Company Report

KBC’s business performance is heavily dependent on legal approvals of new projects, thus, even with a strong 35.8% upside from the current price, we upgrade our rating on the shares of KBC from MARKET PERFORM to OUTPERFORM, with a target price of VND 33,600/share. Although we lean toward our bear case for FY2024, the share price has decreased more than 19.6% since our previous report (17 May 2024), then, we upgrade our rating on the shares of KBC.

VNM posted impressive 2Q24 earnings, which exceeded preliminary consensus estimates. Net sales reached VND 16.7 tn (+9.6% YoY), breaking the all-time high record for sales during the quarter, driven by domestic and overseas sales growth of +6% and +30% YoY, respectively. Notably, overall market share increased by 1.2pp in 2Q24. The gross profit margin reached 42.4% (+170bps YoY), a solid improvement over the past ten quarters, resulting in net income advancing +21% YoY. During 1H24, net sales and net profit reached VND 30.8 tn (+5.7% YoY) and VND 4.9 tn (+18.6% YoY), respectively, completing 49% and 52% of the target for the year. As Q2-Q3 are VNM’s high seasons, management expects the strong sales momentum to continue over the next several months.

2Q24 earnings match our expectation, as its performance finally turnaround after 4 consecutive quarters of deceleration. Q2 earnings growth is led by the seaport and container shipping service while the chartering segment has not yet resulted in YoY earnings growth due to the high base in 2Q23. Overall, HAH reported 1H24 sales and NPATMI at VND 1.652 tn (+30% YoY) and VND 161 bn (-25% YoY), achieving 56% of company guidance for FY24 NPATMI.

In the spot market, typically represented by the WCI, a slowdown is occurring as tensions ease, while the time charter market, which generally lags behind the WCI, has maintained its upward momentum.

HPG’s 2Q24 net profit came in at VND 3.3 tn, achieving growth of 129% YoY and 16% QoQ, in line with our expectation of VND 3.1 tn. This impressive growth was driven by the steel sales volume with construction steel up 31% QoQ and 61% YoY given both market demand and the gain of market share. As 2Q24 earnings were in line with our expectation, we maintain our 2024 net profit forecast of VND12.8tn (+86.6% YoY). We assume that the company’s construction steel and HRC volume will reach 4.5 mn (+17.6% YoY) and 3.05 mn tonnes (+10% YoY), respectively, for 2024. Over the short-term, we expect 3Q24 net profit to decline QoQ from the 2Q level due to the correction of regional steel prices and lower volume amid the low season, before recovering in the final quarter. The YoY growth in 2H24 will likely slow down to 32% YoY from 233% in 1H24 due to a higher base in 2H23 and lower steel prices.

We reiterate our OUTPERFORM rating on VHC given the strong earnings recovery prospects for 2H24 (+215% YoY) and 2025 (+29% YoY). We fully expect earnings to recover during 3Q24 after seven consecutive quarters of decelerating growth.

In 2Q24, VHC posted net sales and net profit of VND 3.2 tn (+17.3% YoY and +12% QoQ) and VND 336 bn (-26.4% YoY and +78% QoQ) respectively. While net sales exceeded our expectations brought on by strong sales volume recovery (+26% YoY and +10% QoQ per our estimates), net profit is in line with industry consensus, given 2Q23 was a high base for the company due to the high pangasius ASP recorded. We noted that VHC strongly outperformed its peers. As a whole, Vietnamese pangasius exports value only increased +6% YoY in 2Q24, and VHC clearly passed that bar with flying colors. ANV posted net sales +11% YoY while net profit declined -134% YoYin 2Q24.

Given the recent share price increase of 9% since our last report, we lower our rating for HSG from Outperform to MARKET PERFORM. Over the short-term, we anticipate that the weaker expected near-term earnings and earnings growth deceleration for FY25 will place downward pressure on the stock. We maintain our target price of VND 24,500/share. Net profit in 3Q24 was closely in line with our estimate, increasing strongly over 19x YoY to VND 273.4 bn driven by strong sales volume (especially for domestic sales). Compared to the previous quarter, net profit dropped by 14.4%, mainly due to the reduction in forex gain to VND 4 bn from 124 bn in 2Q24.

A slow start for 2024, as Tet holiday fell during mid-Q1. For 1Q24, TNH recorded a revenue and net profit decrease of -13% and -39% YoY, respectively. While outpatient visits increased 11%, inpatient visits decreased -8% YoY, as Tet holiday is later and consumption tightening continued . Gross profit declined due to both increased material costs and pre-operating costs associated with TNH Viet Yen (training and payroll for doctors). Net income reached VND 15 bn (-33% YoY), with net income margin decreasing -500 bps and completing 10% of TNH’s 2024 target.

National expansion plan revealed. Shareholders voted for a name change from TNH Thai Nguyen Hospital to TNH Hospital – in preparation of nationwide expansion (targeting Hanoi, Danang, HCMC etc…). Shareholders also approved an increase of foreign ownership from 49% to 70%, which should leave the door open for possible M&A.

