Company Report

We maintain our Market Perform rating on the shares for BSR, but raise our target price to VND 21,600/share given the low interest rate environment. Our target price is based on a 2024 P/E and EV/EBITDA target of 10x and 5x, respectively. Over the short-term, we believe that the share price can outperform the market due to robust earnings growth next quarter. However, due to the volatile nature of the company’s earnings due to fluctuations in both oil prices and crack spreads, the shares are likely more suitable to short-term investors with a high-risk tolerance. In addition, any news regarding the listing on HOSE would be supportive to the share price.

We increase our 2023 NPAT estimate by 32% over our previous forecast, encouraged by lower-than-expected PVC input prices. Our new one-year price target for the shares of BMP is VND 99,200/share (from VND 84,300/share) as we roll forward our price target to 2024F - representing +13% upside. We reiterate our MARKET PERFORM rating for the shares of BMP. 2Q23 earnings surpassed the prior quarter records due to resilient ASP and lower-than-expected PVC input prices despite lower sales volume. Net sales and NPAT were VND 1.3 tn (-14% YoY, -7% QoQ) and VND 295 bn (+103% YoY, +5% QoQ), respectively.

In 2Q 2023, SCS recorded revenue of VND 172 bn (-17.4% YoY) and PBT of VND 147 bn (-10% YoY), continuing the declining trend since 4Q 2022 and in line with our estimates. However, looking to the QoQ comparison, things look brighter with clear recovery in all financial attributes from previous quarters:  revenue growth of 6.4% QoQ and PBT growth of 14% QoQ.

With these results, 1H 2023 revenue reached VND 334 bn (-26.5% YoY) and PBT reached VND 277 bn (-24% YoY). However, such results do not register as a surprise to us, and overall performance during 1H 2023 has closely matched with our current estimates for 2023 and passed the halfway point for the year, which we find to be an encouraging sign.

2Q23 revenue reached VND 288 bn (+10% YoY), while Q2 NPAT recorded the best performance in two years. This result is in line with our forecast when the SZC MOU contract was announced at the end of 2022. Revenue from leased industrial park land was VND 263 bn (+3.9% YoY), having rented 15 ha to the Sonadezi Corporation (owns 46.8% of SZC) at USD 72/m2 (+17% YoY). The gross profit margin jumped from 36.4% in 2Q22 to 53.9% due primarily to increase in average lease prices, which cushioned SZC’s earlier actions of booking additional land costs for the remaining land in the fully-owned Chau Duc Industrial Park since 1Q22. In addition, shophouse sales in the Sonadezi Huu Phuoc Residential Area reached VND 11.7 bn, while there was no revenue in 2Q22. Interest expense increased 21% YoY due to the recognition of loan from the golf course which came on line. General and administrative expenses decreased -30% YoY due primarily to the reduction cost of salaries. Net income reached VND 95.9 bn (+56% YoY).

ACB announced a prelim PBT of VND 4.83 tn (-1.7% YoY) for 2Q23 which turned into 1H23 PBT of VND 10 tn, exceeding our expectations and accomplishing 50% of the AGM’s profit plan. This earnings growth slowdown was caused by NIM shrinkage, the provision burden, and weak fee-based earnings. Whilst credit growth rebounded during 2Q23 at 4.6% YTD (vs. -0.6% YTD for 1Q23), total deposit growth was 4.2% YTD. The NPL ratio increased to 1.07% (vs. 0.96% for 1Q23). Given that the LDR (79%) and short-term funding for medium- and long-term loans (19%) were well below the cap, we believe that funding pressure will not be the primary impediment for ACB to stimulate credit growth during 2H23.    

GAS is trading at 2024F PE of 15.5x. We maintain our MARKET PERFORM rating for the shares of GAS and raise our 12-month target price to VND106,000/share (from VND 103,000/share), based on 2024F EPS (from 2023F EPS) and an unchanged 1-year target PE of 16.5x. Key upside/ downside risks to our call include: stronger-/weaker-than-expected dry-gas volume; and higher/lower-than-expected fuel prices.

