Company Report

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.

Given the decelerating retail sales growth in Vietnam, we downgrade our rating on the shares of VRE from BUY to OUTPERFORM, with a reduced 1Y target price of VND 29,500/share (+37.5% upside) from VND 33,600/share. Our target price reduction reflects lower occupancy over the past three quarters from 3Q23 to 1Q24 and sluggish growth of the Vietnam retail market during the first five months of 2024, which has caused us to lower our 2024 net revenue an NPAT forecasts to VND 9.25 tn (-5.6% YoY, 1.7% lower than our previous estimate of VND 9.4 tn) and VND 4.14 tn (-6.2% YoY, 3.2% lower than our previous estimate of VND 4.27 tn), respectively.

NLG recorded net sales of VND 205 bn (-13.0% YoY, -87.5% QoQ) and a net loss of VND 65 bn (reversal from net profit during 1Q23 and 4Q23). Fewer units in the Izumi City, Southgate, and Mizuki Park project were handed over during 1Q24 than earlier during 1Q23 and 4Q23. During 1Q24, due to the low property sales, the SG&A exp/revenue ratio was high, at 70.6% but still lower than 1Q23. For the past few years, NLG has witnessed an increasing trend of selling and administrative expenses SG&A/ revenue ratio from 16.7% during 2019 to 30.8% during 2023, and the SG&A expenses/ratio during 2023 was the highest among listed Vietnam developers.

We reiterate our Outperform rating on the shares of HDB and roll our valuation forward to mid-2025 with 1Y TP of VND 29,000/share - representing upside of 22.4%. Our valuation is presented without considering the potential dividend yield of 6.3%. We believe that solid credit growth (higher than 20%) will hold up during 2025, allowing HDB to maintain NIM over 5%, and manage the NPL ratio between 1.8% and 2.0%. This should facilitate HDB to generate robust earnings growth and uphold ROE above 20%. However, credit expansion, particularly in real estate and related sectors, should be properly monitored if the market recovers more slowly than expected.

We downgrade our rating to Market Perform (from Outperform) on the shares of QNS, with an increased target price to  VND 56,700/share (from VND 55,400/share), as we roll forward our price target to mid-2025F. QNS trades at a 2024F P/E of 6.3 and 2025F P/E of 6.1x, which is lower than its five-year historical range of between 6.3x-11.5x. However, we believe that QNS’s earnings growth will be lower for 2H24 and flat for 2025, as the sugar business suffers lower growth, and the soymilk segment takes more time to return to normal.

DCM’s net income dropped -75% YoY during 2023 to VND 1.09 tn, owing to a sharp correction in urea ASP (-37% YoY), while the reduction in gas input costs (-3% YoY) was not sufficient enough to shield earnings. Looking forward, we expect global demand for fertilizer to gradually recover after being impacted by El Nino during 2023, enabling fertilizer prices to increase from last year low base. While revenue is projected to grow by 11% YoY to VND 14 tn in 2024, the reduction in depreciation expense should help earnings of DCM to rebound significantly during 2024 (net income of VND 1.84 tn, +69% YoY, from VND 2 tn).

Base case: Meanwhile, 2025 revenue and net income could remain flat at VND 14.3 tn (+2% YoY) and VND 1.85 tn (+1% YoY) as current urea capacity is rather full, while the revenue stream from NPK fertilizer remains quite small. Given this earnings outlook, our 1 year target price for the shares of DCM is VND 38,700/share. We call for MARKET PERFORM rating, as  DCM’s share price rallied 22% since our last OUTPERFORM rating. DCM remains our favorite dividend yield name, offering a 5.3% yield.

We reiterate our Outperform rating on the shares of CTG, although with a reduced 1Y TP of VND 38,500/share (from VND 41,400). As there is no timeline for state divestment below 65%, a resolution for raising capital by CTG remains blurry and is hindering long-term growth. All the while, the earnings outlook for 2024-25 remains exceptional compared to peer, with PBT growth of +17% YoY and +35% YoY, respectively, as we expect the heavier provisioning to come to end during 2024. ROE, therefore, should achieve a more desirable level of 20% during 2025. CTG is the third largest bank in Vietnam with strong brand recognition, solid customer base, and good deposit franchise, all of which would be an advantage for CTG to maintain a resilient NIM and expand fee-based services. A capital raising is the key to the growth puzzle for this bank.

Net profit for 1Q24 fell 25.6% YoY to VND 2.5 tn primarily due to the decline in sales volume amid the depletion of outstanding gas fields in Cuu Long & Nam Con Son 1 &2 basins. According to management, Jan-May PBT is estimated at VND 5.2 tn. This translates to a PBT in Apr-May of VND 1 tn/month, equivalent to the average monthly level for 1Q24, and -20% lower than the average level of 2Q23.

As GAS’s earnings for 1Q24 were in line with our estimates, we maintain our 2024 net profit forecast of VND 11.1 tn (-3.7% YoY) based on dry gas volume of 6.95 bn m3 (-6% YoY) and a slight price increase of 2% YoY.  We expect the company’s earnings to remain flat in 2025 given that the contribution of LNG and the new fields should offset the depletion of old fields.

