Company Report

We continue to issue a strong BUY for TNH shares, with revised target price of VND 84,000/share, representing 60% upside from the current price on November 19th. We continue to set an upbeat outlook for TNH, as this year’s earnings have trounced our previous expectations, irrespective of the nationwide pandemic outbreak. Also, with a safer bet in the ability to control pandemic outbreaks of Thai Nguyen province, faster progress of new hospital facilities in 2022 and sustained growth in hospital visits, we decided to raise our earnings forecast for TNH. We now expect the company net revenue to reach VND 430 bn (+28% YoY) in 2021 and VND 525 bn (+22% YoY) in 2022. For net profit, we expect it to reach VND 153 bn (+40% YoY) in 2021 and VND 180 bn (+18% YoY) in 2022. 

As we roll forward our valuation basis to 2022, we increase our 1Y target price to VND 49,000/share (from the current VND 46,400/share), intimating just 14% potential upside. With such limited potential upside, we are lowering our rating on the shares of TPB from Buy to Market Perform, as the shares have risen 20% since our most recent upgrade in August. Although we remain positively pre-disposed to the shares of TPB, the shares have already priced-in the recent private placement and above peer earnings momentum. Pretax profit for 2021 and 2022 are projected at VND 5.8 tn (+33% YoY) and VND 7.2 tn (+23% YoY), respectively. Upside surprise: Stronger capitalization after the recent private placement (CAR improved to 14.63%), should be supportive for the bank to gain an even higher credit quota. Downside risk: Higher-than-expected NPL formation.

DGC’s 3Q21 net income jumped 107% YoY to VND 488 bn, exceeding our expectation of VND 430 bn, given higher than expected yellow phosphorus and downstream sales product prices. As a result, we raise both our 2021 and 2022 net income forecast 13% and 7%, respectively, to VND 2.0 tn (+109% YoY) and VND 2.8 tn (+40% YoY). Further, given the production restrictions China, the price of yellow phosphorus could peak in 4Q21. As such, we expect that 4Q21 net income will be abnormally high at VND 871 bn (+258% YoY). Over the longer-term, yellow phosphorous prices are more expected to increase at a high single-digit pace given the solid demand from the semiconductor industry. By applying an unchanged target P/E of 13x on 2022 revised financials, we derive a new target price of VND 190,000 per share (from VND 177,000). With an ROI of 23% (inclusive of a 1% dividend yield), we call for maintain our BUY rating. We note that Vinachem (owns 8.9% in DGC) has started divestment of its stake in DGC from November 8th with a starting minimum price of VND 152,100 (lower than the current price of VND 155,500). Given the low liquidity of the stock, the divestment may dampen the share price over the period of divestment (November 8th – December 7th). As such, we recommend to accumulate the stock on price weakness.

In 3Q21, PNJ posted net sales of VND 877 bn (-77% YoY) and a loss of -VND 159.5 bn (Q3’20 net profit of VND 202 bn), in line with our forecast. Although sales have been slow for the first two weeks of October, they did accelerate during the last half of the month, especially with its Vietnamese Women’s Day promotion on 20/10 when sales were at an all-time high. As a result, PNJ’s sales over recent weeks have surpassed management’s expectations despite slow recovery (total retail sales in October declined -19.5% YoY per GSO). We increase our 4Q21 and 2022 estimates by 5.6% and 7%, respectively, to VND 416 bn and VND 1.44 tn. As such, we increase our 1Y target price on the shares of PNJ from VND 101,300 to VND 117,300 (+13.9% upside) and reiterate our OUTPERFORM rating. 

We are upgrading VNM from Market Perform to Outperform, as we raise our target price to VND 106,000/share (from VND 103,000/share) based on a blended DCF and 21x 2022E PER valuation methodology (previously 21x avg 2021-22E PER) - implying 17% upside potential. Our positive outlook on VNM reflects a return to growth - Q3 sales (+3.7% YoY) and parent-company sales +4.5% YoY, after three consecutive quarters of contraction. Notably, according to management, sales growth accelerated to above +20% YoY in October. In addition, VNM expects Q4 sales growth in the range of 10%-15% YoY, as last year’s result was impacted by heavy floods in the central region. Downside risk: Lower than expected sales/higher than expected raw material prices.

