). Cumulatively through 9M 2020, revenue amounted to VND 14.7 tn (+8.5% YoY) with NPAT of VND 635 bn (flat YoY) and NPATMI of VND 575 bn (-11% YoY). This upbeat set of results through Q3 allowed us to revise our forecasts for PVS, as 2020 and 2021 NPAT are now VND 764 (-5.5% YoY) and VND 685 bn (-10.4% YoY), respectively. The 2021 earnings forecast decline is attributed to the sharp decrease in the confirmed backlog for M&C (-44% YoY). We only account for remaining contract value from ongoing projects such as LNG Thi Vai, and Dai Nguyet WHP and others. This suggests that there could be upside to our 2021 forecast if PVS can win the new EPC contracts that it is currently bidding for. 

3Q2020 revenue + 137% YoY, PBT +5% YoY, due to new pricing cut. Jan-Oct PBT growth +14.9% YoY, completing 62% of the 2020 target. Divestment of Viettel Group (6% stake in VTP) is successful on 11^th Nov 2020. Further investment is not yet planned. Reiterate OUTPERFORM rating. New 1Y TP: VND 121,000/share (12% upside) (from previous TP of VND 112,000/share), based on 2021 PBT new estimated growth of 35% YoY (old estimates of 44.8% YoY).

At VND84,900 per share, the shares of VCB trade at 2020E and 2021E P/B ratios of 3.28x and 2.61x, respectively, which is more than double the sector average of 1.45x and 1.31x. 

Our new 12-month target price of VND97,400 (previously VND89,200) is derived from our unchanged target P/B ratio of 3.0x applied to our 2021E BVPS (previously average 2020-21E BVPS) and implies upside potential of 14.7%. Our analysis does not take into account the cash dividend yield of 1.9% for 2019 and 2020 to be paid out in 2020-21. As a result, on valuation grounds we are upgrading our rating on the shares of VCB from Market Perform to Outperform. Key downside risk: higher-than-expected NPLs.

Maintaining Market Perform rating. We increase our estimated credit growth for 2020 to 22.1% (23% of the parent bank and 13% at HDSaison), reflecting parent bank credit growth of roughly +20% YTD through Oct 2020. As the bank continues to extend its restructured loan balance, the 2020 provisioning burden will be partially lifted and carried over to 2021 and onwards. Accordingly, PBT for 2020 and 2021 is expected to attain VND 6 tn (+18.1% YoY) and VND 7 tn (+17.7% YoY), respectively. Our target price for the stock is VND 29,000 and represents 13.7% upside. We reiterate our Market Perform rating.

Better-than-expected recovery in restructured loans. The restructured loan balance declined -34% QoQ to VND 5.1 tn (1.9% of total loans), as MBB clients recovered strongly. Meanwhile, NPLs (before write-off) declined by -3 bps to 1.65%, and Group 2 loans were essentially flattish at 1.47% (vs 1.49% at the end of 2Q 2020), and within acceptable levels. Such a recovery came earlier and was even better than our expectation. This was in conjunction with earnings growth of +10% YoY in 3Q 2020. Upgrade to BUY rating. Given such a recovery, we lowered our credit cost assumptions from 2.6% and 2.8% for 2020 and 2021, respectively, to 2.31% and 2.45%.  As such, we revise our PBT for 2020 and 2021 forecasts to VND 10 tn (+0.15% YoY) and VND 11.7 tn (+17.1% YoY), respectively - a 6.7% and 8% increase from our previous forecast. With a 1 YR price target of VND 24,800 /share (36% upside), we upgrade the shares of MBB to a BUY rating. 

We upgrade our rating on BID to OUTPERFORM from Market Perform, and raising our target price to VND 47,100/share (from 43,650/share) – representing 20% upside. Our upgrade reflects both the reality that COVID-19 has not been nearly as severe as initially forecast, and a positive outlook for NIM in the upcoming quarters thanks to a more favourable interest-spread environment. This is best reflected in BID’s 3Q 2020 PBT of VND 2.7 tn (up 16.6% YoY) which was slightly higher than our forecast. In addition, BID’s non-interest income was quite robust given the favorable market environment for foreign exchange and fixed income. As a result, we have increased our pretax profit forecasts by +5.1% and +2.4% for 2020 and 2021, respectively, to VND 9.1 tn (-14.8% YoY) and VND 13.2 tn (+44.4% YoY). 