Earnings of DPM plunged by 90% YoY in 2023 due to: (1) the sharp correction in urea prices (-39% YoY); (2) an increase in gas input costs (USD10.60/mmbtu, +22% YoY) as DPM had to source natural gas from more expensive sources; and (3) a deterioration in gross margin from trading and NPK fertilizer in the context of the sharp correction in fertilizer prices in 1H23. For 2024-25F, we expect global demand for fertilizer to recover gradually after being hit by severe El Nino in 2023, enabling improved fertilizer prices. This, together with the normalization in profit margin of trading activities and NPK fertilizer from the low base in 2023, should help earnings rebound to VND875bn (+61% YoY, from previous estimate of VND 1.1 tn) and VND1tn (+15% YoY) for 2024F and 2025F, respectively.

We see significant potential in DPR’s large land bank, which can be converted into industrial parks – a major opportunity for the company to unlock value and revenue. The increase in the demand for industrial parks is particularly pronounced in Binh Phuoc province, given that occupancy rates of Binh Duong and Dong Nai industrial parks have reached 94% and 92%, respectively, and the convenient connecting infrastructure, including North - South expressway in  Gia Nghia - Chon Thanh; Ho Chi Minh City - Thu Dau Mot - Chon Thanh; and Dong Phu road - Binh Duong. We believe that the traditional natural rubber business line will continue to benefit from higher market prices near-term. We rate the shares Outperform with a 1-year target price of VND 47,600/share (up 4% due to an increase in rubber prices of 18% vs 12% from our previous report).

Our 2024-25F revenue are estimated at VND23.9tn (+19.4% YoY) and VND27.5tn (+15% YoY), while 2024-25F PBT are estimated at VND14.5tn (+38% YoY) and VND17.6tn (+21.5% YoY) which is a historical high level, based on assumed 14% YoY of total passenger growth in 2024F and normalized long-term growth of 10% YoY in 2025F. We have an OUTPERFORM rating, with a higher 12-month target price of VND136,000/share, based on an unchanged target multiple of 16x applied to our 2025F EV/EBITDA (from 2024F). Short-term catalyst would be continuation of strong growth based on passenger recovery, lower airline-related provisions, and ACV getting approval to pay pending stock dividends from 2019 until now.

As we increase our 12-month target price from VND84,800/share to VND93,400/share (20% upside potential) – rolling over our SOTP valuation to mid-2025E and reflecting SSI’s higher valuation for TCB, we also upgrade the shares of MSN to OUTPERFORM (from Market Perform). 2024-25 should be an eventful period for MSN group: Upcoming milestones include the divestment from mineral processing unit H.C. Starck, the plan to list Masan Consumer Corporation (MCH: currently trading on UPCoM) on HOSE, and the possible stake sales. These recent moves/plans suggest that the Group is actively restructuring to focus on its core consumer business. During 2024, we expect a broad-based recovery across all segments. We believe that revenue growth from its consumer retail chain subsidiary, Wincommerce (WCM), will be achieved via rapid new store openings, a payoff from the restructuring during the 2022-23 period, and a recovery in consumer spend. Subsidiary Masan Consumer (MCH) has consistently proven resilience, having outperformed peer since 2019 (CAGR of 10% in revenue and 11% in NPAT). We believe that the company will maintain this momentum through 2024, leveraging synergies of the retail platform (WCM) and other product innovations.

We maintain our Market Perform ratings on the shares of VHC, with a target price of VND 78,500/share (unchanged). We believe that earnings recovery will be slow and VHC currently trades at a 2024 and 2025 P/E of 13x and 10x, respectively, (average 10-year P/E of 10x). During 1Q24, VHC post net sales and NPATMI of VND 2.9 tn (+29% YoY, +19% QoQ) and VND 170 bn (-23% YoY, +256% QoQ), respectively, which is in line with expectations. During April 2024, sales reached VND 1.1 tn (+26% YoY, flat MoM) with pangasius sales of VND 635 bn (+22% YoY, +6% MoM). Sales to the US led the recovery at VND 411 bn (+33% YoY, +30% MoM). Other regions are still experiencing a weak recovery with sales to EU and China reaching VND 202 bn (+46% YoY, -23% MoM) and VND 53 bn (-52% YoY, -40% MoM), respectively.

We reiterate our Outperform rating on the shares of ACB and roll forward our valuation to mid-2025 with a 1Y TP of VND 36,000 per share, representing upside of 21%. While we believe that unfavorable market conditions will negatively impact asset quality during 2024 and 2025, ACB’s asset quality remains top-notch due to a healthy customer base, and conservative lending practices. Further, ACB is equipped with competitive funding costs, enabling the bank to stabilize NIM in the longer term. Given that ROE remains above 20% for the medium-term along with healthy NIM and asset quality, we believe that ACB is one of the best choices in this turbulent market.

Although we anticipated a turnaround from Q2 to Q3 in our latest update, year-to-date import-export data indicates that the volume recovery of the operating segment may exceed our expectations. Meanwhile, global containership freight rates continue to be firm in both spot and chartering markets. It is notable that the WCI has entered the pandemic-level territory, while 1700-TEU time charter rate is up by 65% YTD. This higher-for-longer shipping rate situation should continue to lead to further YoY upward revision of charter contracts for the period of from 4Q24 onwards, as well as spot freight on domestic routes, which has yet to have strong pickup since early 2024. We think the QoQ turnaround in terms of earnings performance should appear from this Q2, given the favorable shipping freight environment and demand growth that recently reflected in import-export data in April and mid-May.