Company Report

PNJ recently held its AGM, wherein the company set its 2024 net income target at VND 2.09 tn (6% YoY). We think the company set conservative earnings target due to the recent surge in gold material costs. In 1Q24, PNJ achieved net sales and net income of VND 12.6 tn (+29% YoY) and VND 738 bn (-1.4% YoY). While the company posted strong top line growth thanks to the recovery of retail sales (+12% YoY) and record high gold bar sales (+66% YoY), net income was flat as the company has not yet adjusted sticker prices to offset the increase in gold material costs. Although 1Q24 retail sales showed early recovery sign (+12% YoY), the growth mainly came from larger store network (392 gold stores as of 1Q24 vs 357 gold stores as of 1Q23), while retail sales of existing stores increased by single-digit (our estimates). With the slow recovery in retail sales in 1Q24, we think PNJ prioritized gaining market share in 1Q24, hence explaining the flat net income despite resilient top line growth.

1Q24 NPAT recorded strong profit growth on a low base compared to the same period. 1Q24 revenue reached VND 213 bn (+2.49x YoY) thanks to strong IP revenue growth. Revenue from industrial land lease was VND 193 bn (+6.35x YoY) with let area of 8.5 ha (+6.2x YoY) at  $95 USD/m2 (+15% YoY), mainly from the lease contract of Sonadezi Corporation (UPCOM: SNZ), and partially from small investors (leased area is 1-2ha). Subsequently, net income reached VND 65 bn (+4.55x YoY).

Signed areas for lease and MOUs in 2023 is a combined 66.23 ha (+65% YoY), with the large customer being Electronic Tripod Vietnam (total investment capital of $250 mn, equivalent to VND 6.25 trillion) with a lease area of 20 ha, and leased price of $95 USD/m2/period

FPT released its 1Q24 results, with revenue and NPAT achieving VND 14.1 tn (+20.6% YoY) and VND 2.2 tn (+19.4% YoY), respectively, which was line with our expectation. We mainly attribute this solid performance to technology sector, which accounts 60% of FPT’s revenue and 46% of FPT PBT (in line with our expectations).

We currently have an OUTPERFORM rating for FPT at the target price of VND 128,100/share.

Guidance issued by the company set a growth target of 17% in sales and 11% in NPAT, while estimate for 1Q24 sales and NPAT are VND 670 bn (+25% YoY) and VND 109 bn (+33% YoY), respectively. Our estimates sales and net earnings are VND 3.1 tn (+16.3% YoY) and VND 364 bn (flat vs. YoY), respectively, in which sales should witness growth in both segments of construction and BOT toll collection. Those big projects mainly contributing to construction sales are the Quang Ngai - Hoai Nhon highway, the Dong Dang – Tra Linh and Huu Nghi – Chi Lang highways. However, we expected that gross margin of this segment will be thinner than 2023 given the reduction in complexity of those projects. Meanwhile, greater-than-organic sales growth of BOT companies should mainly be attributed to higher toll fees rather than growth in car counts, while profit margin should not witness any significant changes.

For the first two months of 2024, VHC’s net sales reached VND 1.7 tn (+40% YoY), with pangasius sales increasing 25% YoY, outperforming the sector due to the US market recovery. Pangasius sales growth reflects domestic market sales of VND 535 bn (+64% YoY), which accounted for 31% of sales (from 27% during 2M23). US and EU market sales reached VND 407 bn (+30% YoY) and VND 292 bn (+16% YoY), respectively. The Wellness segment witnessed a recovery with sales reaching VND 130 bn (+26% YoY). According to VASEP, Vietnamese pangasius exports during 1Q24 reached 424 mn USD (+0.4% YoY). We maintain our Market Perform rating on the shares of VHC, with a target price of VND 78,500/share (from VND 64,500/share), as we roll our forecast to mid-2015. We increase our target P/E for VHC to 12x (10x previously), as we believe that earnings have bottomed out during 2023, coupled with a low-interest rate environment. Thus, our new target price represents an upside of 2.3% and VHC currently trades at a 2024 P/E of 14x and 2025 P/E of 10x, which is at the 10-year historical average range of between 6x-19x.

