Company Report

In 2018-2020, VTP has been a favorite mid-cap high growth stock mainstay for investors, with earnings growth ranging between 40-50% p.a. thanks to its direct exposure to the Vietnam e-commerce growth story. However, even after COVID-19 has sped up ecommerce market growth significantly, the express delivery market after 2020-2021 period has been further sculpted and is continually refined. It is thus of little surprise the market has been heading into a new period, with more competition and with higher expectations of better infrastructure and customers’ demand for higher service quality. In that context, VTP needs some time to retool its approach towards a new growth strategy, with an initial focus on infrastructure investment before it can reap the fruit of reward, and see high growth yet again. At the current market price, VTP is trading at a 2022F and 2023F forward P/E of 20x and 17x respectively, compared to the regional peers’ average of 24x. We maintain our target P/E of 20x, but lower our estimates for VTP as discussed below. As such, we revise our VTP 1Y target price to VND 74,000/share (12.8% upside), with an MARKET PERFORM rating for the stock.

After posting fruitful earnings results in 2021, MSN continues to set high growth targets for 2022. MSN targets between VND 90-100 tn in revenue (+22%-36% YoY) and core NPATMI of between VND 4.8- 6.2tn (+26%-63% YoY). These targets take the deconsolidation of the feed business into account. For 2022, our forecasts are broadly unchanged, and we estimate MSN to post VND 93.4 bn revenue (+5.4% YoY) and VND 5.76 tn NPATMI (-33% YoY) or core NPATMI growth of 37% YoY. For 2022, strong growth likely will come from: (1) continued growth momentum of MCH and TCB; and (2) profitability improvement at WCM and MHT.  Our SOTP-based 12-month target price is adjusted to VND130,000/share (from VND172,000), after taking into account the recent 20% stock dividend. With 18% upside potential to our TP, we maintain our Market Perform rating.

VIB stands out as the bank with the highest concentration of retail loans, at approx. 86.5% of total loans. Corporate bond balances have been maintained at around 1% of total credit (VND 2.6 tn as of 1Q 2022; less than TPB and OCB). VIB, as a result, has minimized its exposure and was quite conservative with corporate bond issuance, an enviable spot to be in with the current corporate bond crackdown. During 1Q2022, VIB posted a significant pretax profit growth of +26% YoY to approx. VND 2.3 tn, which is backed by an improvement in CIR pf 360 bps YoY to 35.3%, and strong mortgage lending growth of 7.4% YTD to VND 91 tn. However, bancassurance income witnessed a long slide by -36.2% YoY due to acute competition. A close eye needs to kept on asset quality, given the bank’s relatively low credit risk buffer compared to peers (51.8% vs. 148.3% on average). As such, we call for Market Perform rating on the shares of VIB, along with our 1Y TP of 30,700 per share.Downside risk: Higher-than-expected inflation, pressuring the bank to increase its deposit rates. Possible slowing consumer demand. Upside risk: Significant decline in restructured loans.

HPG’s 1Q22 revenue and net profit came in at VND44.1tn and VND8.2bn, respectively, up by 41% and 17% YoY. Construction steel volume hit a company record 1.34mn tons – growing by 57% YoY or 23% QoQ. HRC-type steel sales volume also increased 15% YoY to 763k tons, while volume of finished flat steel (including pipe and galvanized steel) increased by 20% YoY to 313k tons, driven by the recovery in domestic demand. The 15% YTD increase in construction steel prices has enabled HPG to take advantage of its lower-cost stockpiled inventory and aided in the improvement of its gross margin to 22.9% from 21.4% in 4Q21. As 1Q22 net profit for HPG lines up well with our forecast, we largely maintain our 2022E net profit at VND31tn (-10% YoY). We assume 2022E revenue to increase by 18% YoY thanks to the increase in sales volume and steel prices. We reiterate our Outperform rating on the stock, but lower our 12-month TP from VND54,000/share to VND50,600/share based on a target P/E and EV/EBITDA of 7.5x and 5.5x respectively (revised from 8x and 6x respectively due to the decline in regional valuations). Key downside risks to our call would be lower-than-expected steel prices and the possibility of higher costs for iron ore and coking coal compared to our assumptions.

