Company Report

During the final quarter of 2023, PLX’ PBT reached VND 850 bn - a decline of 48.5% from the high base in 4Q22 and 28% QoQ mainly due to the petroleum segment. Domestic petroleum sales volume during 4Q23 dropped 11% YoY to 2.6 mn m3/tons compared to the peak in 4Q22, of which retail sales volume dropped -7.7% YoY to 1.7 mn m3/tons. Earnings from the petroleum segment declined 55% YoY and 33% QoQ to VND 322 bn due to the drop of petroleum prices of over 10% during the quarter which had a negative impact on the company’s trading activities. Cumulatively, 2023 PBT was VND 3.93 tn, recovering 73.2% YoY and exceeding company guidance 22%. The volume from the retail channel increased 6.9 % YoY to 7.02 mn m3/tons, increasing 40% over 2021.

On the other hand, we think the current price has discounted the bad news. Saigon beer remains the dominant brand in Vietnam and we expect SAB to post growth when the sector recovers. SAB is trading at a 2024E P/E of 18x, which is 1SD lower than its past-5-year average (23x). Our revised 12-month target price is VND63,900/share (from VND76,000/share), based on a mix of DCF methodology (WACC: 9.53%, growth: 2%) and a lower PER of 20x (from 23x). With potential upside of 10% to our new TP, we maintain our MARKET PERFORM rating.

For 2024E, we expect net sales and net profit to reach VND63.7tn (+5.6% YoY) and VND10.1tn (+12.1% YoY), respectively. This is 2% and 3% lower than our previous net sales and net profit forecasts. We are still optimistic about a 2H24 recovery but reduce our forecasted gross margin improvement from 250bps to 160bps, as well as assuming no price increase during 2024. The selling expenses/sales ratio is expected to stay at c.21.5%, while financial income is expected to decrease given the lower interest rate environment. VNM is trading at a 2024E P/E of 17x. Our new 12-month target price is VND82,000/share (from VND87,400/share), based on our unchanged DCF and P/E methodology. With upside potential of 15% to our new TP, we reiterate our OUTPERFORM rating.

Net profit during 1Q24 came in at a sterling VND 103 bn, turning the tables on the prev. loss of VND 680 bn at 1Q23. However, it declined -76% QoQ from the high base of the previous quarter due to a drop in export price and higher SG&A expenses. The company’s sales volume increased 16.3% QoQ and 33.7% YoY to 454k tons during 1Q24, the highest level since 2Q22, in which domestic sales volume increased 18.6% QoQ and 24.8% YoY to 250k tons, while export also increased 45.7% YoY and 13.1% QoQ to 202k tons. We maintain our FY2024 earnings forecast for HSG at VND 775 bn (+24.8x YoY). We expect the company’s sales volume to increase 14.6% YoY to 1.6 mn tons for FY 2024, whereby export and domestic volume are expected to increase 16% and 13% YoY to 891k tons and 711k tons, respectively. The FY2024 gross margin to improve to 11.3% from 9.7% during FY2023 due to: (1) the low base of 1Q23 with a loss of VND 680 bn, as mentioned earlier; (2) improvement in the capacity utilization rate from 58% to 67%; and (3) a slight increase in the contribution of the domestic channel from 55% during FY2023 to 56% for FY2024.

During 4Q 2023, Saigon Cargo Service (HOSE: SCS) posted revenue of VND 198.8 bn (+1.7% YoY and +15.9% QoQ) and profit before tax of VND 146.1 bn (-13.8% YoY and +0.2% QoQ), meeting our in-house expectations. It is notable that 4Q 2023 witnessed a 6% YoY increase in international cargo volume, marking the first quarter since 4Q2022 to experience YoY growth. 2024 should be an optimistic year for SCS as they have secured a 3-year contract of cargo handling services at Tan Son Nhat International Airport for Qatar Airways, commencing from this quarter (i.e. Feb 2024). This contract should boost both SCS’ market share (from 35% to nearly 50%) and earnings. This deal should contribute around 25%-30% of 2024 PBT. We do not expect any significant changes to cost structure, but a slight increase in concession fees from 1.5% to 2% from 2H24.

