Company Report

We expect BSR’s 2023 revenue and net income to drop -21.5% and -57.7% YoY, respectively, to VND 131.2 tn and 6.2 tn driven by sales volume of 6.0 mn m3/tons (-15% YoY) under our base case assumption where plant maintenance will occur. We also assume that Brent oil price will average USD 83/barrel (-17% YoY), and average crack spread would drop by 30% YoY in 2023. Our rating on the shares of BSR is Market Perform, with a 1-year target of VND 16,600/share based on a target P/E of 8x, which is regional peer average. However, the recent plunge in global oil prices could weigh on the company’s inventory provisions, as well as the share price over the short-term.

Net sales during 2022 were flat at VND 1.6 tn (USD 66 mn), but some products outperformed. Strong growth came from core products, such as antibiotics (+46% YoY), cancer drugs (+63% YoY), and dialysis solutions (+27% YoY). On the other hand, trading products (medical supplies and drugs) decreased sharply to VND 116 bn (-74% YoY). Gross profit reached VND 767 bn (+23% YoY, USD 33 mn), while PBT reached VND 299 bn (+29% YoY, USD 13 mn) due to the company’s focus on higher margin business. Growth during 2023 is expected to decelerate, according to management. DBD expects revenue to achieve VND 1.8 tn (+9% YoY, USD 75 mn) and PBT of VND 255 bn (-17% YoY, USD 11 mn). This equates to a drop in the PBT margin from 19% during 2022 to 15%. For core products, the company expects slow to no growth except for cancer drugs and dialysis solution of 15% and 20%, respectively.

BMP’s 2022 net revenue and NPAT were VND5.8tn (+28% YoY) and VND696bn (+225% YoY), respectively, achieving 101% and 106% of our 2022 forecast. NPAT during 4Q22 hit a three-year high due to lower PVC input prices (PVC prices accounted for 80% of COGS). However, BMP sales volume has weakened, owing to the slowdown in construction activities. Sales volume reached 24k tonnes (-8% YoY, -5% QoQ) during 4Q22, equivalent to 89% of the 4Q22 target. During 4Q22, BMP reported net sales and NPAT of VND1.4tn (-1% YoY, -6% QoQ) and VND248bn (+117% YoY, +41% QoQ), respectively. Gross margin increased significantly from 19.9% during 4Q21 to 33.7% during 4Q22, as ASP remained high while input costs remained low. Since the 2Q22 peak, PVC resin prices have dropped dramatically from USD1,430/metric tonne during 2Q22 to USD 950/tonne during 4Q22. Due to the increase in the gross margin, net profit/metric ton reached a record high of VND10.4m/metric tonne during 4Q22, a significant increase from VND4.4m/metric tonne during 4Q21.

We reiterate our Outperform rating on the shares of VCB, with a new 12-month TP of VND103,750 (from VND89,600), based on a 2023E P/B of 2.6x (from 2.3x), as we increase our 2023E PBT by 15% to VND44.6tn (+19.4% YoY). With a historical prudence in lending, VCB is much less prone than peers to be impacted by the elevated risk in the real estate and corporate bond market.

With a critical position in the Vietnamese banking system, a solid and recognizable brand name, and stronger-than-peer earnings growth, we see VCB’s business being protected by a moat. Hence, VCB’s valuation gap relative to the private banks should further widen, assuming continued strong execution.

4Q 2022 revenue increased 16% YoY, while NPAT increased 86% YoY during the last quarter of the year, thanks to strong improvement in EPC/EPCI segment and JV contribution. EPC segment recorded strong results thanks to Dai Nguyet project completion, as well as continuation of large projects such as Gallaf – Batch 3, Shwe Jacket…2022 revenue thus reached VND 16 tn (+ 15.5% YoY), while NPATMI reached VND 772 bn (+28.5% YoY). This is 20% higher than our estimate, with the key upside surprise coming from higher EPC/EPCI profit and profit margin. 2022 EPS was VND 1,212/share, +33% YoY, and translating into a trailing-12 month P/E ratio of 22x.