GMD posted strong 1Q22 revenue and PBT of VND 880 bn (+28% YoY) and VND 350 bn (+82% YoY), respectively, which is the highest quarterly core earnings result ever recorded by the company - although Q1 is normally the industry’s low season. We believe that growth momentum can be sustained in 2022 given Gemalink’s contribution and the cost efficiency improvement, which should lead to GMD posting a PBT of VND 1.2 tn (+50.7% YoY) for 2022. Beyond 2022, however, GMD’s growth outlook remains very bright with the contribution of Nam Dinh Vu Phase 2 beginning 2023 and Gemalink’s Phase 2 from 2025. We reiterate OUTPERFORM rating on the shares of GMD with a revised 1Y TP of VND 65,000/share, which implies 16% upside.  Downside risks include: (i) prolonged Covid-19 lockdowns in China to affect shipping volume; (ii) weakened global demand as a result of high inflation and/or economic downturn; and (iii) higher competition in the Northern port system.

We expect the company to post net sales and net profit of VND 5.8 tn (+22% YoY) and VND 434 bn (-2% YoY), respectively, in 2022, reflecting  preliminary 1Q22 results. At VND 91,600/share, MSH trades at a 2022 P/E of 11.2x on SSI Research estimates and 12x on company guidance. This is lower than peer average of 13x. Our rating on the shares of MSH remains MARKET PERFORM, as does our 1Y target price of VND 97,800/share (+7% upside) based on our target P/E of 12x. Despite the short-term headwinds, we believe that the recent capacity expansion from two new factories are supportive medium-term catalysts for the shares, as orders continue to shift from China to Vietnam.

Given that raw material prices (raw milk, feed, sugar, packaging costs) have remained at elevated levels for longer than we had expected, we lower our 2022E revenue and NPAT by 1% and 10%, respectively. We trim our 12-month TP for VNM to VND82,000/share (from VND90,000/share), based on a blended DCF valuation (with a higher WACC to reflect a higher risk-free rate) and a lower P/E target of 18x (from 19x). We are of the view that the negative growth outlook for 2022 has been largely flagged by the market. Given upside potential of 13% to our new TP, we reiterate our Outperform rating on the shares of VNM.

After a rough year in 2021 where HT1 earnings dropped to a 12-year historic low, management now targets a revenue and PBT recovery of between 7%-11% in 2022. During the first quarter, earnings continue to experience significant weakness given high coal prices. However, sales volume has regained some positive growth momentum after falling during the past two consecutive quarters. Over time, we expect the recent increase in cement selling prices and cost -cutting measures to enable the company to recover. Accordingly, HT1’s revenue and PBT for 2022 is forecast at VND 7.9 tn and 530 bn, respectively, increasing 14% and 15% YoY. We maintain our 1 YR target price on the shares at VND 17,500/share, based on a 1-year PE and EV/EBITDA of 15x and 6.5x, respectively. However, we are upgrading the shares from Underperform to Market Perform, as the share price has declined by -29% price since our last report.

We recently attended the MWG AGM, wherein the management guided for 2022 earnings to increase by 30% YoY. As a result, we increase our SOTP-based 12-month target price to VND196,000 (from VND174,000) – for upside potential of 31.4%. While the revenue recovery for its grocery chain (BHX) is slow, 2022 earnings growth should be supported by: (1) a recovery of DMX/TGDD off of a low base in 2021; and (2) improvement to BHX’s bottom line due to cost optimization measures. Our 2022 revenue and net income estimates are now VND138.8tn (+13% YoY) and VND6.7tn (+37% YoY), respectively. The AGM pledged a maximum of 20% toward a capital raise to expand the grocery segment beginning 2023 - a positive catalyst for the shares, in our opinion. We, hence, raise our target PS for the grocery segment from 0.8x to 1.3x, which is decent compared with the PS of 2x based on the most recent stake sale of Wincommerce (a competitor grocery chain). We reiterate our BUY rating on the shares of MWG. Downside risk: possibility of store closures due to renewal of lockdown measures.

We reiterate our Outperform rating for GAS, with our 12-month target price maintained at VND134,000/share (16.2% upside potential), based on a blend of a target PE of 22x and DCF valuation. Although we raise our base-case assumption for the Brent crude oil price from USD80/bbl to USD90/bbl in USD terms (or the fuel oil price from USD430/tonne to USD490/tonne), we lower our gas volume forecast to reflect the fact that high oil prices might dampen demand. Accordingly, we estimate dry gas volume to reach 8.1 bcm (+12% YoY, from our previous estimate of 8.5 bcm). Therefore, our revenue and NPAT for GAS in 2022E are almost unchanged: VND88.6tn in revenue (+15.7% YoY) and VND11.56tn in NPAT (+34.9% YoY).