Taseco Land (TAL) was established in 2009 with its main business in real estate development. In early 2018, TAL restructured the organization and increased the chartered capital to VND 900 bn. Thanks to profit retained in the last several years along with capital raising from current shareholders, currently, the charter capital of TAL stands at VND 2.97 tn (US$123 mn). For FY2023, we estimate the Company will achieve VND 3.29 tn in revenue and VND 480 bn in NPAT. For FY2024, we expect the Company will i) launch for sale in residential area in Hai Yen Resettlement area, Nghi Son town, ii) sale continuation in the Alacarte Ha Long, Central Riverside and Luong Son Riverview project and iii) recognition of unbilled bookings revenue in N01-T6 apartment building in Hanoi and one-off financial income from the divestment of office building in land lot B2-CC4, Starlake Urban Area, Hanoi. As a result, TAL is expected to achieve revenue and PAT for FY2024 of VND 3.37 tn (+3% YoY) and VND 631 bn (+31% YoY) respectively.

For 2024, we estimate revenue at VND 5.2 tn (+12% YoY, from VND 5.08 tn) and net income at VND 281 bn (+15% YoY, from VND 250 bn). While we expect the demand in export market to be warmer in 2024, the gross profit margin may not improve much as the depreciation expense from the new radial production line kicks in. Our new 2024 earnings estimates are 12% higher than the previous as we take into account the recent increase in sales order from the US market (from 22K units/month to 25K units/month, accounting for 33% of the total radial tire sales volume), while the sales order from the Brazil market is to be remained unchanged (35K units/month, accounting for 47% of the total radial tire sales volume). With an unchanged target P/E of 12x on 2024F revised financials, we derive a new target price for DRC at VND 28,400 per share (from VND 25,300). We maintain MARKET PERFORM rating on DRC.

Given the weaker-than-expected 9M23 results, we slash our NPATMI estimate to VND608bn (-83% YoY; from VND2.05tn) for 2023, due primarily to the underperformance of the retail, meat, and mining business lines. For 2024, we expect a broad-based recovery across all segments.  We believe that revenue growth from WCM (consumer retail chain) could come from a rapid pace of new store openings during 2022-23 that should start yielding fruit, along with the recovery in consumer spending. For the mining business, we admit that uncertainty in ore grade poses too much of a challenge to estimate MSR’s margin - prompting us to take a more conservative view. Associate TCB is estimated to post 15% PBT growth for 2024, with encouraging credit growth and a higher NIM. Meanwhile, interest expenses have already established a high base for 2023 and will likely not increase during 2024 (as we expect MSN will partly reduce its outstanding debt). Our 2024F net sales and NPATMI estimates are set at VND90.1tn (+9.3% YoY) and VND1.58tn (+160% YoY), respectively.

We reiterate our MARKET PERFORM rating for the shares of BMP. Our new target price for the shares of BMP is VND 103,400/share (from VND 99,200/share), as we apply a target P/E 2024F of 10x (unchanged) - representing 2.6% downside. BMP posted net sales and NPAT of VND 926 bn (-38% YoY, -31% QoQ) and VND 209 bn (+19% YoY, -29% QoQ), respectively, off from its 2Q23 historical high due to a significant decline in sales volume. We estimate that 3Q23 sales volume decreased -38% YoY while ASP remained flat YoY due to a slowdown in construction activities and rising competition. Gross profit margin increased to 43% during 3Q23, compared to 42.8% for 2Q23 and 28.3% for 3Q22, owing to a drop in PVC input prices. During 3Q23, the expense-to-sales ratio remained stable at 12.8% compared to 13% for 2Q23, but staged an increase from the 8.8% at 3Q22.