Given the uncertainty of a full recovery and an upside of just 2% (VND 36,700/share price target) based on our new target price, we downgrade our rating on the shares of ANV from Outperform to Market Perform. At the AGM, management provided net revenue and PBT guidance for 2023 of VND 5.2 tn (+6% YoY) and VND 300 bn (-61% YoY), respectively. PBT guidance was revised down 40% from VND 500 bn (-35% YoY) during April 2023 to VND 300 bn (-61% YoY) during the June 2023 meeting, reflecting management's much less sanguine view on the recovery of fishery exports and gross profit margin contraction in less than two months. Reflecting management’s perception, we too lower our 2023 NPAT forecast 34%  given the: (1) longer-than-expected ASP recovery; and (2) lower-than-expected order volume from the Chinese market.

After the sharp drop of -30% in 1Q23, the company’s urea price continued to decline in 2Q23. DPM urea price now stood at VND 9,000/kg (vs VND 9,600/kg in 1Q23). We believe the urea price is to stabilize around this level throughout 3Q23, before rebounding moderately in 4Q23 when the high season approaches. Having said that, we forecast earnings of DPM to set a trough in 2Q23 in terms of absolute value, but recovery is rather slow. As such, 2023 net income is estimated to drop to VND 1.18 tn (-79% YoY, from VND 1.23 tn estimated previously, lower than the company guidance) due to (1) urea price downtrend, (2) sluggish urea demand and (3) increase in gas transportation tariff. In 2024, net income may increase to VND 1.27 tn (+8% YoY, from VND 1.32tn estimated previously) thanks to the recovery in sales volume. As DPM may have passed the earnings trough period (2Q23), we roll over to 2024 and use higher target multiples to derive a new target price of VND 34,700 per share (from VND 30,600). With an ROI of 10%, we maintain our MARKET PERFORM rating.

NTC is trading at a forward 2023 P/E and P/B at 13.1x and 5.0x, respectively – higher than the average industrial park developer P/E of 11.5x and P/B of 2.1x. We recommend an OUTPERFORM on the shares of NTC, with a target price of VND 185,900/share (upside 11%) based on RNAV valuation. We believe that the NTC3 industrial park will start operating at the end of 2023 with a commercial land area of 254 ha, while industrial parks in Binh Duong have run out of leased land with occupancy rates reaching over 92%. NTC3 Industrial Park should be the main source of revenue for NTC, with a forecasted gross profit margin of over 45% and project NPV of VND 2.5 tn.

Phu Nhuan Jewelry’s (PNJ) financial performance trailed behind our expectations, with net income in April declining by -24% YoY. However, we think the results more truly reflected the state of the general economy. We expect earnings of the company may still decline by double digits in 2Q23 and 3Q23, as the economic downturn may still weigh on jewelry consumption. Rate cut action by the Vietnamese central bank brought on a decline in policy rates by a range of 200-300 bps YTD, but it may take time for this to aid multisector economic recovery. We expect overall consumption demand to recover in 4Q23. As such, earnings may only swing back to positive territory from 4Q23. With worse-than-expected April performance, we revise down our 2023-2024 net income assumptions by -8% and -5% respectively to VND 1.74 tn (-4% YoY) and VND 1.96 tn (+13% YoY). We derive a new target price at VND 81,400 (from VND 86,000) per share based on 2024 financials (from average 2023-2024) and unchanged target P/E of 15x. With an upside of 11.1% from the current share price, we downgrade our rating to MARKET PERFORM (from OUTPERFORM). PNJ may only be suitable for investors with a long term investment horizon, wherein investors can get exposure to the jewelry retail industry which benefits over time through the expected rise in disposable income, and the transition from traditional trade to modern trade outlets.

VNM reported 1Q23 net sales and net profit of VND13.9tn (+0.3% YoY, -7.6% QoQ) and VND1.9tn (-16.5% YoY, +2% QoQ), respectively, trailing our expectations. Domestic sales continued to struggle, given weak consumer sentiment and aggressive competition in the market. For 2023, the company has set an annual sales and net profit target of VND63.4tn (+5.5% YoY) and VND8.6tn (+0.5% YoY), respectively, which we believe to be rather conservative. We also lower our 2023E earnings to reflect challenging overall market conditions. We expect 2023E net sales and net profit to reach VND63.8tn (+6.4% YoY) and VND9.2tn (+7.3% YoY), respectively. Our new earnings are 3% lower than our previous net profit estimates. For 2024E, we expect net sales and net profit to reach VND67.8tn (+6.3% YoY) and VND10.2tn (+11.3% YoY), respectively. We lower our DCF/PER-based 12-month target price for VNM to VND74,700/share (from VND82,900/share) as we now use a lower target PER of 16x (from 18x) to reflect the gradual loss of market share. Our new TP implies 13.5% upside potential. We maintain our Market Perform rating on the shares of VNM. 

