Company Report

PVS has released its financial results for Q1, and in short, it’s a stunner. While net sales totaled a respectable VND 4.09 tn (+22.8% YoY), net profit exploded, posting a remarkable VND 385 bn (+103.7% YoY). Net earnings to parent shareholders was also quite welcome news, reaching VND 369 bn (+45.8% YoY). Although we have expected strong profit growth for Q1, results exceeded even our own estimates. Our 1-year target price for PVS arrives at VND 27,000/share (from VND 24,000/share) based on an unchanged target P/E of 13x and P/B of 1x. With an 7% upside from the current market price, we reiterate our Outperform rating for the stock.

At the current price, HSG is trading at 2019 PE, PB and EV/EBITDA metrics of 10.2x, 0.6x and 6.3x respectively. We update our rating for the stock from Underperform to Market Perform, with a 1-year target price of VND 8,300/share based on target PE, PB and EV/EBITDA of 7x, 0.6x and 6.5x respectively. We are of the opinion that the company’s business results may recover in the long term given the company’s willingness to execute cost-cutting measures and others in order to improve the company’s financial health. In addition, we think that domestic competitive pressure can gradually be mitigated in 2020, especially when factoring in that less new capacity is coming online in the domestic market during the next year. However, we still remain concerned about the company’s loss of market share and high interest expenses. We will closely monitor the company’s sales volume and financial health, and provide an update in later reports.

Net sales recorded at VND 823.6 bn (+12.3% YoY), accomplishing 20% of 2019 target. Bias sales volume drop by -13% YoY as customer are still unfamiliar with the new Euro 4 compatible tire, while radial sales volume surged by 38% YoY thanks to the contribution from radial II factory. Gross profit margin remained fairly flat at 10%. Pretax profit arrived at VND 21 bn (-19% YoY), fulfilling only 13% of 2019 target. In 1Q19, selling expenses increased by 23% YoY, higher than +12.3% rise in net sales as the company booked several expenses for the following quarter. At the current price of VND 22,000/share, DRC is being traded at 2019 PER of 19.1x which is expensive given 2019-2020 single digit growth. The current high valuation reflects the market expectation upon the Vinachem divestment from 50.5% to 36% this year.

At the current price of VND 19,050/share, VPB is trading at a 2019F PBR of 1.09x based on the bank’s plan of 2019F PBT at VND 9.5 tn, at 3.3% YoY. The PBR is lower than peers average of 1.5x. 

At the current price, PAC is trading at 2019 PE forward of 11.7x. Our rating for the stock is market perform with 1-year target price of VND 40,200/shared based on consistent PE of 12.5x. We think that the short term outlook of PAC is positive thanks to the low level of lead price and the company’s effort to address the capacity limitation of CMF battery line. However, amid the rising competition pressure and the change in market demand toward more modern product lines such as CMF or battery for electric vehicle, the long term prospect of the company would depend on the success of the company’s technology innovation to catch up the overall trend.

DPM’s revenue increased notably to VND 9.395 tn (+16% YoY), surpassing its 3.8% revised guidance provided in December 2018. Net income arrived at VND 712 bn (-20% YoY, based on the post-audit financials of 2017), accounting for 115% of the 2018 revised target. At the current price of VND 17,550 per share, DPM is trading at 2019E PER of 18.5x on our revised 2019 earnings. These revisions were influenced by (1) the decline in sales volume of urea, NH3 and NPK and (2) increase in transportation tariffs. With equal weight assigned to PER, PBR and EV/EBITDA multiples of 9.5x, 1x and 5x (unchanged), respectively on our revised 2019 forecasts, we arrive at a new TP of VND 17,600 per share (from VND 21,700), and downgrade our rating to UNDERPERFORM (from Neutral).

Net sales increased by 16.4% YoY to VND 15.298 tn in 2018 (a bit lower compared to the growth of 21.1% YoY in 2017), accomplishing most of the 2018 plan at 95.5%. At the end of 2018, FRT had acquired a 19.2% market share of mobile phones (vs. 18.2% in 2017, 10.7% in 2014), and a 25% market share of laptops (vs. 18.5% in 2017, 13.3% in 2014) in terms of sales value. Since 2015, FRT has maintained its position as the second biggest retailer in mobile phones (only trailing MWG, whose market share is 45% in 2018), and has reaffirmed its position as the biggest laptop retailer. Taking into account only phones, GFK estimated that the general market in 2018 had grown by merely 1% YoY, much lower than previous double-digit growth from recent years.