We maintain our Market Perform rating for the shares of BID, despite the increase in our 12-month TP to VND50,000 (from VND48,000). 3Q21 results exceeded expectations from a credit growth, NIM sustainability (at 2.97%), and bad debt perspective. The bank wrote off VND5.4tn in bad debt during 3Q21, on top of providing an additional VND7.5tn against problem loans. This caused PBT to inch lower by 1% YoY to VND2.7tn, although asset quality metrics have clearly stabilized. Through 9M21, pretax profit for BID reached VND10.7tn (+52% YoY), completing 79% of our in-house full-year estimate. As restructured loans have more than doubled in 3Q21, we still see some pressure on credit costs going forward which likely will impact the bottom line. We maintain our PBT estimates for 2021E and 2022E at VND13.5tn (+50% YoY), and VND15.5tn (+14% YoY), respectively. An upside risk to our call would be a better-than-expected recovery in restructured loans, as well as any firm progress in its new share issuance of 8.5% pre-money charter capital. Improved capital would enable the bank better growth potential. We also expect that the stock dividend will be finalized by December. Downside risks include macroeconomic weakness.

SAB reported 3Q21 net sales and net profit of VND 4.3 tn (-47% YoY) and VND 472 bn (-68% YoY), respectively, the lowest level since 2014. Depressed results were due to the prolonged lockdown restrictions which caused distribution to be grounded for the majority of Q3. The company, however, is guiding for an improved outlook and is confident of GPM expansion in 2022. Positive forward-looking factors include a rebound in production volumes, a marginal increase in ASPs, and effective hedging of raw materials. After the recent share price run up of +9%, we downgrade our rating on the shares of SAB from BUY to OUTPERFORM, with an unchanged 1Y target price of VND 190,000/share (+10% upside potential). 

We are initiating coverage on the shares of DPR with a BUY rating, and are establishing a 1 YR target price of VND 91,000 – representing an ROI of 20% (including the 4% dividend yield). We see significant potential in DPR’s large land bank, which can be converted into industrial parks – a major opportunity for the company to unlock value and revenue going forward. The increase in demand for industrial parks is particularly pronounced in Binh Phuoc province, more so once the highway connecting Ho Chi Minh City – Binh Duong province (Thu Dau Mot) – Binh Phuoc province (Chon Thanh) is completed in 2025. By way of example, lease rates for industrial parks in Binh Duong province have increased 50% since 2019 (from $80/sqm in 2019 to $120/sqm in 2021). The highway completion should cause lease rates to accelerate.  Further, Binh Phuoc’s 54%-59% lease rate discount to Binh Duong’s ($55-65 USD/sqm in Binh Phuoc vs $120-160 USD/sqm in Binh Duong) makes industrial parks in Binh Phuoc substantially more attractive to SMEs. That being said, we believe that DPR’s traditional natural rubber business will still continue to benefit from higher market prices in the short-term. Also, income from rubber tree disposal will likely post a double-digit growth in 2021-2022 thanks to the recovery in demand from furniture exporters. For 2021, we estimate earnings to rise by 28% YoY, thanks to a favorable natural rubber price and higher income from rubber tree disposal. For 2022, we believe that DPR will recognize land compensation income of VND 317 bn – pushing earnings 100% higher YoY. 

