Company Report

Net profit well exceeded the 2019 target: HPG posted 2019 revenue of VND63.7tn (+14% YoY), and net profit of VND7.6tn. Net profit for the year dropped by 12%, but still exceeded the company guidance by 13%. HPG’s sales volume of construction steel in 2019 reached 2.77 mn tons, attaining an encouraging growth of 16.7% YoY. After remaining flat at nearly 24% for about 2 years, HPG’s market share increased to 26% in 2019. For 2020, we expect HPG’s revenue and net profit to increase by 15.9% YoY and 23.8% YoY to VND73.8tn and VND9.3tn, respectively, with construction steel and steel pipe volume assumptions of 3.7mn tons (+33% YoY) and 828k tons (+10% YoY), respectively. At the current price, HPG is trading at 2020E P/E and EV/EBITDA ratios of 7.2x and 5.4x, respectively. We maintain our BUY rating on the stock, with a 12-month target price of VND29,500/share (previously VND 30,900) based on an unchanged 2020E target P/E and EV/EBITDA metrics of 9x and 6.5x, respectively, on our new 2020E estimates. 

Base on 2018 low base, performance running up to 2019 was very positive. Besides, the bank managed to restructure assets and funding sources as described above.  In the positive scenario, a turnaround in profit from 2022 is possible, primarily driven by (1) an increase in NIM and stronger credit growth thanks to enhanced Tier 1 capital, (2) strong fee-based income, and (3) well-managed operational costs, despite a huge provision to resolve VAMC bonds. At the current price of VND 27,750 per share, the stock is trading at a 2020E P/B of 1.25x and a P/E of 7.8x, lower than the sector average of 1.41x and 8.93x respectively.  We estimate CTG fair value to be VND 31,100 per share, based on a targeted P/B of 1.4x and 2020E BVPS of VND 22,224. As the potential upside is +12.1%, we place a OUTPERFORM rating on this stock. 

Vietinbank has recently held an analyst meeting, and below are the key takeaways:

Strong earnings result in 2019 with separate PBT of VND 11.5 tn, at +83% YoY. This was driven by improved NIM thanks to retail segment and strong growth in Non-NII at +28% YoY. Although credit growth was only +7.2% YoY, SME and individual lending, which yield higher than other loans, rose by +23% YoY. CIR reduced significantly from 48.6% in 2018 to 37% in 2019.

Improved asset quality: NPL ratio reduced to less than 1.2% from 1.59% in 2018 while the loan-loss-coverage ratio surged to 128% from 93% in 2018. The bank completed book provision for 54% of the gross VAMC bond.

For 2020, the bank targets a PBT of VND 12.6 tn at a 10% YoY rise. Growth of total assets, credit, and deposits are targeted at 6-7% YoY, 8-10% YoY, and 10-12% YoY, respectively, based on the scenario that its capital will be raised by stock dividend. CIR is expected at less than 40%, while the NPL ratio will be less than 2%.

We finetune our 2020FY revenue and net profit forecast from VND 28 tn and VND 453 bn to 27.7 tn (-1% YoY) and VND 485 bn (+34% YoY). We assume that sales volume would increase slightly by 2% in FY 2020, whereas the average price dropped by -2.5% compared to a decrease of -6.5% in HRC steel price. HSG shares are currently trading at P/E and EV/EBITDA 2019 levels of 7.5x and 4.5x respectively. We maintain our Outperform rating for the stock, with a 1-year target of VND 9,500/share based on a composite target PE and EV/EBITDA of 7x and 5x respectively. We think the share price in the coming quarter can be supported by the recovery in HSG earnings compared to the low base witnessed in the first quarters.

At the current price, HPG is trading at 2019E and 2020E P/E forward ratios of 8.4x and 6.8x respectively, which is quite attractive in our view. We maintain our BUY rating for the stock, with a 1-year target price of VND 30,900/share (previously VND 31,950) based on unchanged 2020E target P/E and EV/EBITDA metrics of 9x and 6.5x respectively on our new 2020E estimates. Key risks: Lower ASP and higher input costs than our assumptions; further delay in the Dung Quat Integrated Steel complex.

At the current price, HSG is trading at a 2020 P/E forward of 7.5x. Our rating for the stock is Outperform, with a 1-year target of VND 9,000/share based on a target PE and EV/EBITDA of 8x and 5x respectively. We think the company’s net profit in the coming quarter would show significant recovery compared to the low base in 1H of FY 2019. However, difficulties encountered in the company’s various export markets, along with the company’s thin net margin, could still mean a volatile ride along the way to growth and returns.

In 2019, we estimate net sales and net profit to reach VND 4.44 tn (+12.3% YoY) and VND 437 bn (+18.1% YoY), with a GPM of 20.6%. In 2020, we estimate net sales and net profit to reach VND 5 tn (+13% YoY) and VND 467 bn (+6.8% YoY), with a GPM of 20.5% assuming a lower gross profit margin recorded for CMT orders due to competitiveness. Revenue growth is assumed to be higher than net profit growth in 2020 due to higher expected SG&A expenses, such as marketing costs involved to promote new bedding collections. At the current price of VND 54,300/share, MSH is trading at 2019 and 2020 P/E levels of 6.3x and 5.9x respectively, which is rather attractive. Our 1Y target price for the stock is VND 64,000 (+17.9% upside) based on the current industry average PE of 7x, equivalent to an OUTPERFORM rating.

