Company Report

DPM’s net sales increased notably to VND 9.297 tn (+16.3% YoY) in 2018, surpassing its 3.8% guidance in December 2018. Gross profit margin fell to 20.4% from 26.4% in 2017 on the back of a 28% YoY hike in gas input cost. In Q4, following comments from the state audit, DPM revised its 2016 and 2017 numbers. While there were little changes for 2016, 2017 net income was raised by 26%. 2018 net income came to VND 712.5 bn (-20% YoY, based on the post-state audit financials of 2017). At the current price of VND 20,500 per share, DPM is trading at 2019F PER multiple of 12.8x.

In 2018, PV Power (POW) generated a total of 21 bn kWh, +2% YoY, on par with SSI Research’s estimate. That leads to revenue increasing by 9.9% YoY, reaching VND 32.6 trillion. Overall, firm-wide ASP increased by 7.7% YoY to VND 1,555/kWh, which is accountable to lower rainfall leading to higher electricity market spot price. We maintain our EV/EBITDA target of 6x for POW. Our 1Y target price is revised up to VND 18,200/share (+11% upside) as we lower forex loss estimate. As upside is now lower, we change our recommendation to OUTPERFORM for POW. In 2019, we see strong earnings growth as the main catalyst for the stock price.

VEA recorded VND 2.391 tn in net sales (+0.1% YoY and +81.5 % QoQ) in Q4. This sales figure is higher than our expectation, due to VEA having accomplished the bulk sale of more than 1.7k trucks at the end of December 2018. The stock price has increased by 29% since our last call on 7^th Jan, thanks to its impressive earnings for Q4 2018. At the current price of VND 49,000, VEA is trading at 2019 PER of 8.1x and its dividend yield is expected at 7.14%.

2018 PBT declined by 7.7% YoY due to the deterioration in construction materials, whereas the property segment attained strong growth with PBT increasing by 37% YoY. In 2019, VGC’s 2019 revenue and profit are expected to reach VND 9.953 tn (+10.8% YoY) and VND 928 bn (+9.3% YoY) in 2019, which is driven by the the growth momentum of industry park segment and the rebound in construction materials. At the current price, VGC is trading at 2019 PE metrics of 13.2x, which in our view is not very compelling for financial investors. However, the full state divestment in particular may still support the stock price in the coming year ahead. Our rating for the stock is Market Perform, with a 1-year target of VND 23,400/share based on SoTP method.

In its unaudited financial statements for 2018, PetroVietnam Gas (GAS) reported VND 75.6 tn in net revenue (+17.2% YoY) on a consolidated basis, and VND 12.36 tn in consolidated net profit (+24.3% YoY). We revise upwards our 12-month target price for GAS to VND 106,000 from VND 95,500 after taking into account our upward earnings revisions, based on an unchanged target P/E of 17x and EV/EBITDA of 10.5x.

In 2018, TCM posted net sales of VND3.66tn (+14.1% YoY) and net profit of VND260bn (+35.2% YoY). Excluding one-off items relating to one closed-down spinning factory and the provision of doubtful debt for Sears, net core profit would have arrived at VND284bn (+78% YoY). Gross profit margin expanded from 15.7% in 2017 to 18.5% in 2018 thanks to: (i) change in the sales mix towards fabrics and garments, which had higher margins than yarns; (ii) the increase in woven fabrics’ gross margin and (iii) yarn margin turning positive in 2018, from negative in 2017. At the current price of VND29,600/share, TCM is trading at 2019 and 2020 PERs of 7.4x and 6.1x respectively. Our rating for the stock is Market Perform with a 12-month-target price of VND30,700 (+3.7% upside), based on the industry average PER of 7.5x.

HPG’s revenue and net profit for 2018 came in at VND 55.8 tn (+21% YoY) and 8.6 tn (+7% YoY), respectively. On a standalone basis, revenue in the final quarter reached VND 14.4 tn, an increase of 13% YoY. Meanwhile, net profit dropped by 26% YoY to VND 1.76 tn, mainly attributed to the contraction in the gross margin. Gross margin shrank from an average of 22.8% in the previous 4 quarters to 17.8% in Q4, which was largely attributed to the 11% correction in the steel price during the last 2 months of the year, with a 17% decline in Chinese steel prices reported over the same period. At the current price, HPG is trading at 2019 and 2020 forward PERs of 7.5x and 5.6x respectively. We cut our 2019F revenue and net profit by 7-10% to reflect the 4Q18 results. As a result, we lower our 12-month TP to VND 39,300 (from VND 44,700) based on an unchanged target PER and EV/EBITDA of 9x and 7.5x respectively, but reiterate our BUY rating for the stock.

In 2018, VNM reported VND52.56tn in net sales (+3% YoY) and VND10.23tn in net profit (-0.7% YoY). At the current price of VND142,000/share, VNM shares are trading at a 2019E PER of 24.9x and an EV/EBITDA of 15.9x. After adjusting up our earnings, we lift our 12-month TP to VND131,500/sh (from VND129,000) based on an unchanged 2019E PER of 23x, slightly below its regional peers’ valuation of 24x. We reaffirm our Underperform call on VNM as we see no strong catalysts that would trigger us to turn more positive on the counter.

2018 revenue for Q4 arrived at VND 2.317 tn, a slight growth of 4% YoY on the back of a 5%YoY increase in sales volume. Compared to the market, HT1 market share in the domestic market continued to improve to 10.6% in Q4, stepping up from 10.3% in Q3 and a further rise from 8.6% in Q2. The market share in the southern market also improved to 31% in Q4, a steady rise from 29% in Q3 and 27% in Q2. At the current price, HT1 is trading at 2019 PER and EV/EBITDA of 8.7x and 5.0x respectively, which is quite fair in our view. We change our rating for the stock from BUY to Neutral with one-year target price of VND 16,700 based on consistent PE and EV/EBITDA target of 8x and 6x respectively.

VCB announced that it has successfully issued 111.1m shares by way of private placement, increasing its charter capital by 3.088% to VND37.089tn. The buyers are GIC Private Limited (GIC – the investment arm of Singapore government) and Mizuho Bank Ltd (VCB’s current strategic shareholder). VCB would receive proceeds of VND6.2tn, or c.USD265m from the issuance. We estimate an issuance price of VND55,500 per share, which is equal to a 2018E PBR of 3.22x. We raise our 12-month TP to VND68,600 (from VND63,100), based on an unchanged 2019E PBR of 3.0x. As our new TP offers some 25% potential upside from the current price and given SSI’s view of 10% return for the VNIndex in 2019, our rating bands call for a BUY rating (from NEUTRAL).