Company Report

MWG released solid 2Q24 financial results, with net sales of VND 34.1 tn (+16% YoY) and net income of VND 1.17 tn (vs. only VND 17 bn in 2Q23), which was ahead of our full-year estimates. In 2Q24, the company resumed closing poor-performing ICT & CE stores (last time the company closed ICT & CE stores was in 4Q23) to further optimize costs in the coming quarters. This, together with a lower inventory balance, further helped to revive the profitability of the ICT & CE segment. Meanwhile, the performance of the grocery segment tracks our annual estimate, with continually rising sales per store and hence profitability. The chain managed to deliver positive earnings in 2Q24 (PBT of VND 7 bn), though the new openings pace remained slow in 1H24. Nevertheless, once revenue per grocery store stabilizes, the company will focus more on optimizing costs (digitalize operational activities to reduce labor and logistics costs) to enhance the profit margin and also accelerate new openings. MWG expects its grocery store count (~1,700 store outlets in Vietnam as of 2Q24) to well surpass the ICT & CE store count (~3200) in the midterm (2027-2028). With better-than-expected 2Q24 results of the ICT & CE segment, we revise up our 2024-25F net income to VND 4.3 tn (+26x YoY, from VND 3.47 tn) and VND 6.0 tn (+39% YoY, from VND 4.5tn). We derive a new SOTP-based 1Y target price for MWG at VND 76,000 (from VND 65,800) based on 2025F financials and maintain the OUTPERFORM rating.

2Q24 NPAT reaches highest level since 3Q21: 2Q24 Revenue from land lease was VND 233 bn (-11% YoY) with leased area of 7.2 ha (-18% YoY) at USD 92/m2 (+7.8% YoY). The gross profit margin increased sharply to 61.8% (+7.8% YoY), as the company commanded the highest lease prices since the industrial park began operating. Subsequently, net income reached VND 102 bn (+6% YoY). For 2024, we expect lease price increases of 12% YoY, with an MOU expected to be inked from Tripod and other small investors totaling 45 ha (+12% YoY) - higher than the company's annual total leasing plan of 40 ha. In 2H24, SZC's net income is forecast to reach VND 141 bn (+14% YoY). Accordingly, total revenue is estimated at VND 1.08 tn (+32.8% YoY), and net income at VND 308 bn (+ 40.5% YoY) - higher than the company's targets of VND 881 bn in revenue and VND 228 bn in net profit. EPS is VND 1,724 /share, and is equivalent to a forward P/E of 19.8x for 2024 - higher than the industry average P/E of 10.9x.

Recent sharp JPY movement is not material to the company’s fundamental and valuation. It has been all over recent news that the Yen has appreciated sharply against the USD as well as the VND due to the BOJ’s sudden rate hike. Specifically, we observe that from its trough, the JPY has appreciated by 9.5% against the VND to VND 172/yen. This has effectively erased all JPY depreciation YTD, and brought the JPY/VND back to the level at the beginning of 2024. In our view, even though the JPY movement is large and sudden, we do not see the impact as too material to ACV. Upgrade to BUY, maintain target price of VND136,000/share. The recent stock price movement is not exactly linked to the fundamentals of the company, and thus presents an attractive opportunity to accumulate the stock. In terms of fundamentals, we maintain our estimate that ACV’s PBT would grow by 38% YoY in 2024F and 20% YoY p.a. in 2025-26F as in our last report. We maintain our 12-month TP of VND136,000/sh (+23.7% upside potential) based on a 2025F EV/EBITDA target of 16x, and upgrade our rating for ACV to BUY (from OUTPERFORM) on valuation grounds.

FPT continued its impressive growth path during the first half of 2024, with revenue and NPAT achieving of VND 29.3 tn (+21.4% YoY) and VND 4.4 tn (+21.2% YoY), mainly driven by the technology segment.

Overall, the 1H24 results were in line with our expectations. Our respective 2024 and 2025 NPAT forecasts for FPT are VND9.3tn (+19% YoY) and VND11.1tn (+19% YoY). Our SOTP-based 12-month target price for FPT is VND142,800/share (from VND141,500) and we upgrade our rating to OUTPERFORM (from Market Perform).