From our recent call in November 2021, HAX share price has increased 25% and reached our previous target, with better-than-expected growth in its 2021 earnings result. However, after attending recent 2022 AGM, we saw a possible peak in HAX earnings in Q2 & Q3 2022. We have also seen stricter requirements in terms of Mercedes’ dealer standards, which has pressured the company to raise significant equity for expansion, and dilute earnings growth in the near term. The impact of worsening chip shortage also causes us to lower 2022 and 2023 earnings forecast. Thus, we decided to rerate HAX to UNDERPERFORM, with a revised 1-yr target price at VND 32,000/share after taking into account the dilution impact, which equates to total return of -4% from capital gain of -6% and expected dividend yield of 2%. We expect 2022 total sales and net profit to reach VND 5.8 tn (+5% YoY) and VND 218 bn (+36% YoY), respectively.  Dilution ratio is 21% if the right issue is fully absorbed and recent convertible bonds is fully converted in 1-yr, in our estimate.

We reinitiate another strong BUY rating for TRA. From our recent call in August 2021, TRA share price has increased 28% and reached our previous target, with strong earnings growth confirming our previous forecast. After attending recent 2022 AGM, we saw another buying opportunity as the company: (1) continue to post double-digit sales growth, with increasing number of R&D and transferred products, (2) benefit from strong demand on drug store and hospital channel due to less severe Covid-19 cases and recovery of nationwide hospital visits, (3) persist improvement in profit margin as SG&A expenses on sales continue to decline.  Thus, we upgrade our 1-yr target price for TRA to VND 124,400/share as we roll out our earnings forward for 2022, equal to 24% upside from the current price of April 6^th 2022, plus an expected 3% dividend yield for 2022. We keep our earnings estimate similar to previous report, with total sales and net profit in FY22 to reach VND 2.6 tn (+19% YoY) and VND 343 bn (+29% YoY), respectively, and raise our target P/E from 17.5x to 18.0x to reflect the high-growth period of the company.

Since our upgrade to BUY on March 7, 2022, the shares of DGC surged 29% - surpassing our target price. As such, we downgrade the shares of DGC to OUTPERFORM, with just 11% remaining to our new target price of VND 252,000 (based on unchanged target PE of 11x, vs previous target price of VND 214,000) per share. On March 29, 2022, DGC held an AGM whereby the company provided conservative net income guidance of VND 3.5 tn (+39% YoY) given the reduced sales volume for wet phosphoric acid and thermal phosphoric acid. As phosphate rock reserves in Vietnam becoming increasingly scarce, management set a conservative sales volume target. Nevertheless, we believe that DGC could increase the extraction of phosphate rock from its own mine to compensate for the reduction in externally purchased phosphate rock. Given a greater-than-expected 1Q22 ASP for yellow phosphorus, we raise our 2022 net income estimate 24% to VND 4.6 tn (+83% YoY).

We initiate a BUY recommendation for the share of DBD (Binh Dinh Pharmaceutical & Medical Equipment) with the target price of VND 73,000/share, which is equal to a total return of 35% from the current price as of March 23th, 2022. We saw DBD as an attractive investment as the company: (1) capable of manufacturing highly complex products - cancer treatment and dialysis fluid, (2) active in products R&D with significant unused capacity, (3) about to hold one competitive GMP-EU factory, (4) is a potential target for large M&A deal. We expect DBD sales and net profit in 2022 to reach VND 1.78 tn (+9% YoY) and VND 223 tn (+21% YoY) respectively. We also expect DBD sales and net profit CAGR at 9% and 13% respectively during 2023 – 2028, backed with expansion in drug store sales channel, increase in capacity and impact of GMP EU certification to drug bidding activities in hospital. 

We reiterate our Outperform rating on the shares of VNM, although we lower our 12-month target price to VND90,000/share (from VND106,000/share), based on a blended DCF valuation and a lower target P/E (19x from 21x). Our adjustment takes into consideration a slower-than-expected 4Q21 revenue recovery at a time when the gross margin continues to be under pressure in the near term. We have not seen any sign that prices for inputs (ie, milk powder, cattle feed, and oil prices) will correct soon in 1H22.  Accordingly, we are trimming our 2022E NPAT by 4.4%. Catalysts: higher-than-expected sales growth/lower-than-expected raw material prices. Downside risks: lower-than-expected sales and higher-than-expected raw-material prices.