GAS reported 3Q NPAT of VND 2.4 tn, up 19.1% YoY on a consolidated basis. Meanwhile, NPAT of the parent company reached VND 2.5 bn (+16% YoY). The results exceeded the company’s preliminary results and our estimates, despite the significant drop in gas consumption during 3Q due to strict lockdowns in the Southern provinces. Cumulatively through 9M2021, GAS posted NPAT of VND 6.8 tn (+9.2% YoY), completing 97% of its full year earnings target. Upbeat 3Q earnings prompt us to increase our 2021 NPAT forecast by 10.2%. For 2022, we raise our base case assumption for Brent oil prices from USD 68/bbl to USD 75/bbl (+7% YoY). Accordingly, we increase our 2022F NPAT to VND 11.8 tn (from VND 10.9 tn previously) translating into a 22% YoY growth. After factoring in our earnings revisions, we derive a new TP of VND 130,000/share (from VND 118,500/share) based on an equal blend of a target PER of 20x (from 19x) and EV/EBITDA of 11.5x (from 11x), and using 2022E earnings. As the share price appreciated by 40% in the past 2 months, and in our base-case ROI is just at 8%, we downgrade our recommendation on GAS from Outperform to Market perform. Nevertheless, GAS remains our preferred stock in the oil & gas sector and we recommend investors to accumulate the shares at an attractive entry point.  

Reflecting our revised estimates, we derive a new 12-month target price of VND 190,000 (previously VND 183,000), which is predicated on an equally weighted target P/E of 28x (from 25x) and our DCF. As SAB gained back market share temporarily during the lockdown period, which is a special circumstance, it is early to conclude that it can sustain its market leader position. However, we think it still deserves a re-rating due to the following: (i) we believe that there will be a strong demand recovery from November post-Covid-19 lockdown; and (ii) SAB can rely on the strength of its on-trade channels and distribution network in order to capture sales volume growth more quickly, as folks begin dining out again. At the current price of VND 159,900/share, SAB is trading at 2021 and 2022 P/E of 26.7x and 23.2x respectively, which is rather attractive compared to its historical average P/E of 34x. With 19% potential upside from the current levels, we upgrade SAB to BUY (from Market Perform). Key downside risks to our call are softer-than-expected sales volume due to the stiffer-than-expected competition, and further lockdowns.

HPG released its 3Q21 results, with revenue and net profit reaching record highs of VND 38.9 tn and VND10.35 tn (up by 56% and 170% YoY), respectively primarily attributable to the HRC segment. Cumulatively, HPG’s revenue and net profit in 9M21 increased 63% and 206% YoY, respectively, to VND105 tn and VND27 tn, respectively. We attribute the strong growth during the quarter to resilient sales volumes and especially to the surge in HRC prices on the back of pre-signed two month contracts. As 3Q21 results are higher than our estimates mainly due to a better-than-expected profit margin, we raise our 2021 net profit forecast by 24% to VND 36.6 tn – translating into 171% YoY growth. Sales volumes across all steel product lines is expected to recover during the final quarter of the year, but the HRC margins could experience a correction compared to the record highs in 3Q21. In 2022, we expect the construction steel sales and HRC volumes to maintain growth of 17% and 28% YoY, respectively. The gross margin should normalize to 24.5% from 28.7% in 2021F due to a 5-6% YoY correction in steel prices. Accordingly, we forecast 2022 revenue and net profit at VND 165 tn (+6% YoY) and VND 32.7 tn (-10.5% YoY), respectively. We reiterate our Outperform rating on the shares, but raise our 1-year target price by 16.7% to VND 63,000/share due to the upward revision in our 2022 earnings forecast.

Viconship announced impressive prelim 3Q 2021 PBT results of VND 149.3 bn (+73.4% YoY), supported by superior volume growth relative to peers and enhanced profit margins post-management reshuffle. We observe marked improvement in company profit margins in 2Q21 and 3Q21. As a result, we increase our PBT forecasts to VND 474 bn (+41% YoY) and VND 604 bn (+27% YoY) in 2021 and 2022, respectively. We reiterate BUY rating on the shares of VSC on the back of higher earnings outlook and the potential strategy change into a growth company after several years of stable earnings, leading to our re-rating to 2022F target P/E ratio of 12x. Pre-money 1-year target price is VND 80,800/share (+26% upside), while post-money target price is VND 46,500/share (after 1:1 rights issuance in the coming time). VSC offers 1:1 rights issuance to all shareholders (ex-rights date on Oct 25), and short-term selling pressure could increase with some large shareholders registering to sell 1.5 mn shares over the near-term. Over the longer term, increased risks come from the new project pipeline which will require large capex with profit uncertanties. However, this also presents Viconship an opportunity to become more of a growth company.