At the current market price of VND 30,500/share, QNS is trading at 2019 P/E and 2020 ratios of 7.3x and 7.3x, which is around a 50% discount compared to overall market valuations. We consider these price levels to be relatively cheap, despite the fact that we agree that the stock should be traded at some discount as it is traded on Upcom, and because of its large exposure of a commodity business like sugar. Our 1-year target price for QNS arrives at VND 37,000/share (from VND 35,300/share), based on a target P/E of 6x for sugar & biomass, and 10x for soymilk and other consumer businesses (confectionery, beer and beverages). With a 21% upside, we continue our Outperform rating for the stock at the moment.

At the current price of VND 23,350/share, TCB is trading respectively at 2019E and 2020E P/B ratios of 1.33x and 1.13x, lower than the sector average of 1.56x and 1.28x respectively. We like the bank’s business model, which has focused on retail products for affluent clients, and possesses core competencies in banking for the housing, FMCG, and the auto industries, etc. TCB is also the dominant player in corporate bonds, with more than 80% of bond distribution market shares residing on the HOSE.We maintain the targeted P/B ratio for the stock at 1.3x and the 1Y targeted price of VND 26,900 per share. This is equivalent to an upside of +15.2% from the current price. Therefore, we maintain our OUTPERFORM rating on TCB.

Based on the above estimates, EPS would likely reach VND 2,736 in 2019 and VND 3,148 in 2020 after excluding the 12% bonus and welfare fund. At the market price of VND 54,000, IMP is being traded at a 2019 and 2020 P/E of 19.7x and 17.6x. Based on a target P/E of 18x, average when compared to comparable peers, we recommend a Market Perform for the stock, with a 1-year TP of VND 56,600/share, a 5% upside. Annually, IMP often generally books about 10% of its PBT in administrative expenses for its R&D fund, as has been the case since 2012. The Company intends to not distribute this fund until the latest factory completely obtains the EU-GMP certification standard.  Hence, IMP perhaps may not record this expense next year, and may get higher growth in terms of its bottom line in 2020 that exceeds our estimates. At present, we have not opted to factor this assumption into our model.

MSN Q3 2019 revenue totaled VND 8.97 tn (-2.2% YoY), and NPATMI reached VND 2.23 tn (+197.8% YoY). It should be noted that in Q3, MSN recorded a VND 1.65 tn gain in the ‘Other Income’ category before tax from the settlement of the arbitration case with Jacobs. Thus, core NPATMI actually was only VND 577 bn (-24.7% YoY). A slight decrease in revenue of the MSN Group was largely due to a -31.3% drop in mining revenue, while MCH revenue was up 5.2%, and MML revenue went flat (+0.6% YoY). Meanwhile, a sharp drop in NPATMI for Q3 could be mainly traced to disappointing MSR results, in which its EBITDA decreased by -61% YoY and incurred a loss of VND -320 bn in Q3 (vs. a net profit of VND 61 bn in Q3 2018). At the current market price of VND 74,400/share, MSN is trading at a 2019F P/E of 24.9x and 2020F P/E of 21x. Due to our lower earnings forecast for 2019 and 2020, we lower our 1-year SOTP-based target price for MSN to VND 86,000/share from VND 91,000/share. Since our TP offers a 16% potential upside from the current market price, we maintain our Market Perform rating.

HDB released its Q3 financial statements, where total operating income (TOI) and pre-tax profit (PBT) were VND 2.871 tn (+35.7% YoY) and VND 1.238 tn (+50.7% YoY). It’s worth noting that the growth rate, which appears impressive, actually came from a low base set back in Q3 ‘18. Cumulatively up to 9M2019, TOI and PBT grew at +18.6% YoY and +19.6% YoY reaching VND 8.044 tn and VND 3.448 tn respectively. This was fueled primarily by the 25.1% YoY growth in net interest income, as NIM of the parent bank expanded +55 bps at the cost of using short-term funding to finance longer term loans. Given the targeted P/B metrics of 1.3x for the parent bank and 3.0x for HD Saison, using 2020 book value, we arrive at the target price of VND 33,000. This is equivalent to a 2020E consolidated P/B ratio of 1.52x and an 1Y upside of +14.9%. Therefore, we issue a MARKET PERFORM rating for the stock.

At the current price, DHC is trading at 2019 and 2020 P/E forward ratios of 17.4x and 9.6x respectively. Our rating for the stock is BUY, with a 1-year target price of VND 46,200/share, giving an upside potential of 20% from the current price based on the target PE of 11.5x, which is the 4-year historical average. We think that the earnings growth driven by the new factory can support the stock price in the coming time.

At the current market price of VND 98,700/share, VHM is being traded at 2019 P/E and 2020 P/E metrics of 17.5x and 14.4x, which is relatively lower than industry peers. Regarding valuation, given the above-mentioned adjustment, our target price is raised to VND 110,200/share using RNAV approach, implying an upside of 13% compared with the current market price. Hence, we reiterate our OUTPERFORM rating for the stock at present. In the short-term, the share buyback plan of up to 60 million shares (equivalent to 1.79% of total charter capital) is expected to have a positive impact on the share price. In our opinion, VHM has ample financial resources to execute this deal considering its debt/equity ratio of 0.46x, and its 9.4 trillion VND cash and cash equivalent balance for Q3.