HT1’s 2022 net revenue and NPAT was VND 8.9 tn (+26% YoY) and VND 262 bn (-29% YoY), respectively, achieving 102% and 100% of our 2022 in-house forecast. During 4Q22, HT1 reported net sales and NPAT of VND 2.3 tn (+14% YoY, +2% QoQ) and VND 58 bn (+8% YoY, +58% QoQ), respectively. Cement sales volume during 4Q22 totaled 1.7 mn tons (+5% YoY, + 5% QoQ) with ASP remaining flat QoQ at VND 1.3 mn/ton. Cement sales volume during 4Q21 were low due to COVID-19. During 4Q22, cement sales volume decreased 7% compared to 4Q20. This reflects lower construction activity due to the downturn in the real estate market. Profit has bottomed as input coal prices corrected -10% QoQ. As a result, GPM increased to 9.1% during 4Q22 -up from 8.4% during 3Q22.

MWG’s financial performance was worse-than-expected during 4Q22, with net income declining by 60% YoY due to: (i) lackluster demand in the context of macroeconomic headwinds; (ii) the 4Q21 high base when the company experienced pent-up consumer demand; (iii) slow delivery of the iPhone 14; and (iv) a sharp increase in interest expense. On the bright side, we estimate 4Q22 PBT margin at BHX to have improved by 0.9pp vs. that in 3Q22 and 2pp vs. that in 1H22. The improved profitability of the grocery segment and the absence of one-off expenses relating to grocery store closures should be the main earnings growth driver for 2023, while the ICT & CE segment should be impacted by rising inflation and unemployment. We forecast 2023E net income at VND4.4tn (+9% YoY, from VND4.7tn), as we factor in larger-than-expected losses from the pharmacy segment. With our revised 2023 financials, we derive a new SOTP-based 12-month target price of VND44,600 (from VND43,500) for the shares of MWG, and maintain our MARKET PERFORM rating.

We update NLG to Market Perform, with our 1Y target price of VND 29,200 (+15.6% potential upside). As such, we revised down our 1Y target price by -30% since our last report by revising the discount rate from 12% to 14% as well as extending the presale progress of NLG key projects such as Waterfront, Waterpoint, NLG Can Tho, among others. With a large percentage of real estate second tier city projects in the company land bank, homebuyer demand for these projects will continue to be affected due to high interest rate mortgages, as well as low transactional liquidity in the market. In 2023, sales and handover of multiple projects (including Akari and Mizuki Park, Izumi, and Southgate) will still be the key momentum for NLG business results. As such, we forecast 2023F net revenue of VND 5.5 tn ($234 mil USD, +26% YoY) and NPATMI of VND 930 bn ($39 mil, +7.6% YoY). With a strong backlog of nearly VND 17 tn ($723 million USD) at the end of 2022 (mostly coming from mid-end housing projects), NLG earnings should be gradually allocated over the next upcoming years (2023-2025).

We update KDH rating to Market Perform, with a revised 1Y target price of VND 30,500 (+19.8% potential upside). As such, we revised down our 1Y target price by -26% since our last report, as we revised the cash flow from sales progress of recurring real estate projects and apply a more prudent discount rate for potential projects in the future. Among our coverage, we determine that KDH has some advantages compared to other developers, such as the company’s land plots located in District 2, 9, and Thu Duc area, which usually has a higher absorption rate compared to other second tier areas. Not to mention, KDH project execution has been proved over the years which create a strong believe for home buyers. In addition, KDH clean bank legal status projects and good financial health, can also help the company to withstand difficult market conditions.

Continued double digit growth for third year in a row. For 2022, Traphaco posted revenue of VND 2.4 tn (USD 102 mn, +11% YoY), NPAT of VND 293 bn (USD 12 mn, +11% YoY), and NPATMI of VND 269 bn (USD 11mn, +11% YoY). Non-herbal medicine category grew at faster pace than herbal medicine. But we expect to see single-digit growth for 2023. Even though Traphaco possesses a strong product portfolio with potential for growth, we are concerned about weak economic conditions affecting sales of preventive medicine and supplements. We lowered our 2023 revenue forecast to VND 2.6 tn (USD 111 mn, +8% YoY) due to worries over weakening demand. NPATMI is expected to reach VND 306 bn (USD 13 mn, +13% YoY) with the assumption of slight increase in cost of goods and reduction in SG&A expense to conserve profit level. Our new target price is VND 95,000/share, which based on a mix of our DCF methodology and target P/E of 12x. Given the 8% potential ROI (counting 3% dividend yield), we maintain our MARKET PERFORM rating on the shares of TRA.

QNS posted 2022 net revenue and NPAT of VND 8.3 tn (+13% YoY) and VND 1.3 tn (+3% YoY), respectively, achieving 103% and 101% of our 2022 forecasts.