With a 12-month target price of VND 24,700 (equivalent to 26% upside potential), we upgrade our rating from MARKET PERFORM to BUY for the shares of NT2. We witnessed a higher-than-expected NPAT for 2Q24 due to higher-than-expected contracted volume (Qc) for June, which resulted in the quarter’s earnings nearly offsetting the loss of -VND 158 bn for 1Q24 (the company recorded a net loss of -VND 36 bn during H1 2024). At June 2024, EVNGenco 3’s (PGV: HOSE) gas price surpassed that of NT2. Therefore, we believe that NT2 could witness higher-than-expected volume for H2 2024 (vs. that being initially planned), benefiting from a potentially higher priority of electricity mobilization for the national power system. For 2025, we expect that the gas shortage issue will somehow ease in Southeast Vietnam and support an NT2 volume recovery. We project a profit of VND 20 bn for 2024 and VND 399 bn for 2025. Our earnings increase primarily came from our respective upward revisions of 2024 and 2025 volume, following our projection of higher-than-expected volume during H2 2024. We believe that NT2 could somehow achieve a profit during H2 2024, offsetting the H1 2024 loss.

KBC’s business performance is heavily dependent on legal approvals of new projects, thus, even with a strong 35.8% upside from the current price, we upgrade our rating on the shares of KBC from MARKET PERFORM to OUTPERFORM, with a target price of VND 33,600/share. Although we lean toward our bear case for FY2024, the share price has decreased more than 19.6% since our previous report (17 May 2024), then, we upgrade our rating on the shares of KBC.

VNM posted impressive 2Q24 earnings, which exceeded preliminary consensus estimates. Net sales reached VND 16.7 tn (+9.6% YoY), breaking the all-time high record for sales during the quarter, driven by domestic and overseas sales growth of +6% and +30% YoY, respectively. Notably, overall market share increased by 1.2pp in 2Q24. The gross profit margin reached 42.4% (+170bps YoY), a solid improvement over the past ten quarters, resulting in net income advancing +21% YoY. During 1H24, net sales and net profit reached VND 30.8 tn (+5.7% YoY) and VND 4.9 tn (+18.6% YoY), respectively, completing 49% and 52% of the target for the year. As Q2-Q3 are VNM’s high seasons, management expects the strong sales momentum to continue over the next several months.

We reiterate our OUTPERFORM rating on VHC given the strong earnings recovery prospects for 2H24 (+215% YoY) and 2025 (+29% YoY). We fully expect earnings to recover during 3Q24 after seven consecutive quarters of decelerating growth.

In 2Q24, VHC posted net sales and net profit of VND 3.2 tn (+17.3% YoY and +12% QoQ) and VND 336 bn (-26.4% YoY and +78% QoQ) respectively. While net sales exceeded our expectations brought on by strong sales volume recovery (+26% YoY and +10% QoQ per our estimates), net profit is in line with industry consensus, given 2Q23 was a high base for the company due to the high pangasius ASP recorded. We noted that VHC strongly outperformed its peers. As a whole, Vietnamese pangasius exports value only increased +6% YoY in 2Q24, and VHC clearly passed that bar with flying colors. ANV posted net sales +11% YoY while net profit declined -134% YoYin 2Q24.

A slow start for 2024, as Tet holiday fell during mid-Q1. For 1Q24, TNH recorded a revenue and net profit decrease of -13% and -39% YoY, respectively. While outpatient visits increased 11%, inpatient visits decreased -8% YoY, as Tet holiday is later and consumption tightening continued . Gross profit declined due to both increased material costs and pre-operating costs associated with TNH Viet Yen (training and payroll for doctors). Net income reached VND 15 bn (-33% YoY), with net income margin decreasing -500 bps and completing 10% of TNH’s 2024 target.

National expansion plan revealed. Shareholders voted for a name change from TNH Thai Nguyen Hospital to TNH Hospital – in preparation of nationwide expansion (targeting Hanoi, Danang, HCMC etc…). Shareholders also approved an increase of foreign ownership from 49% to 70%, which should leave the door open for possible M&A.

