Company Report

Net profit for HSG in 3Q20 grew at a remarkable breakneck pace of +91% YoY to VND 307 bn, fueled by the drop in HRC input price versus a resilient output price. Sales volume in the quarter also increased positively by +5% YoY on the back of pent up demand from Feb-Mar period due to the Covid-19 epidemic, as well as from gradual stabilization in export volume. As results in 3Q20 exceeded our expectations, we revise up our net profit forecast for FY2020 from VND 670 bn (+85% YoY) to VND 841 bn (+133% YoY). For 2021, although we expect sales volume might increase by +4% YoY to 1.52 mn tons, net profit is expected to correct by -5.6% to VND 794 bn due to normalization in the gross margin. HSG shares are currently trading at P/E and EV/EBITDA 2021 levels of 6.5x and 4.2x, respectively. We maintain our Outperform rating for the stock, with a 1-year target of VND 13,700/share based on an unchanged composite target PE and EV/EBITDA of 7x and 5x, respectively – implying upside of 22%. 

On the back of a -9% YOY decline in 1H ’20 VCGM price – where we do not envision a recovery until mid-2021 when the COVID-19 pandemic is contained; and a downward-revised PPA price for PPC’s associate - Hai Phong Thermal Plant (HND) in 2021 which will negatively impact overall earnings and the company’s dividend; we revise downward our earnings forecast for 2020 by 3% and remain weak outlook for 2021. As such, we are forced to cut our price target by 5% to VND 26,000 – which presents investors with a meager 5% upside. The questionable dividend yield of 8% in FY20 causes us to maintain our Market Perform recommendation. Furthermore, by looking forward to FY21, we expect a lower dividend yield of 6% due to saving up cash for Pha Lai 3 coal-fired plant’s capex purposes. Pha Lai 3 is being debated & approved to add into the Power Development Plant VIII (construction pipeline: kick off from 2022-2023 and finish in 2027-2028).

We maintain our Market Perform rating on MSN: At the current market price, MSN shares trade at a 2020E P/E of 71.1x and EV/EBITDA of 9.2x, respectively. We maintain our Market Perform view on MSN, with a 12-month target price of VND64,900/share before dilution, or VND59,000/share after dilution should we take the private placement plan into account, though we would also have to evaluate the impact of the above-mentioned M&A deal. Downside risk: lower-than-expected domestic demand for packaged foods and meat products; upside risk: higher-than-expected VCM revenue growth. 

The previous lockdown order in Vietnam coupled by unrecovered demand by way of pandemic-related lower income brought VEA profit down. Moreover, VEA is going to make a provision for uncollectible loans. Therefore, VEA might experience a contraction in consolidated profit for Q2. We consider reviewing our forecast after its 1H financial statement is announced. Until then, we maintain our previous forecast for VEA. Net sales is forecasted to come in at VND 4.508 tn (+0.3% YoY) and VND 4.811 tn (+6.7% YoY) in 2020 and 2021. Net income reached VND 6.633 tn (-9.4% YoY) in 2020 and VND 7.157 tn (+7.9% YoY) in 2021. We continue to provide a Market Perform rating for the stock, with a 1 year TP of VND 48,300 (+11% upside in capital again and +23% in total return including 12% dividend yield), and we reiterate our buy-the-dip recommendation. 

In 2020, we expect handling volume of GMD ports to be flat at 1.7 million TEU in total, though revenue and profit from this segment might be contracted due to high competition. We also assume Gemalink will operate in the last 2 months of 2020 and make a small loss with expected utility of 10% capacity. We estimate GMD net sales and PBT to reach VND 2,372 bn (-10% YoY) and VND 537 bn (-24%) in 2020, translating to 1,273 VND (-20%) in EPS. Looking forward into 2021, we assume Gemalink might fulfill 50% its capacity in 2021, lower than the management expectation (60% capacity). At this level, Gemalink might make sizeable loss and drag down consolidated results of GMD to VND 567bn (+5% YoY) in PBT, estimated EPS is 1,345 VND in 2021. Combining 3 valuation methods including DCF, and PE and PB multiples, we arrive at target price of VND 22,300/share at the end of 2021. With 18% upside, we rate the stock OUTPERFORM.

Given the current market price, VTP is trading at 2020F and 2021F P/E ratios of 17.7x and 13.1x respectively, which shows that 2020 growth prospects have been reflected quite fully into the current stock price. As the stock price has advanced recently, we change our recommendation to an OUTPERFORM rating, with a new 1Y target price of VND 160,000/share (17% upside) based on a new target PE of 18x (a switch from the old target of 20x due to higher short-term-risk from the pandemic). We still prize this stock when looking at its potential for long-term growth. We believe the pandemic has sped up the consumer transition in behavior toward e-commerce, and this benefits VTP. A downside tail risk from our call comes from the risk that COVID might come back in a 2nd wave, or that a new competitor might increase pricing pressure for VTP. Currently, barrier of entry is high for international companies in this sector, as foreign ownership limit for domestic transportation firm is 49%. Also, it takes very large capital and time in order to establish a nationwide network like that of VTP. 

