Company Report

GAS’s revenue for 1Q23 declined by 20.5% YoY primarily due to an average decline in oil prices of 18% YoY. However, net income attributable to parent shareholders during 1Q23 decreased 2.3% YoY to VND3.4tn due to resilient volume for electricity and fertilizer clients. In addition, the tripling of net financial income has also been supportive to earnings. For 2023, according to the company’s annual report, net profit is conservatively targeted at VND6.5tn (a significant decline of 56.6% YoY), which is largely attributed to the drop in oil prices. Guidance is likely based on a Brent oil price assumption of USD70/bbl (-30% YoY). Shares in GAS are trading at a 2023E P/E of 15x. We maintain our Market Perform rating and 12-month target price of VND103,000/share, based on a 2023F P/E of 16.5x (from 18.5x), the past-10-year average. 

1Q 2023 results: revenue up 124% YoY and 15% QoQ, while PBT was up 86% YoY and 29% QoQ, as its pretax margin expanded to 43% from 38% in the previous quarter. We note that the company is on track to meet our PBT estimate of VND 10.6 trillion for 2023. The company served 36.5 million passengers in the first 4 months of 2023 (+6% compared to pre-Covid), and international passengers have recovered to 77% of pre-Covid levels (4M 2019 international volume was 12 mn passengers). We maintain our current 1Y TP of VND 98,000/share based on 2024F EV/EBITDA-ex landing charge with a target of 16x, and maintain our OUTPERFORM rating for the stock. The catalyst for the stock price in the short term would be the approval for extension of the visa-exemption period for tourism, which would significantly boost Vietnam’s attractiveness and accessibility compared to regional peers like Thailand or Indonesia.

Following the MWG analyst meeting on May 12 2023 and the worse-than-expected 1Q23 results, we trim our 2023 and 2024 net income forecasts by -24% and -8%, respectively, to VND 3 tn (-27% YoY) and VND 4.6 tn (+52% YoY). However, we believe that MWG’s earnings bottomed out in 1Q23, with April revenue recovering by 20% MoM. We believe earnings could recover over the remainder of the year QoQ, powered by: (i) higher demand for white goods due to the unexpected hot weather; (ii) lower interest rates; and (iii) recovery in external and domestic demand from 4Q23. We also expect earnings to return to YoY growth from 4Q23. Using unchanged target multiples applied on our revised 2024F estimates (from averarge 2023F-2024F), we derive a new SOTP-based target price of VND 43,900/share (from VND 44,400) which offers 15% upside from the current share price. We maintain MARKET PERFORM rating. 

We find VCB’s 1Q23 results solid, with decent profitability and well-controlled credit quality. Its NPL formation and ‘Group 2’ tier of other orbiting loans were amongst the lowest in the industry in 1Q 2023. During April, the base NPL ratio increased just 4 bps to 0.89%, while the satellite Group 2 loan ratio remained flat MoM, without any further write-offs. This proved the bank’s capability in risk management. Despite the bank considering another rate cut package with an impact on NII of between VND 600-700 bn, the impact on the 2023 PBT should be offset by the curtailment of credit cost. Therefore, our PBT estimate for 2023 remains broadly unchanged at VND 44.5 tn (+19% YoY) and we introduce our 2024 forecasts. However, we are rolling forward our valuation basis to mid-2024 which results in a new 1Y TP of VND 109,400/share (from VND 103,750/share). This is equivalent to a 2024F P/B ratio of 2.4x (from 2023F P/B ratio of 2.6x). We reiterate our Outperform rating.

2Q23 was a return profitability, posting earnings of VND 251 bn (+7.1% YoY) driven by an inventory provision reversal of VND 466 bn due to a steel price recovery. However, the company’s sales volume remains weak, especially in the domestic channel with 2Q23 volume declining -37% YoY to 167k tons (equivalent to the 4Q21 bottom amid the Covid-19 lockdown). However, export volume has stabilized at around 50k tons between Feb and Mar versus the bottom of around 32k ton between Jul-Sep 2022, albeit still between 50%-60% lower than the peak of 2H21. We lower our rating on the shares of HSG from Market Perform to Underperform, along with our 1-year target price of VND 14,300/share based on target PB of 0.8x. HSG’s earnings have already bottomed out, which can serve as a supportive factor for the share price.

At the 28 April AGM, guidance for net revenue and NPAT in 2023 was set at VND6.4tn (+9% YoY) and VND651bn (-6% YoY), respectively. Earnings guidance reflects management's conservative view of weak market demand and PVC input price fluctuations. BMP is expected to focus its strategy on sales volume and lowering inventory. For 2022, BMP is set to pay 99% of net profit in a cash dividend, which is equivalent to VND8,400/share (a 10% dividend yield). We increase our net profit for 2023F by 21%, as BMP has a high ASP level and low PVC input prices. We raise our 12-month target price for BMP to VND84,300/share (from VND62,000), based on a 2023F PER of 9x. But given only 2.3% upside potential to our new TP, we downgrade our rating to Market Perform (from Outperform).