The company’s leverage is FRT’s main concern. However, the financial pressure of FRT has eased, reflected in the improvement in the interest coverage ratio (2.5x at 1Q24 vs 0.5x at 4Q23 and 1.0x at 1Q23) on the back of lower borrowing costs (-350 bps YoY and -100 bps QoQ in  1Q24) and improved earnings. With lower borrowing costs, Long Chau can speed up new openings of vaccine centers. FRT also plans to raise capital to scale the vaccine business. The company aims to raise a 10% stake via private placement during late 2024. We now apply higher multiples for the ICT business (from 9x to 11x) on narrower loss and a safer inventory level during 1Q24. As Long Chau now delivers sustainable profit, and the chain is the key growth driver for FRT in the long term, we now use DCF to value the chain. We derive a new target price for the shares of FRT at VND 211,000 (from VND 139,000), and reiterate our OUTPERFORM rating. Long Chau chain accounts for 98% of FRT valuation and 91% of 2025 earnings (vs only 10% in 2022). As such, we view FRT as a pharmacy retail company.

Proposed supportive measures to be approved. During May 2024, the Ministry of Finance proposed a couple of ways to support domestic automobile industry (extending excise tax payment deadline, registration fee reduction from Aug 24 to Jan 25). These measures were quite effective during 2020 (+50% increase in monthly sales after policy was in place) and 2022 (+20% YoY increase in sales volume), but were not as successful during 2H23, which, in retrospect, was the height of the recent consumer belt tightening in Vietnam. So far, excise tax payments extension has been approve, but the registration fee waiver should be approved soon as well.

We maintain our view that total volume for cars during 2024 will increase 9% YoY, but lower our total volume projections for Honda motorbikes to only 2% YoY (from 4% YoY) due to weak performance during Jan-May ‘24.

PC1 announced their strategical priority to the properties and construction segment, while mineral exploration and power generation serve as secondary focal points. For 2024 guidance, the company sets ambitious target, of 38.5% growth in sales and 77% increase in net earnings, to VND 10.8 tn and VND 525 bn. PC1 expected to distribute a stock dividend in 2023, of 15% on its chartered capital. We see effort of the company in maintaining growth, under the challenging circumstances of the industry. The turnaround of properties should have a stronger impact on earnings, thanks to the size and the low base of performance during the 2022-2024 period. However, the possibility of residential properties projects to generate sales from 2025 (expected by the company) might be hard to accomplish, and we incline towards residential projects could contribute to earnings growth from 2026 onwards. We expect FY24 sales and NPATMIO to reach approx. VND 9 tn (+ 15.4% YoY) and VND 220 bn (+124% YoY). Although our estimates are lower than the company’s guidance, they indicate our expectation in 2024 to witness strong growth in earnings performance following two years of contraction. For 2025F, sales and NPATMI are estimated at VND 8,759 bn (+19.7% YoY) and VND266 bn (+20% YoY).

We reduce our rating on the FPT shares to MARKET PERFORM (from OUTPERFORM), with a 12-month SOTP-based TP of VND 141,500/share (equivalent to 7% upside potential). The company’s 5M24 results exhibited double-digit growth in both revenue and earnings. On 23 Apr 2024, FPT formed an AI (artificial intelligence)-related partnership with NVIDIA, which we believe is the first step toward joining the global AI value chain, especially given FPT’s already well-placed background in AI. Further, we expect that the establishment of AseanConnect.One alliance will help improve FPT’s telecom services quality (especially data center) and enhance customer access.

Masan Consumer Corporation (UPCOM: MCH) is a direct subsidiary of Masan Consumer Holdings (excluding the beer business, Masan Brewery). Since being established, the company has expanded its portfolio brands across eight fast-moving consumer goods (FMCG) categories to become one of Vietnam’s foremost consumer staple companies.

MCH food and beverage segment offers a wide range of products, with hundreds of SKUs under six main categories: seasoning, convenience food, coffee, beverage (mainly energy drinks; again, excluding beer), and processed meat (which moved to MML from 2023); of which its seasoning portfolio including fish sauce, chilli and soy sauce have led the market for years (market share of 45%, 64% and 43%, respectively) MCH also penetrated the home & personal care (HPC) market during 2020 via the acquisition of NET Detergent JSC. In the period 2017-2023, each year, the company introduced 50 initiatives on average to their product pipeline to meet consumer’s daily basic needs.

GEX’s 1Q24 PBT arrived at VND 385 bn, soaring by 168% YoY. The gross profit from most segments, especially electrical equipment and construction materials dropped significantly due to weak demand from household channel and higher input cost. However, the gross profit from the industrial park segment increased 34.6% YoY to VND 615 bn during 1Q24, driven by an increase in lease pricing between 7-20% throughout 2023. In addition, GEX recognized a net stock trading profit of VND 111 bn versus a loss of -VND 144 bn for 1Q23 on the back of the positive performance of the stock market during 1Q. We expect GEX’s PBT to increase 67% YoY to VND 2.3 tn, driven by the divestment of renewable projects at an estimated profit of VND 1.1 tn. Management expects the the divestment of most projects can be completed during the second quarter. Excluding the impact of financial income, the PBT would decline by 4% YoY. 

In May 2024, Vietnamese pangasius exports reached $167.3 mn USD (+5% YoY, flat MoM). According to Agromonitor data, this translates into a 21% approximate increase YoY in terms of sales volume growth. Exports to the US declined -2.1% YoY and exports to China inched up by +1% YoY, which is offset by significant gains in other smaller markets such as the Middle East (+31% YoY) and South America (+44% YoY). ASP to major markets such as the US and China remained stagnant at $2.98 USD/kg (-19% YoY) and $1.91 USD/kg (-17% YoY) respectively in May ’24, which weighed on overall gains in terms of volume growth over 20% YoY for each market. However, we still have been noting a slow MoM recovery in terms of ASP to the US since the trough in Dec’ 23.