Company Report

Maintain MARKET PERFORM. We up our 1Y TP for PVT to VND 27,000/share (from VND 24,000) based on P/E target of 9x, equivalent to 11% upside.

Short-term catalyst: we think price catalyst can be higher tanker spot rates in winter season and solid 4Q 2023 earnings growth estimated at 15% YoY.

Long-term catalyst: we would be careful on the reversal of the tanker industry should a demand destruction event were to happen, but we believe PVT earnings trend would be more stable because of its high provision practice to serve as a buffer for hard times.

In 3Q 2023, PVD posted net sales growth of 11% YoY (-2.1% QoQ), while NPAT reversed its loss of -VND 52 bn to a gain of VND 133 bn this year, achieving 74% and 343% of the company’s 2023 target, respectively. This level of earnings is lower than the flat QoQ expectation due to a large forex loss.  PVD’s nine month 2023 NPATMI reached VND 381 bn, or 73% of our 2023 estimate.

For 3Q23 VFS posted vehicle sales of USD 319mn (+1% QoQ), total revenue of USD 343 mn (+4% QoQ), and gross losses of USD 102 mn (-9% QoQ). Its gross margin stands at -30% (QoQ increase of 420 bps) due to an increase in sales and a decrease in inventory write-downs.  However, these gains were offset by a financial cost of USD 145 mn (+25% QoQ). Overall, VFS increased its loss during the quarter to -USD 623 mn (see fig 4). Through the first three quarters of 2023, the net loss is -USD 1.7 bn, with an accumulated loss of -USD 7 bn.

After attending DBD’s analyst meeting on Sep 22^nd, we decide to revise up our forecast for revenue and net income to 1.7 tn (+9% YoY) and 291 bn (+19% YoY) (see table 1), respectively, given ETC witnessed strong growth in 1H23 and we expect ETC growth to uphold during 2H23 enough to offset weaker OTC spending environment. We also introduce our 2024 forecast of revenue and net income of 1.9 tn (+10% YoY) and 321 bn (+10% YoY) respectively, with assumption of fiercer competition from imported drugs, higher financial and SG&A expenses.

DPM posted poor earnings in 2Q23 with net income of only VND 105 bn (-92% YoY, -60% QoQ), as fertilizer prices continued its downtrend during the quarter. Nevertheless, this was in line with our expectation that its earnings would hit a trough in 2Q23. Quite encouragingly, we see a recovery in urea prices that is set to flip the dynamic. In the international markets, urea export prices in Egypt and Middle East surged by 46% from the bottom in June & July, whereas Black Sea urea prices rose by 31%, and urea prices in China and Indonesia increased at a slower pace (27% and 18%, respectively). The average urea price in Vietnam has rallied by 20% from the bottom, tracking the pace of urea price recovery in nearby countries (again, China and Indonesia). 

Given the weak H1 results, MSN management provided lower guidance for 2023, aiming for revenue of between VND 83.5-90 tn (from VND 90-100 tn) and NPAT of between VND 3-4 tn (from 4-5 tn NPAT). Such recalibration implies a growth rate of 9.8% YoY to 18.4% YoY for revenue, and a reduction of -36.8% to -15.8% YoY in net profit. We believe that the reason for the guidance reduction is due to external factors (difficult economic conditions which pose a prolonged impact on consumer demand) as well as internal factors (high gearing, weaker-than-expected performance in the mining business, and a drop in affiliate TCB’s earnings).

While TRA posted 2Q23 revenue and NPAT of 517 bn (-12% YoY) and 79 bn (-8% YoY), respectively, which was in-line with our forecasts, the company did well to preserve profitability, as it increased its net profit margin from 14% to 15% via cost cutting measures – which we anticipate to continue. Prescription drug sales were encouraging during 1H23, although OTC struggled. Going forward, we anticipate 2H23 numbers to exceed 1H23, but nevertheless reduce our 2023 revenue and NPAT forecast to VND 2.5 tn (+3% YoY) and 309 bn (+5% YoY) respectively, due to concerns over weak OTC sales (see details below). We also introduce our 2024 revenue and net profit estimates of VND 2.6 tn (+3% YoY) and VND 327 bn (+6% YoY) respectively, with assumption of moderate 9% growth in non-herbal products.