The company’s leverage is FRT’s main concern. However, the financial pressure of FRT has eased, reflected in the improvement in the interest coverage ratio (2.5x at 1Q24 vs 0.5x at 4Q23 and 1.0x at 1Q23) on the back of lower borrowing costs (-350 bps YoY and -100 bps QoQ in  1Q24) and improved earnings. With lower borrowing costs, Long Chau can speed up new openings of vaccine centers. FRT also plans to raise capital to scale the vaccine business. The company aims to raise a 10% stake via private placement during late 2024. We now apply higher multiples for the ICT business (from 9x to 11x) on narrower loss and a safer inventory level during 1Q24. As Long Chau now delivers sustainable profit, and the chain is the key growth driver for FRT in the long term, we now use DCF to value the chain. We derive a new target price for the shares of FRT at VND 211,000 (from VND 139,000), and reiterate our OUTPERFORM rating. Long Chau chain accounts for 98% of FRT valuation and 91% of 2025 earnings (vs only 10% in 2022). As such, we view FRT as a pharmacy retail company.

Proposed supportive measures to be approved. During May 2024, the Ministry of Finance proposed a couple of ways to support domestic automobile industry (extending excise tax payment deadline, registration fee reduction from Aug 24 to Jan 25). These measures were quite effective during 2020 (+50% increase in monthly sales after policy was in place) and 2022 (+20% YoY increase in sales volume), but were not as successful during 2H23, which, in retrospect, was the height of the recent consumer belt tightening in Vietnam. So far, excise tax payments extension has been approve, but the registration fee waiver should be approved soon as well.

We maintain our view that total volume for cars during 2024 will increase 9% YoY, but lower our total volume projections for Honda motorbikes to only 2% YoY (from 4% YoY) due to weak performance during Jan-May ‘24.

We reduce our rating on the FPT shares to MARKET PERFORM (from OUTPERFORM), with a 12-month SOTP-based TP of VND 141,500/share (equivalent to 7% upside potential). The company’s 5M24 results exhibited double-digit growth in both revenue and earnings. On 23 Apr 2024, FPT formed an AI (artificial intelligence)-related partnership with NVIDIA, which we believe is the first step toward joining the global AI value chain, especially given FPT’s already well-placed background in AI. Further, we expect that the establishment of AseanConnect.One alliance will help improve FPT’s telecom services quality (especially data center) and enhance customer access.

Masan Consumer Corporation (UPCOM: MCH) is a direct subsidiary of Masan Consumer Holdings (excluding the beer business, Masan Brewery). Since being established, the company has expanded its portfolio brands across eight fast-moving consumer goods (FMCG) categories to become one of Vietnam’s foremost consumer staple companies.

MCH food and beverage segment offers a wide range of products, with hundreds of SKUs under six main categories: seasoning, convenience food, coffee, beverage (mainly energy drinks; again, excluding beer), and processed meat (which moved to MML from 2023); of which its seasoning portfolio including fish sauce, chilli and soy sauce have led the market for years (market share of 45%, 64% and 43%, respectively) MCH also penetrated the home & personal care (HPC) market during 2020 via the acquisition of NET Detergent JSC. In the period 2017-2023, each year, the company introduced 50 initiatives on average to their product pipeline to meet consumer’s daily basic needs.

GEX’s 1Q24 PBT arrived at VND 385 bn, soaring by 168% YoY. The gross profit from most segments, especially electrical equipment and construction materials dropped significantly due to weak demand from household channel and higher input cost. However, the gross profit from the industrial park segment increased 34.6% YoY to VND 615 bn during 1Q24, driven by an increase in lease pricing between 7-20% throughout 2023. In addition, GEX recognized a net stock trading profit of VND 111 bn versus a loss of -VND 144 bn for 1Q23 on the back of the positive performance of the stock market during 1Q. We expect GEX’s PBT to increase 67% YoY to VND 2.3 tn, driven by the divestment of renewable projects at an estimated profit of VND 1.1 tn. Management expects the the divestment of most projects can be completed during the second quarter. Excluding the impact of financial income, the PBT would decline by 4% YoY. 

Given the decelerating retail sales growth in Vietnam, we downgrade our rating on the shares of VRE from BUY to OUTPERFORM, with a reduced 1Y target price of VND 29,500/share (+37.5% upside) from VND 33,600/share. Our target price reduction reflects lower occupancy over the past three quarters from 3Q23 to 1Q24 and sluggish growth of the Vietnam retail market during the first five months of 2024, which has caused us to lower our 2024 net revenue an NPAT forecasts to VND 9.25 tn (-5.6% YoY, 1.7% lower than our previous estimate of VND 9.4 tn) and VND 4.14 tn (-6.2% YoY, 3.2% lower than our previous estimate of VND 4.27 tn), respectively.