HPG’s earnings reversed during 1Q23 and were positive at VND383bn. Much of the earnings recovery during the quarter likely took place during March, led by the 3-10% MoM increase in steel prices, and a sales volume increase of 5% MoM. On the other hand, furnace utilization rates at HPG continued to decline to a record low of 65% from 70% during 4Q22 and 100% during 1Q22. Construction steel volume during 1Q23 was 868k tons, falling 35% YoY given the high base effect of 1Q22 (historical quarter of high volume), but recovering 6% QoQ. The volume of other steel segments, including HRC, steel pipe, galvanized steel and billet also dropped between 27-59% YoY.

We attended the PLC AGM on 20^th April and there are some key takeaways: Annual targets of VND 8.9 tn for revenue (+3.5%) and VND 200 bn for PBT (+8.5% YoY) were approved. Management discussed that the asphalt segment should be a key growth driver over the next several years, as it benefits from the current public investment acceleration driving GDP growth. To illustrate, management stated that PLC has supplied and will further supply asphalt to  popular projects, such as 12 sub-projects of the mega project North-South expressway (to be completed no later than 2025), amongst others.

At NKG’s recent AGM, a revenue target of VND 20 tn was set – declining -13.3% YoY. However, the company is expected to turn a profit of VND 400 bn compared to a loss of -VND 107 bn during 2022. Guidance is based on a sales volume target of 940k tons (+7.4% YoY), and an HRC steel price of between USD 600-700/ton. According to management, NKG continued to book a -VND 50 bn loss for 1Q23. Sales volume during 1Q 2023 was 194k tons and fell -25% YoY, but recovering 6.2% QoQ due to a 14.1% rebound in export volume.

SZC held its annual general meeting to set its target for 2023, and fielded questions regarding its operations. Using NPV method, our new 1-year target price for SZC is VND 31,900/share (previously VND 51,900/share) due to: (i) the CDIP investment capital has been marked with market price and increased from VND 4.9 tn to VND 8.0 tn; and (2) higher capex for CDUA (from VND 1.2 tn to VND 9.8 tn). We reiterate our MARKET PERFORM rating on the shares of SZC.

DHC’s NPATMI declined YoY in 2022, the first time since 2018. Net sales reached VND 3.9 tn (-5.3% YoY) due to a decrease in paper consumption demand. Such a decrease in demand was witnessed by export company customers and packaging companies. DHC has also doubled raw material inventory during 4Q22, compared to the same period last year, as the company accumulated raw materials when the OCC paper price dropped -40% YoY. We estimate that the current inventory should help to improve the gross profit margin during 1Q23.

Earnings continued to normalize from the brief upcycle with NPATMI declining -21% QoQ and -16% YoY, leading to our lowering of 2023 earnings forecast by 24%. Lingering high inflation and overstocked inventories issue needs some time to correct and shipping volumes are expected to remain weak within 1H 2023, before improvement can be expected from 2H 2023.We change our rating for the stock to OUTPERFORM (from BUY) with a revised 1Y P/E target of 6x and a revised 1Y TP of VND 40,500/share (~16.9% upside). We believe even though earnings outlook might be negative in short-term, the industry dynamics have passed its worst time, as evidence in the recent recovery of charter rate. We expect 2H 2023 industry dynamics to improve, which can lay a good foundation for market re-rating for the sector.

We maintain our positive outlook on TDM’s operations, given the stable growth in consumption demand and TDM’s most efficient clean water enterprise due to its low water loss rate and stable source of raw materials from both the Dong Nai River and Phuoc Hoa Lake. Additionally, the Bau Bang factory is expected to surpass 10% of the average demand for Binh Duong province between 2022-2025 to cater to future demand in the Bau Bang Industrial & Residential Area, as well as additional industrial customers setting up shop at VSIP 3. We recommend an Outperform rating for the shares of TDM, with a target price of VND 39,600 (6.5% upside) based on our DCF valuation. Dividend payout ratio will reach 45% in 2023, translating to an yield of 3.6%. In the long term, we expect that the M&A of Gia Tan - Dong Nai water plants and Can Tho Water Supply JSC to be the main drivers for TDM's profit growth  when demand growth in Binh Duong slows down.

We reiterate our OUTPERFROM rating on the shares of PVT despite lowering our 1Y TP to VND 23,200/share (~17% upside) from VND 24,000/share. 4Q 2022 revenue and gross profit increased 17% and 33% YoY, respectively, due to 25% YoY growth in transportation segment revenue associated with higher charter rates, as the FSO segment stabilized. We see a strong tanker charter market supported by sanctioning measures on Russia oil&oil products increasing ton-mile demand for oil transport. Full year 2022 PBT thus reached VND 1.5 tn (+40% YoY), which is 8% higher than SSI Research estimates due to a surprising asset disposal gain during 4Q. Excluding all asset disposal gains, 2022 PBT would have been VND 1.2 tn (+17% YoY), slightly higher than its PBT CAGR of 15.6% over the past ten years.