Company Report

With coal prices rising at a more accelerated pace than that of oil/gas, gas-based urea producers in Vietnam like DPM are key beneficiaries of this trend as they do not bear high coal prices while taking advantage high urea sales prices. NPK sales volume also have improved significantly over 2Q21. Combined with one-off items of VND 329 bn (recognized in 2Q21 and 3Q21), we increase our 2021 pretax profit to VND 2.099 tn (+148% YoY), while 2H21 pretax profit growth is estimated to increase 200% YoY. We believe that 2022 core earnings could increase another 9% YoY, but without the one-off income as prior, total pretax profit is estimated at VND 1.929 tn (-8% YoY). As the company benefits from the recent urea price uptrend, we increase target multiples and derive a new target price at VND 42,200 (from VND 32,000). With an ROI of 5% (dividend yield of 6%), we call for an MARKET PERFORM rating for DPM.  In the short term, DPM share price momentum may still be strong on the back of solid 2H21 earnings. 

For 2021, we lower our gas volume estimate from 8.15 bcm to 7.75 bcm to reflect the impact of the strict Q3 lockdown on dry gas consumption by industrial and power plant users. Any recovery in Q4 will be gradual in nature.  Nevertheless, higher oil prices likely will offset this volume cut. Our 2021 revenue and NPAT forecast of VND 73.7 tn (+19.5% YoY) and VND 8.8 tn (+8.6% YoY), respectively, remains largely unchanged from our previous estimates. For 2022, we are looking top and bottom line growth of 23.6% and 25.2% YoY, respectively, driven by a strong gas volume recovery (25% YoY to 9.6 bcm, about 3% lower compared to post-Covid-19 levels) on the back of more robust business activity.  On our higher 2022E EPS, we raise our 12-month TP price for GAS to VND118,500/share (from VND101,500), based on an equal blend of a target PER of 19x and EV/EBITDA of 11x, and 2022E earnings. We reaffirm our Outperform call on GAS. Downside risks: weaker-than-expected dry-gas volumes and lower-than-expected fuel-oil prices.

We are upgrading the shares of DCM to OUTPERFORM from MARKET PERFORM, as we increase our one-year target price 26% to VND 31,500. As gas-based urea producers are well positioned to benefit from the rise in coal prices and the coal shortage in China associated with decarbonization target, heavily flood and coal mine accidents, we are also increasing our 2021 and 2022 earnings estimates by 0.5% and 7%, respectively. As DCM is a gas-based urea producer its profit margin will benefit when coal prices rise at a more accelerated pace than that of oil/gas, as DCM does not bear the increase in coal price - enjoying the benefit of higher urea sales prices. Also, as DCM’s net cash balance continues to improve (net cash per share of VND 6,921 at 2Q21 vs VND 1,645 at 2Q20), we expect that DCM will increase its 2021-2022 dividend to 12% on par value (vs 2020 dividend of 8% on par value), equivalent to 2021-2022 payout ratio of 82%-76% (vs 2020 payout ratio of 79%). The urea plant of DCM will be fully depreciated around 2023 year end, raising net income and hence dividend payment significantly afterwards.

MWG’s August net income dropped -32% YoY, as social distancing and lockdown policies tightened. This was well foreseen, and we were not surprised by lower-than-usual results. From September 16th, southern provinces began to relax social distancing/lockdown measures, allowing MWG to serve customers in-store and to provide home delivery services in areas deemed to be of low pandemic threat. This was welcome news, as re-opening prospects in this case were faster than our previous assumption of a re-opening around November. Given the speedier re-opening of MWG outlets, we increase our 2021-2022 net income forecasts by between 1%-2% to VND 4.5 tn (+14% YoY) and VND 6.0 tn (+35% YoY), respectively. By applying unchanged target multiples on 2022 revised-up earnings for the ICT segment and sales for the grocery segment, we derive a new target price on the shares of MWG of VND 143,000 per share (from VND 130,000). With upside potential of 13%, we reiterate our OUTPERFORM rating. Downside risk to our call would be a longer-than-expected duration of the COVID-19 pandemic.

2Q21 PBT increased strongly by +188% YoY to VND 1.97 tn, thanks to stellar growth of TOI (+87.3% YoY), while CIR decreased & provision expenses also decreased by -41% YoY. 1H 2021 PBT delivered VND 3.12 tn (+220% YoY), fulfilling 95% of the full year plan of VND 3.28 tn.We increase our 2021F PBT forecast by 6% to VND 4.23 tn (+67.8% YoY), while we reduce our 2022F PBT forecast by -9.3% to VND 4.43 tn (+4.6% YoY). Our forecast adjustment is influenced by our downward revision of NIM for both years, given prolonged low lending interest rates. MSB booked about VND 1.6 tn of upfront fee into income in 2Q2021, and we assume that MSB will continue to book VND 400 bn of the bancassurance upfront fee into fee income in 2022F. Provision expenses are revised up +5.8% to VND 1.1 tn (+6.7% YoY) in 2021F. We reduce our 1Y share price target for MSB to VND 29,600 (down from VND 31,400), using an average BVPS of 2021F and 2022F and unchanged P/B ratio of 1.5x. As this implies an upside of 2.4%, we subsequently maintain our Market Perform rating for MSB.