We had initially anticipated a double digit decline in revenue and earnings for both 2Q23 and 3Q23. However, 2Q23 results surprised, with revenue declining by -17% YoY and net income by -8% YoY. In July, the decrease in revenue eased to -4% YoY, while net income increased by 10% YoY. This is explained by: (1) more rapid new store opening pace and (2) better-than-expected gross profit margins on product mix changes. Taking recent developments into account, we increase our 2023 and 2024 net income forecasts to VND 1.84 tn (+2% YoY, from VND 1.74 tn) and VND 2.04 tn (+11% YoY, from VND 1.96 tn), respectively. As such, 2H23 earnings may post YoY growth (+4% YoY).  Our higher EPS forecasts prompt us to increase our target price for the shares of PNJ to VND 90,200 per share (previously VND 86,000/share), representing 13.5% upside. We reiterate our OUTPERFORM rating on the shares. 

July preliminary results: total revenue VND 9.8 tn (-11% YoY, +4% QoQ), in which ICT &CE and grocery revenue were VND 6.7 tn (-21% YoY, flat MoM) and VND 2.8 tn (+17% YoY, +11% MoM), respectively. With worse-than-expected 2Q23 results, we revise down our 2023 net income estimate to VND 1.27 tn (-69% YoY, from VND 3 tn). 2024 net income is estimated at VND 4.99 tn (+294% YoY, from VND 4.6 tn). We believe that MWG’s earnings passed the trough in 2Q23 and is on a recovery trajectory. Hence we raise our target multiples and derive a new SOTP-based target price of VND 61,500 per share (from VND 59,400). Since our last BUY call on July 12^th, the MWG share price has increased by 10%. As our new target price offers 14.1% upside, we rate the stock as OUTPERFORM (from BUY).

At the current price, HSG is trading at 2024FY P/E, P/B and EV/EBITDA forwards of 23.6x, 1.2x and 7.6x respectively, while NKG trades at 2024 P/E, P/B and EV/EBITDA forward of 20.4x, 0.9x and and 8.1x respectively. Our rating for both stocks is Market Perform, with a 1-year target price of VND 19,300/share for NKG, and VND 19,900/share for HSG based on target PB and EV/EBITDA of 0.9x and 7.5x respectively for NKG, and 1.2x and 7.5x for HSG respectively.

DGC delivered net income of VND 882 bn (-54% YoY) for 2Q23, which exceeded company guidance of VND 630 bn. Compared to the latest quarter, net income increased 7% QoQ, due primarily to higher usage of in-house phosphate rock, as ASP continued its downtrend. We expect that earnings for 2H23 will rise 11% vs. 1H23 as the price of yellow phosphorus and related products recover - along with the rebound in demand from fertilizer and semiconductor producers. The price of DAP-type fertilizer has increased between 12%-15% from the trough of July due to higher agro-commodity prices. Meanwhile, we expect that demand for yellow phosphorus from semiconductors to recover during late 2023, helping DGC to post double digit net income growth for 2024. We estimate 2023 and 2024 net income of VND 3.59 tn (-41% YoY, from VND 3.8 tn) and VND 4.34 tn (+21% YoY), respectively. We derive a target price for the shares of DGC of VND 84,000 per share – representing upside of 14.4%. We call for OUTPERFORM rating on the shares.

For 2023, we expect that the company will post net sales and net profit of VND 63.4 tn (+5.7% YoY) and VND 9.1 tn (+5.9% YoY), respectively. This is -1.3% lower than our previous net profit forecast. Such an outlook translates into 2H23 net sales and net income growth of +10% and +18% YoY, respectively. For 2024, we expect net sales and net profit to reach VND 67.4 tn (+6.3% YoY) and VND 10.7 tn (+17.2% YoY), respectively. Our 2024 net profit forecast is 4.4% higher than our previous estimate. We raise our GPM assumption for 2024 from 42.1% to 43% to reflect the declining trend of imported milk powder. Our updated 1Y target price for the shares of VNM is raised to VND 86,600/share (from VND 82,000/share), based on our 2024E EPS and DCF methodology. With upside of 19%, we reiterate our OUTPERFORM rating on the shares of VNM.