Reflecting a hydropower recovery from 3Q ’20 onwards, we lift our 2020 and 2021 NPATMI forecasts by 14% and 9%, respectively, under our base case.  As such, we increase our 1Y TP 11% to VND 46,200, which implies a 13% ROI (including 4% dividend yield). Additionally, given upside surprises for our earnings forecast under best case, we see that the 2021 NPATMI growth will potentially register 14.1% YoY if La Nina expands until the end of 2021. We reiterate our Outperform rating on the shares of REE.  

We upgrade our rating on the shares of STK to BUY from Market Perform. Via a stable P/E target of 7.0 applied to 2021F EPS, our target price for STK arrives at 21,400 VND per share (+32% from previous TP), representing an upside of 18.9%.  Our upgrades are predicated on the continued strong recovery since September. This is especially true for recycled yarn and value-added yarn – the two product lines which differentiate STK from most other local yarn producers.

After the resilient 3Q20 results, we raise our 2020-21E net income by 15-37%. Our 2020E net sales and net income now rise to VND112.4tn (+10% YoY) and VND3.872tn (+1% YoY), respectively. For 2021E, we are raising our top line to VND140.8tn (+25% YoY), while we expect strong net income, up by 36% YoY to VND5.3tn, to be driven by: (1) the recovery in discretionary spending; (2) additional market share gained in the ICT segment during the pandemic; and (3) continuous improvement in profitability of the grocery segment. At the current price of VND106,800, MWG trades at 2020-21E PERs of 12.3x and 9.3 x, respectively, which we consider attractive. Using unchanged target multiples (PER of 9x for the ICT segment and P/S of 0.3x for grocery segment), and rolling over our valuation basis to 2021E earnings, we derive our new SOTP-based 12-month target price of VND147,000 (previously VND113,700), which implies 38% upside potential. Hence, we are reiterating our BUY rating on the shares.

We are upgrading the shares of VHC to OUTPERFORM from Market Perform, reflecting both a rollover to 2021 EPS forecasts and the application of our SoTP methodology. As such, we are raising our 1 year target price on the shares to VND 48,200 – which represents 16.1% upside. Our upgrade is also supported by the continued recovery in the pangasius segment, as well as the continued strength in VHC’s wellness segment – which has grown to 8.5% of the top-line through 9M20 (2019: 6.5% in top-line). Further, we find that VHC has outperformed peer during the 2020 pandemic chaos with quite stable Q3 net sales, as it remains on track to meet plan. 

The increase in our 2021E pre-tax earnings by 3% coupled with a P/E target re-rating in the technology segment from 13x to 14x causes us to increase our 12-month TP by 12% to VND62,600. The latest FPT deal wins in 3Q20 should add to 4Q20 earnings growth and beyond. We also see attractive earnings growth over 2020-21 relative to its peers. Forward-facing momentum is further fueled by a large net cash balance which can be used to finance M&A deals. Thus, with 22% upside potential to our new TP, we issue our BUY rating on the shares of FPT. 

We are upgrading the shares of PNJ to OUTPERFORM from UNDERPERFORM, as we raise our target price to VND 78,100 per share (up 36% from our previous TP) which represent upside of 13.2%.  We believe that September marked the turnaround for PNJ, with SSSG bouncing back to low-teens growth after falling into negative territory  in August. Although the retail sales growth was achieved mostly because of larger ticket size (which possibly was a result of higher gold price this year); transaction volume has recovered to flat growth during the month, according to the management, showing a good sign of demand recovery. We believe that the demand recovery occurred due to: i) PNJ’s target customer group (middle-income class) being less affected by the pandemic than expected; and (ii) PNJ’s adaptation to new market conditions and new preparedness to capture the demand recovery post-pandemic. 

We reiterate our MARKET PERFORM rating on the shares of SHB and maintain our 1Y target price of VND 16,950 (+6.6% upside). SHB relies heavily on wholesale lending channels, and as a result is substantially more sensitive to market movements. The downtrend in interest rates should continue to act as a major supportive factor for SHB earnings, as it now has a better ability to more aggressively offset losses associated with problem assets. 

Given the protectionist measures expected to be implemented which should positively impact domestic sugar consumption along with the return to profitability for the biomass segment in 2021, we are increasing our share price target on the shares of QNS to VND 43,100 per share – representing 28.7% upside and an ROI of 37.6% when the dividend yield is included.   In addition, our OUTPERFORM rating on the shares is supported by: i) soymilk sales exceed industry average; ii) in 2021, both sugar and biomass segments are anticipated to benefit from a higher sugarcane yield and higher ASP troughing during the COVID-19 pandemic; iii) the completion of an enormous CAPEX plan for sugar/biomass.