Highly leveraged position has been the main concern for FRT, especially in the rising interest rate environment (4Q22 and 1Q23). The funding pressure of FRT has eased with borrowing costs in 3Q23 declined by 200 bps from the peak and improved profitability from the pharmacy chain. With lower borrowing costs, FRT can speed up new openings for Long Chau chain to gain market share in the context that competitor An Khang and Pharmacity are still struggling with their business model. Larger scale should eventually help to enlarge the profit margin for Long Chau over the long term. As such, the reduction in borrowing costs is meaningful for a highly levered company like FRT, we hence raise P/S target multiple for the pharmacy chain from 0.8x to 1x. We hence lift our 1-year target price to VND 117,000/share (from VND 105,000). As FRT share price has increased by 35% since our last BUY call, we now call for OUTPERFORM rating on FRT shares with 13.5% upside.

In 9M2023, we witnessed a YoY decline in power volume from all of POW-owned&operated power plants, except for the Vung Ang and Ca Mau plants. We attribute this to unfavorable weather conditions weighing on hydropower plant utilization rates. Furthermore, the gas shortage in Southeast Vietnam led to Nhon Trach 1 and Nhon Trach 2 (NT2: HOSE) failing to meet power demand and running the plants on expensive diesel oil. For 2024, after a 2023 major maintenance schedule for Ca Mau 2, Vung Ang’s Generator 1, Nhon Trach 2 and Dakdrinh’s Generator H2, we anticipate a recovery in terms of both volume (14% YoY in 2024 vs 3% of 2023) and NPAT (+19% YoY vs -52% YoY of 2023) per our estimates. Aside from the long-term gas shortage issue due to depleting gas fields, we see the delay risk of Nhon Trach 3&4 LNG-fired project’s commercial operation date and expect two plants will come online in the foreseeable future: Nhon Trach 3 in H2 2025 and Nhon Trach 4 in H2 2026. We call for a MARKET PERFORM rating for POW, with a 12-month target price of VND 12,980/share (equivalent to 16.4% upside potential; based on DCF and EV/EBITDA multiple valuation methods).

We maintain our Market Perform rating on the shares for HT1, projecting that cement demand is expected to continue to weaken during 1H24 with the possibility of a rebound during 2H24. Our target price for the shares of HT1 is VND 11,300/share (from VND 12,600/share), as we apply a target P/E of 15x and EV/EBITDA of 7x for 2024.

HT1 recorded a net loss of VND 10 bn during 3Q23 (compared to a net profit of VND 37 bn during 3Q22) due to poor sales volume. Net sales reached VND 1.6 tn (-30% YoY, -21% QoQ), with sales volume of 1.2 mn tons (-27% YoY, -19% QoQ), amid weak demand resulting from weakened construction combined with the rainy season. GPM increased from 8.4% for 3Q22 to 9.0% for 3Q23 due to lower coal input prices. For 9M23, HT1 net sales reached VND 5.3 tn (-20% YoY) and net losses reached VND 37 bn (-119% YoY), lower than our expectation.

Earnings increased by double digits mainly driven by the industrial park leasing segment. In 3Q23, revenue and net income reached VND 3.4 tn (+ 8% YoY) and VND 434 bn (+64% YoY) respectively. Significant growth in net profit was mainly driven by the industrial park leasing segment. In 9M2023, net revenue totaled VND 10.17 tn (-11% YoY) and NPAT reached VND 1.2 tn (-30% YoY) - having completed 131% of the company plan. Given such better than expected earnings results posted in 9M23 (mainly from the industrial park leasing).

DCM posted lower-than-expected 3Q23 results, as avg. urea ASP continues a slow recovery as well as higher-than-expected input gas price. The company continued to recognize gas input costs higher than actual costs, reflecting in the rise in provision for the increase in gas input costs. As of 3Q23, the said provision totaled VND 1.3 tn (vs VND 680 bn as of 2022YE and vs VND 1.29 tn as of 2Q23). We had initially expected that DCM to make a partial reversal of said provision in 2H23 as per the announcement of DCM at 2023 AGM, hence helping to reduce gas input costs in 2H23. However, Petrovietnam Group (the largest shareholder of DCM) has not finalized this matter yet. As the timeline for this issue is uncertain at the moment, and that the 3Q23 fuel oil price increased at a faster rate than our assumption, we increase our 2023-2024 gas input cost assumption.