Company Report

Preliminary 2022 results of ACV: 99 million passenger throughput, consolidated revenue of VND 15.3 trillion (+225% YoY) and pretax profit of VND 7.5 trillion (equivalent to 74% of 2019 level). The results were supported by strong pent-up demand for domestic travel, forex gain from JPY-denominated debt, and landing area consolidation into the P&L. 2023 plan: 116 million passengers (on par with 2019 level), consolidated revenue of VND 18.4 trillion (on par with 2019 level) and pretax profit of VND 8.5 trillion (17% lower than 2019 level). Upgrade to OUTPERFORM, with 1-year target price of VND 98,000/share based on 2024F EV/EBITDA target of 18x (from 18x 2023F EV/EBITDA). China’s early reopening and strong earnings growth outlook in 2023-2024F are the key reasons for our call.

We reiterate our rating Market Perform with 1Y TP price for TPB shares of VND 22,800 by applying a discount target P/B to 1.x from 1.8x to reflects our concern about the high exposure to corporate bond. Coupled with the potential for NIM contraction and higher NPLs, headwinds are likely for TPB over the near-term. 3Q22 witnessed humble operating income growth of 2.5% YoY to nearly VND 3.8 tn, due primarily to the absence of trading gains as bond interest rate hiked. For 4Q22, we estimate that TPB will achieve PBT of VND 2.1 tn (+26.2% YoY), resulting in 32.5% YoY growth (VND 8 tn) for FY 2022.

In 9M 2022, PVS posted consolidated revenue of VND 11 tn, +14.8% YoY and NPATMI of VND 415 bn, -19.8% YoY. The key culprit for the fall in gross margin is from lower margin of EPC/EPCI segment, as its margin contracted signifcantly from 3.7% in 9M 2021 to 0.4% this year. The O&M segment also saw a significant margin cut, to nearly the breakeven point. Significantly higher material and input costs (65%) is the main reason so far. Recently, Vietnam National Assembly has passed the Revised Oil & Gas Law, which is supposed to create a clearer legal framework for oil & gas activities, including new investments in E&P projects. As the outlook for Vietnam oil & gas E&P sector can be improved marginally in 2023 and more positively from 2024, we expect PVS to continue to rely on the international market for large EPC contracts in 2023.

ACB posted a pretax profit of VND 4.5 tn (+71.1% YoY) in 3Q22, fueled by solid credit growth (+11.1%), strong interest income growth (+33.4% YoY), robust fee income (+36.4% YoY), and the reduction in loss provisions (-89% YoY). Notably, the NIM kept heading upward without interruption. Despite modestly weaker asset quality having in 3Q22, ACB has maintained a very robust credit buffer which eased pressure for credit provision expenses and facilitated stellar earnings growth momentum. Restructured loans declined -13.9% QoQ (approx. VND 11.2 tn), and a total lack of corporate bond balance enabled ACB to be less impacted by current market condition. Despite major headwinds being included our assumption and a reduction in our 1Y TP to VND 26,300 per share (from VND 34,400), we reiterate our BUY rating on the shares of ACB given the upside of 29.2%.

For 3Q22, QNS posted net sales and NPAT of VND 2.3 tn (+9% YoY, +4% QoQ) and VND 318 bn (-8.7% YoY, -13% QoQ), respectively. For 9M22, the company reported net sales of VND 6.3 tn (+9.3% YoY) and NPAT of VND 859 bn (-1.2% YoY), respectively.  Soymilk volume reached 207 mn liters (-1.3% YoY), and sugar output came in at 94k tons (+12% YoY) in 9M22. Weaker-than-expected earnings occurred during 9M22 due to: (1) soymilk selling volume decreased -1.3% YoY through 9M22 (-12% YoY in 3Q22); and (2) sugar segment GPM dropped from 20.9% in 9M21 to 16.5% in 9M22.

Net profit in 3Q22 recorded a three-year high. BMP posted net sales and NPAT of VND 1.5 tn (+184% YoY, -4% QoQ) and VND 176 bn (+21% QoQ) respectively. Due to the COVID-19 lockdown, 3Q21 set a low base effect (a net loss of VND 26 bn). GPM increased to 28% in 3Q22, up from a low base of 4.5% in 3Q21 due to a drop in PVC input prices. ASP for BMP remained flat QoQ in 3Q22, while PVC resin prices fell -31% since 2Q22 to $900-1,000 USD/tonne, which is -35% lower than the average price in 2021. With lower PVC resin prices and a flat ASP, we believe BMP’s 4Q22 GPM will remain high. We forecast BMP net sales and NPAT in 2022 to be VND 5.7 tn (+26% YoY) and VND 655 tn (+206% YoY) respectively.