The company set its FY20 targets for sales and NPAT at VND 7 tn (+20% YoY) and VND 469 bn (+25% YoY). In general, we think that it is quite aggressive given the negative impacts from Covid-19 upon the grid construction pipeline, compounded by unfavorable weather for the hydropower segment in the next 3-6 months. Management also shared that 1H20 prelim sales (+1.7% YoY) and NPAT (+6.4% YoY) fulfilled 44% and 54% of their respective targets. Although we are quite concerned about FY20 results given the unexpected nature of the Covid-19 pandemic, we believe that the company might still earn positive growth in FY21, and power through with strong double-digit growth in FY22: (1) In FY21, the grid construction sector might enjoy higher disbursement from the National Power Transmission Co. (EVNNPT) for transmission line projects on the back of Power Development Plan VIII being finalized in FY20. (2) In FY22, we estimate PC1 to achieve sales and NPAT growth at 11.2% YoY and 15.4% YoY, thanks to solid growth from the grid construction sector, coupled with full production coming online from the Lien Lap wind project.  Within our base case, we call for a  MARKET PERFORM recommendation, with a target price of VND 19,800. This offers a potential upside of 9% vs the 04-Jun-2020 closing price. As of the 04-Jun-2020 closing price at VND 18,200, PC1 P/E is traded for FY20/FY21/FY22 at 7.9x/7.6x/6.6x. Given the FY2020-2022 EPS CAGR of 9%, the current price may offer a 3Y PEG at 0.8x.

We finetuned our 2020 estimates for QNS in light of 1Q20 results and the recent post-lockdown situations. For 2020, we raise our RS sales volume forecast to 87k tons from 80k tons, and expect sales volume of soymilk to contract by -1% (previously -5%), expecting a net sales position of VND 8.186 tn (+6.6% YoY) and a PAT of VND 1.229 tn (-4.8% YoY). For 2021, we expect net sales of VND 9.924 tn (+21.2% YoY) and net profit of VND 1.448 tn (+17.8% YoY), backed by strong recovery of sugar sales, in both price (+5% YoY) and volume (+30% YoY). QNS shares are now trading at the price of VND 26,100 per share, equivalent to 2020 and 2021 P/E ratios of 6.44x and 5.46x. We maintain our target P/E of 8.0x for QNS. We apply a discount of 15% on the target price, but roll EPS over to the 2020-2021 average. Our target price for the shares thus arrives at VND 29,900 (a +15% upside). Hence, we maintain our Outperform rating for the shares. 

At the price of VND 11,400/share, PVD is trading at a 2021 P/B ratio and an EV/EBITDA ratio of 0.35x and 4.17x for a base case scenario. This is comparatively lower than the respective regional peer ratios of 0.43x and 16.2x, and lower than the historical P/B and EV/EBITDA of 0.54x and 12.1x. Because of the uncertain workload in 2021 brought on from the risk of coronavirus affecting company operations, we set a 1-year target 2020 P/B ratio and EV/EBITDA ratio at 0.35x and 6.0x, equivalent to a 1-year target price at VND 12,700 per share for our base case scenario, equivalent to an upside of 11.4%.

At the current price, BID is trading at a 2020E P/B ratio of 2.12x and 2021E P/B ratio of 1.92x. BID is the largest bank in Vietnam, and has many advantages in the form of an optimal customer base that comes with its size. In addition, having taken the necessary actions to effect a drastic settlement of all of its VAMC bad debt in 2020, the bank is poised to fulfill its potential and create the momentum for growth in 2021 and beyond. We set a new target PBR of 2.2x (from 2.0x) on the average BVPS of 2020 and 2021, and derive a 1-year target price of VND 45,300. With upside potential of just 9.3%, we downgrade our rating on BID to MARKET PERFORM.

As we still remain cautious regarding credit risk of the consumer finance industry under the current circumstance, we reiterate our Market Perform rating for VPB, with an 1Y target price of VND 25,020/share. The key upside surprise to our call outside our immediate expectations would be an earlier-than-expected containment of Covid-19 (before the end of Q2 – both within Vietnam and at least regionally), and a better recovery rate in relation to restructured loans. The key downside risk to our call would be a prolonged pandemic situation, which would trim down our estimates potentially lower than the aforementioned forecasts.

We raise 1-yr target price for MSN to VND 64,900 (from VND 59,000) based on the SOTP approach applied to 2020-2021 earnings projections, plus the application of a 15% conglomerate discount. Our recommendation is Market perform.  We forecast group NPATMI growth of -83.2% / +89.1% in 2020F/2021F.   The consolidation of VCM and lack of extraordinary income look to undermine 2020 earnings, while a decent rebound in NPATMI from the 2020 low base is likely for 2021 although the 2020/2021 P/Es look pricey at 76.9x/40.6x. Downside risks: Lower-than-expected domestic demand for packaged foods and meat products, as well as higher than-expected commodity prices (raw fish sauce, wheat, maize, soymeal, etc.) and metal prices (tungsten, copper, etc.). In addition, there are risks for the meat deli business in the form of a lower-than-expected conversion ratio from wet-market pork to chilled pork, as well as possible diseases at hog farms that impact pork consumption and the hog price. Upside surprises: Stronger-than-expected demand for MSN products, higher-than-expected VCM revenue growth, or any unpredictable one-off income. The consolidation of the mid-stream tungsten platform in 2020, which we have not taken into account yet, could also be an upside to our forecasts.