With lower-than-expected 1Q24 results, we revise down our yellow phosphorus ASP for 2024-2025 to VND 113 mn/ton (+7% YoY, from VND 118 mn/ton) and VND 121 mn/ton (+7% YoY, from VND 123 mn/ton). Net income are hence estimated at VND 3.79 tn (+16% YoY) and VND 5.47 tn (+44% YoY) for 2024-2025. Projected 2024-2025 earnings growth will be primarily determined by (i) sales volume and ASP recovery of phosphorus-related finished products and (ii) reduction in phosphate rock material costs on higher usage of in-house phosphate rock (80% in 2023, 90% in 2024, 100% in 2025).  We apply our unchanged target P/E of 12x on revised 2024-2025 earnings estimates, and derive a new target price at VND 133,000 per share (from VND 142,000). We maintain our MARKET PERFORM rating. Pullback in earnings during 1H24 may weigh on share price performance after a period of strong price rally, though we believe that price weaknesses should present opportunity to accumulate the stock for investors with a long investment horizon.

For 2024, we expect a broad-based recovery across all segments.  We believe that revenue growth from consumer retail chain subsidiary, Wincommerce (WCM), could come from rapid new store openings, restructuring during the 2022-23 period that should start yielding fruit, and a recovery in consumer spend. Subsidiary Masan Consumer (HOSE: MCH) has consistently proven resilience and outperformed peers since 2019 (CAGR of 10% in revenue and 11% in NPAT). We believe that the company will maintain this momentum through 2024, levering synergies of the retail platform (WCM) and the innovative product innovations.

4Q23 performance missed estimates. DBD posted 4Q23 revenue and NPAT of VND 444 bn (-4.4% YoY) and VND 59 bn (-25% YoY), respectively, which were 10% and 40% lower than our estimates. The company saw lower sales as consumers skipped OTC drugs/supplements, as well as increased competition from imported brands. For FY23, the company recorded net sales and NPAT of VND 1.65tn (+6% YoY) and VND 269bn (+11% YoY), respectively. This result is 3% and 8% lower than our estimates. The increase is largely credited to the robust performance in the prescription drugs, including antibiotics and cancer drugs. Significant facility upgrades underway mobilizing aggressive growth plan. As DBD aims to reach VND 2.6tn in manufactured drug revenue before 2026 and 4.5tn before 2030 (from current revenue of VND 1.65tn), the company has been investing heavily in its production capabilities. DBD recently broke ground on the construction of a small volume injection drug factory (Nov 2023), focusing on production of new dosage forms/packaging such as sterile injectable and eye drops. Scheduled for completion during 2025, the factory aims to commence production before 2027.

Despite NT2 not targeting any major maintenance schedule in 2024, which implies an opportunity for the company’s volume and earnings recovery, we are concerned that Vietnam Electricity Group (EVN) might reduce its reliance on gas-fired electricity in 2024 (including that of NT2) as 1) the current gas supply issue might not favor EVN to deploy gas-fired power as a stable source to meet the power demand and 2) EVN might very well prioritize cheaper power sources to endeavor to cut losses or at least breakeven in 2024, such as coal-fired electricity, hydropower and renewables. Therefore, we expect that NT2 should face another year of volume decline (-54.4% YoY per our estimate). With such lower utilization compared to 2023, we project a loss of VND 261 bn for the company in 2024. With a 12-month target price of VND 22,900 (equivalent to a 8% downside potential) (based on DCF and EV/EBITDA valuation methods), we issue a SELL rating for the stock.