Given the resurgence of the COVID-19 pandemic in Vietnam during 3Q21, we lower our 2021E and 2022E earnings for GAS by 9% and 10%, respectively. Despite our earnings cuts, we are of the opinion that demand for dry gas will return next year, driven by a strong economic recovery and higher gas-fired electricity mobilization. Thus, we reaffirm our Outperform rating for GAS, with a new 12-month target price of VND101,500/share (previously VND105,000/share) based on an unchanged target P/E of 19x and EV/EBITDA of 11x on our 2022E earnings. Our target price implies 14.6% upside potential.  

MWG achieved upbeat results for 2Q21, with net sales and net income increasing by 20% YoY and 36% YoY, respectively. Notably, the grocery segment managed to break even in terms of EBITDA. Meanwhile, the resurgence of COVID-19 may leave MWG behind its full-year target of achieving 21% YoY growth in net income. In July, net income dropped by 29% YoY as the government placed restrictions on home delivery for ICT products, whereas the closure of wet markets and wholesale markets allowed BHX stores to post a record high revenue, helping the company to cushion the earnings decline. We hence revise down our 2021E net sales and net income by 10% and 13%, respectively, assuming the retail chains will reopen fully from November 2021. Market consolidation will accelerate amid the resurgence of the pandemic, enabling MWG to post strong earnings growth in 2022. We introduce our 2022 estimates, with net sales and net income respectively increasing by 19% and 33% YoY. We apply a higher target P/S for the grocery segment (from 0.3x to 0.5x as the company already reached EBITDA breakeven in 2Q21) and a higher target P/E for the ICT segment (from 10x to 11x thanks to market-share gains). By rolling over into 2022 financials and assigning higher multiples, we derive a new SOTP-based 12-month target price of VND130,000 per share (from VND110,000, adjusted for stock split). With upside potential of 19% from the current share price, we downgrade our rating to OUTPERFORM rating (from BUY). Downside risk to our call would be a longer-than-expected duration of the COVID-19 pandemic.

Despite the positive revenue growth of 16% in 2Q21, BMP’s net profit fell by 73% YoY to VND42bn due to a sharp contraction in the gross margin, stemming from surging input costs. We believe the company’s business results will hit their lowest level ever in 3Q21, with the capacity utilization rate falling to between 20-50% during the July to September period, due to the social-distancing measures in place in Southern Vietnam. We lower our 2021E sales volume for BMP from 115k tons to 99 k tons (-10% YoY), and our gross margin from 18.2% to 14.0%, which leads to a 52% cut to our net income. Accordingly, we expect 2021E revenue and net profit at VND4.8tn (+3% YoY) and VND202bn (-61% YoY), respectively. Following our earnings cut, we downgrade our rating on the stock from MARKET PERFORM to UNDERPERFORM with a lower 12-month target price of VND51,700/share (previously VND55,000), based on an unchanged target PER of 11x now applied to our 2022E EPS (previously 2021E). We look for the share price to drop in the short-term, and then stabilize as we anticipate a recovery in business results from 4Q21. For 2022E, we expect the company’s results to recover with net profit rebounding to VND391bn (+ 94% YoY), on the back of 13% YoY growth in sales volume and a 5% correction in the plastic resin price. Upside risk: lower-than-expected input costs. 

We believe that SZC's gross profit margin can remain above 60% as a result of low compensation and clearance costs in Chau Duc IP. In addition, demand for leased land will increase due to the shift of production from China to Vietnam and the development of infrastructure in Ba Ria - Vung Tau, where leased land demand is expected to rise by 5- 8% YoY from 2021 to 2025. However, in the short term, Covid’s impact has reduced the number of new investors in 3Q2021. We lower our recommendation from BUY to MARKET PERFORM after the stock price has increased by 35.3% since July 2021, for which target price is 42,700 VND per share.

We maintain our MARKET PERFORM rating on the shares of MSN, despite raising our SOTP-based 12-month target price to VND153,000/share (from VND116,500/share). Our higher TP is based on (1) rolling forward our valuation basis from average 2021-22E to 2022E; (2) a re-rating for TCB’s valuation with our target P/E rising from 1.8x to 2x; and (3) our higher estimates for MML and VCM given their better-than-expected operating performance in 1H21. We also remove the 10% conglomerate discount from our SOTP valuation as we see initial synergies being achieved amongst members in the group, especially the consumer, retail and 3F businesses. Fundamentally, we believe that positive financial performance for MSN in 2021E and 2022E has largely been factored in the valuation. In 2022, we forecast MSN to continue the strong growth momentum in its NPAT of 67% YoY, as we expect continuous profit improvement at both VCM and MML, as well as a strong performance at Techcombank. This prompts us to raise our 2021-22E NPATMI by 11-27%. Over time, positive catalysts should include: (1) corporate actions, such as a stake sales (TCX, MHT, and MML [feed business]), a private placement at the group level, or the listing of TCX; and (2) improved performance within the retail and/or mining businesses. 

Despite our downward earnings revision for 2021, we still believe that oil prices for 2021 and 2022 will remain above USD 60/bbl), oil&gas projects in Vietnam and in the region will gradually restart, and that there will be better pricing for PVD services. PVD is trading at a 2021F and 2022F P/E ratio of 221x and 39x, respectively, which is quite pricey. Forward P/B for the 2021-2022 period, however, is a much more reasonable 0.57x. We reiterate our Market Perform rating on the shares of PVD, with a revised 1Y TP of VND 21,000/share (~13% upside) from our previous TP of VND 23,000/share. Additional upside surprises could come from news on contract bids won for 2022, or higher oil prices. Downside could occur from a delay in the deployment of the TAD rig (commencing operation in Oct 2021), as well as a lower oil prices.