During 4Q22, QNS reported net sales and NPAT of VND 1.9 tn (+25% YoY, -15% QoQ) and VND 427 bn (+11% YoY, +34% QoQ), respectively. Sugar was the main driver of revenue growth, with net sales during the quarter reaching VND 523 bn (+51% YoY, -14% QoQ) as QNS benefited from higher sugarcane volume yield during FY 2022/23. The sugar segment’s GPM fell from 32.8% during 4Q21 to 26.0% during 4Q22, owing to: (i) an increase in the ratio of refined extra sugar to total sugar consumption; and (ii) the sugarcane input price hike outweighing the sugar ASP increase. The biomass segment continued to post a slight profit, while the soymilk segment reached VND 915 bn (+8% YoY, -27% QoQ) in net sales. Soymilk consumption decreased 12% YoY during 3Q22 and 4% YoY during 4Q22 - indicating weak demand for the nutrition market. The soymilk segment’s GPM reached 36.7% during 4Q22 compared to 37.4% during 4Q21 due to rising input costs (soybean, sugar, packaging, etc.). Accordingly, QNS’ overall GPM decreased from 32.1% during 4Q21 to 30.2% during 4Q22.

For 2022, MSN reported a net revenue and NPATMI of VND 76.2 tn (-14% YoY) and VND 3.6 tn (-58.3% YoY). If we exclude the one-off sale of MML’s feed business to DeHeus during 2021, core NPATMI would have remained flat YoY. In our view, all business lines will remain impacted by weak macro conditions. During Q4, MCH revenue declined -16.5% YoY due to tight consumer spend and the high base effect of Q4 2021 (as the company aggressively pushed sales to distributors during Q4 2021). WCM’s revenue during Q4 was also lower QoQ, despite the early Tet holiday (part of Tet sales were recorded during Q4 2022). On the cost front, financial expenses increased 11% YoY during 2022 (Q4 standalone financial expense rose 16.7% YoY) due to a higher debt balance and interest rates. Given the high gearing ratio (D/E of 1.9x by 2022-end), we expect high interest costs to be a theme throughout 2023 should the group fail to de-lever.

We are downgrading our rating on the shares of VNM from OUTPERFORM to MARKET PERFORM, reflecting only 9% upside potential to our lower PER/DCF-based 12-month target price of VND82,900/share (from VND85,000). VNM’s disappointing 4Q22 results were the result of a net sales and net profit decline of 5% YoY and 16% YoY, respectively, while the gross margin was the lowest recorded since 2015. While the price of raw milk powder has declined significantly YoY, VNM’s relatively high-cost inventory is expected to last through the year. Nevertheless, 2023 is marginally more hopeful, as we forecast net sales and net profit growth of 6.4% and 10.3% YoY, respectively – but still off of a low base. Management expects significant gross margin improvement from 3Q23 due primarily to the recent hedging contract for raw milk powder at lower prices. Meanwhile, we are not as optimistic for domestic sales growth, given the inflationary pressure and intense competition. Upside risk: fall in raw material prices; downside risk: loss of market share.

Net income during 2022 increased sharply due to retrospective one-time revenue from Nhon Trach V Industrial Park (IP), and an accounting change from an annual basis to a one-time booking at Phu My II, Phu My II expanded and the Huu Thanh IP. Net revenue reached VND 8.2 tn (+91.6% YoY), whereby IP real estate revenue reached VND 4.2 tn (+5.35x YoY), including the retrospective one-time revenue of Nhon Trach V IP of VND 1.5 tn and a record one-time gain from Phu My II, Phu My II expanded and the Huu Thanh IPs with a lettable area of 91.5 ha. Gross profit margin increased sharply to 43% (+26% YoY), where the Nhon Trach V Industrial Park profit margin reached 84%. NPAT during 2022 reached VND 2.5 tn (3.9x YoY), which is equivalent EPS is VND 7,001/share for IDC.

We maintain our Market Perform for the shares with a revised 1-year target price of VND 20,000/share, which is predicated on an equally-weighted target 2023F PE and EV/EBITDA of 11x and 6.5x respectively. We use higher target multiples as we believe that the company has already passed the worst period in 2H22. However, the shares may already be reflecting an earnings recovery for 2023 and could face short-term profit-taking pressure given the weak projected earnings during the first half of the year.