Within the aim to keep gaining new clients, PNJ did not raise prices amid rising gold input costs during the period, hence the gross profit margin was compressed in the short term. However, we believe the company may eventually adjust its prices in tune with the increase in gold prices, and we believe it is able to do so given its leading position in jewelry retail business, not to mention that the Vietnamese public appreciates gold’s property as a store of value. In addition, PNJ frequently releases new jewelry collections, whereby the company will likely increase sticker prices to offset the increase in the price of gold. We hence maintain 2024 revenue and net income estimates of VND 37.7 tn (+14% YoY) and VND 2.3 tn (+17% YoY). We introduce 2025 estimates with revenue and net income at VND 41.5 tn (+10% YoY) and VND 2.57 tn (+12% YoY). Earnings growth in 2025 is driven by full year operation of stores opened in 2024 (+9%), on top of the expected increase in overall jewelry consumption (+5% YoY). With an unchanged target P/E of 17x on average 2024F-2025F financials (from 2024F), we derive a new target price at VND 114,000 per share (from VND 107,500). With 16% upside potential, we maintain an OUTPERFORM rating for PNJ.

We maintain our MARKET PERFORM rating on the shares of BMP. Our new target price for BMP is VND 112,000/share (from VND 103,400/share), as we revise up the 2024F NPAT by 8% compared to our previous forecast, representing a +1% upside (dividend yield of 10%). 4Q23 results: BMP posted net sales and NPAT of VND 1.5 tn (+3% YoY, +57% QoQ) and VND 257 bn (+3% YoY, +23% QoQ), respectively, which are in line with our expectations. We estimate that the sales volume during 4Q23 reached 24k tons (+2% YoY, +57% QoQ), as BMP sold at discounted prices to distributors during the second half of 4Q23. The ASP was flat QoQ and YoY. The gross profit margin reached 40.6% during 4Q23, compared to 43% and 33.7% during 3Q23 and 4Q22, respectively. During 4Q23, the expense-to-sales ratio increased to 15.4% compared to 12.8% during 3Q23. For 2023, BMP reported net sales of VND 5.2 tn (-11% YoY) and NPAT of VND 1 tn (+50% YoY).

The 2024FY business plan received shareholder approval, with two scenarios just as for the previous year: Lower bound net profit for 2024FY is targeted at VND 400 bn (+13x YoY), whereby sales volume is assumed to increase 13.3% to 1.63 mn tons. For the upper-bound plan, net income is targeted to increase by 17x YoY to VND 500 bn if sales volume increases by a higher rate of 20.7% to 1.73 mn tons. ASP is assumed to decline 5.2% YoY during the first case and by 5.7% YoY during the second case, primarily due to the high base during the first quarters of the last fiscal year. Returning to cash dividends: After many years of stock dividends, HSG is poised to begin the payment of cash dividends for FY 2023 at 5% on par (VND 500/share – equivalent to a dividend yield of 2.3%).

Poor 4Q results as people skip hospital visits during economic slowdown. For 4Q23, TNH recorded unaudited revenue and net profit decrease of 7% and 24% YoY, respectively. For 2023, TNH recorded unaudited revenue and net profit of VND 532 bn (+15% YoY) and VND 133 bn (-6% YoY), which is 9% higher than our revenue estimate but 15% lower than our NPAT estimate. If excluding one-off revenue, core revenue increased 3% only, which is 3% lower than our estimate. According to management, total outpatient visits saw 5% decrease while inpatient visits saw 9% increase compared to 2022. Continued expansion projects laid out for medium- to long-term. Management expects the commencement of its 3^rd hospital TNH Viet Yen during 2Q24. The fourth hospital - TNH Lang Son - also saw groundbreaking during Feb 24, which was faster than expected. The new hospital is expected go into operation during 4Q25.

For residential development, KBC still works towards determining calculation of the land use right fee (LUR) payment for Phuc Ninh Urban Area in Bac Ninh province. We expect that this may be delayed through 2025, thus 10 ha of saleable land which KBC sold before would be recorded during 2025 only. As such, we expect KBC to lease around 102 ha of industrial land in total in 2024, of which 30 ha has been secured to lease by new investors during 2023, 50 ha from Trang Due 3 IP and 22 ha from Tan Phu Trung IP. Accordingly, KBC is forecast to achieve VND 4.92 tn (-12.8% YoY) in net revenue and VND 1.36 tn (-38.5% YoY) in NPAT for FY2024. This forecast is lower than our previous forecast of the optimistic case due to the delay of revenue recognition from residential sales in Phuc Ninh Urban Area to 2025 as discussed above.