MWG reported revenue of VND32tn (+32% YoY, -7% QoQ) and net income of VND907bn (+15% YoY, -20% QoQ) for 3Q22. Given the 3Q21 low base when the company suffered from lockdown activities in provinces within Southern Vietnam, 3Q22 net income growth of 15% YoY was below our expectations. This could be attributed to the increase in financial and one-off expenses related to the closing of non-performing BHX stores. We expect financial expenses to rise in 4Q22 due to the: (1) trend of higher interest rates, (2) debt restructuring to longer maturity, and (3) VND depreciation. We forecast 4Q22F net income at VND1.67tn (+7% YoY). As such, we reduce our 2022F net income by 6% to VND5.16tn (+5% YoY, from VND5.48tn) and that for 2023F by 18% to VND5.86 (+14% YoY, from VND7.19tn). While earnings of the ICT & CE segments will likely be hurt next year, improvement in the grocery segment (due to the increase in sales and absence of one-off expenses) and smaller FX losses should secure decent earnings growth for 2023F. Despite rolling over our basis to 2023F (from average 2022-23F), we lower our SOTP-based 12-month TP to VND61,000 (from VND87,800) to reflect the cuts to our earnings and target multiples. With 44% upside potential to our new TP, we recommend investors to accumulate the stock despite possible periods of price weakness.  

FPT trades at an attractive FY22E and FY23E P/E of 15x and 12.7x, respectively, on the back of 22%  and 18%  EPS growth under our base case. Meanwhile, peers with an average of 6%  and 15%  EPS growth in 2022 and 2023, respectively, are trading at an average FY22E and FY23E P/E of 17x and 15x. While the IT spending weakness need to be monitored, in light of FPT’s low cost advantage, having the lowest exposure to the EU market compared to peers, a healthy interest coverage ratio, and an abundant net cash position, we remain positive on the stock. We call for Outperform rating on FPT with 12-month SOTP-based TP of VND95,400 representing 31% upside potential. Key risks: extreme recession could negatively impact the domestic & global IT services sector, as well as digital advertising segments.

According to the most recent update, sales volume of HPG’s construction steel during October dropped significantly to 210k tonnes, the lowest level since March 2021, whereby export and domestic volumes for the month dropped by 73% and 44% YoY, respectively. The volume of billet, pipe, and galvanized steel also dropped by 92%, 21%, and 40% YoY, respectively, to a respective 15k, 57k, and 27k tonnes for October. On the other hand, HRC volume for October remains strong at 269k tonnes (+30% YoY) but it could decrease near-term given the weak consumption of finished flat-steel products. Accordingly, the utilization rate of HPG blast furnaces during October was likely closer to 70%, based on sales volume. Given the rapid deterioration in the overall market, we revise down our 2022F net profit by 16% to VND10.2tn, implying a net loss of VND270bn in 4Q22F. In 2023F, we lower our net profit by 14% to VND10.88tn, which calls for 6.6% YoY growth thanks to a lower forex loss and the drop in coking coal price. 

HT1 recorded 3Q22 revenue of VND 2.3 tn (-5% QoQ, +118% YoY from the low base set in 3Q21). NPAT came to VND 37 bn (-73% QoQ, whereas Q3 2021 saw a loss of 20 bn VND). GPM fell from 13.4% in 2Q22 to 8.4% in 3Q22, due to an 11% QoQ increase in coal prices. We believe that the high level of coal prices will place additional pressure on the company's 4Q22 gross profit margin, as cement companies will find it difficult to raise cement prices further in the face of weaker domestic demand. As a result, we expect that HT1 net sales and NPAT in 2022 will be VND 8.7 tn (+24% YoY) and VND 261 bn (-37% YoY) respectively.

We estimate that HT1 net profit will rebound to VND 400 bn (+54% YoY) in 2023, based on the assumption that coal will fall -10% from its peak in 2022. We maintain our Market Perform rating on HT1, with a one-year target price of VND 10,190/share (+1% upside). We think the stock in the short-term can be supported by the positive news of lower coal prices that could result in positive earnings growth in 4Q22 (+19% YoY), and a public investment boom expected in 2023.

We attended the NVL analyst meeting on Oct 28-2022 and came away with the following key takeaway. While net revenue stayed flat in Q3, NPAT dropped significantly by -56% YoY as the bottom line was negatively impacted by high financial expenses. Due to high leverage of approx. 160% D/E  at the end of Q3 2022 compared to other developers, the company also has a comparatively high amount of USD-denominated debt obligations (24% of its debt being USD-denominated vs. total debt), the financial burden for NVL will be heavier until the end of this year, due to the tightening conditions in the funding market as well as generally unfavorable market conditions.

In 3Q 2022, PVT revenue grew impressively by 38.7% YoY to VND 2.33 tn while PBT growth is even more impressive at 143% YoY to reach VND 481 bn, including an one-off gain from PVT Athena’s disposal of VND 211 bn. This result has been in line with our expectation so far, benefiting from the higher charter rate of its vessels in the international market, while domestic market is stable. From our discussion with the company, we expect this favorable condition for tanker owners to continue into upcoming quarters, since we do not see any improvement from the Russia-Ukraine conflict in the short-term and the tanker market is still in uptrend. There might be some impact on forex loss in 4Q 2022, but that should be offset by higher earnings from better charter market condition. Thus we maintain our previous forecast for PVT as in our previous report (here), while we revise down our 1Y target price to VND 24,000/share (from VND 26,200/share) based on a lower P/E target of 10x (from 11x) to reflect our overall market lower rating. We maintain our OUTPERFORM rating for the stock on the base of stock price upside and positive outlook into 2023.

In 3-6 months, we see core earnings of 4Q 2022 to improve further when more charter contracts are renewed at a more favorable price, which should be the main catalyst for the stock price in the coming time. Also, there should be further gain on asset disposals from 2 vessels (PVT Eagle, PVT Dragon) in the upcoming quarters, which should be another catalyst to watch.