For 2023, KBC maintains its target (approved at the EGM held in December 2022) of VND 9 tn in revenue (+840% YoY) and VND 4 tn in net profit (+151% YoY). Such an optimistic plan is based on the expectation of delivery of: (i) 250 ha of industrial land (Quang Chau & Nam Son Hap Linh IP account for the majority); and (ii) 10 ha of residential land (mainly in Phuc Ninh Urban Area) during the year. While the company is quite confident in securing land leases, there does remain the risk of delay in land delivery due to slower-than-expected land clearance and the procedural processes which could lead to lower-than-expected earnings. We reiterate our positive outlook on KBC’s IP business as most of its ongoing and upcoming projects are located in key industrial hubs in Northern Vietnam (Bac Ninh, Bac Giang, Hai Phong, Hung Yen) where it directly benefits from the relocation trend of production from China to Vietnam. However, we do not exclude risks of weakening global demand, global minimum tax, higher labor cost, difficulties in land clearance, and insufficient infrastructure that could pose challenges to KBC, as well as the sector in general.

Conservative plan: GAS 2023 net profit was conservatively targeted at VND 6.5 tn (a significant decline of 56.6% YoY), based on an average oil price of USD 70/bbl (-30% YoY). According to management, If 2023 oil prices average USD 80/bbl like in the first quarter, GAS’ revenue and net profit could exceed guidance by 10% and 30%, respectively. Cash dividends for 2022 were approved at 36% on par. The AGM approved the issuance of 382.8 mn bonus shares, equivalent to 20% of current outstanding shares. This issuance is expected to take place between 3Q and  early 4Q23. Our current rating for the shares of GAS is MARKET PERFORM. Our 12-month target price of VND 103,000/share is based on a 2023 net profit forecast of VND 12.3 tn (-18.5% YoY). We assume that that volume of dry gas and LPG will drop by 2% and 5.5% YoY respectively, while the ASP is forecast to drop by an average of 14% YoY in 2023.

Contracting loan balances and NIM pressures during 1Q23 did not prevent ACB from achieving record core profit growth of 25.3% YoY to VND 5.2 tn (26% of the annual plan). The main driver was interest income (+14.2% YoY), strong earnings from both forex trading (+44.4% YoY), improved bad debt collection (+53.6% YoY), and OPEX control. Asset quality was affected by an increase in both bad debt and the troubled Group 2 loans. As a result, the NPL ratio increased 23 bps QoQ to 0.97% at 1Q23. For 2023, we expect that ACB will achieve a PBT of VND 20 tn, which is lowered -1.7% due primarily to lower-than-expected credit growth of 12% YTD (from 14%). We extend our valuation to mid-2024, and arrive at a 1Y TP of VND 32,200 (up from VND 30,900). We like bank’s conservative approach to risk management with lending, and that there appeared to be no corporate bond investments with minor exposure to real estate projects. We reiterate our BUY rating on the shares of ACB.

We attended the analyst meeting hosted by SAB. The overall message from the CEO is that despite some short-term headwinds due to unfavorable macro conditions, the company is well prepared for growth once demand recovers (which is expected during H2 or early 2024). While the 2023 sales target appears to be a bit of a stretch against the prospect of uncontrollable outside factors, management sees a path forward to meet its annual NPAT target by controlling costs. Given weak Q1 2023 results as well as expectation of weak consumer sentiment to remain in the coming quarter, we cut our 2023 sales estimate by 6% to VND 37 tn (+4.7% YoY), while estimated NPAT remains almost unchanged at VND 5.8 tn (+5.2% YoY). We cut our target price for SAB to VND 182,000/share (from VND 198,500/share) based on a PER of 23x (from 24x) applied on our 2023F EPS due to the soft outlook for 2023, combined with our DCF model. With 13% forecasted upside in the shares of SAB, we maintain our Market Perform rating.