Company Report

We believe that POW’s earnings witnessed a low base during 1Q24, unlikely to be replicated in the upcoming quarters. In fact, we observe that the company suffered the lowest volume and NPAT in 1Q24 compared to the same quarter during 2018-2023 as: 1) Nhon Trach 2 plant (NT2: HOSE) was assigned insignificant contracted volume (Qc) (at 1 mn kWh vs 750-1,000 mn kWh for every first quarter during 2018-2023); and 2) the Hua Na (HNA: HOSE) and Dakdrinh plants had to undergo limited operations to reserve adequate water levels for peak power demand season. Specifically, compared to 2018-2023 period, Hua Na’s 1Q24 volume was only higher than that of 1Q20, and this figure for Dakdrinh was higher than that of 1Q19 and 1Q20. Nevertheless, the company’s 1Q24 results were in line with our expectations. Hence, our 2024 earnings forecast remains nearly unchanged. For 2025, due to the successful compensation negotiation related Vung Ang 1’s Generator 1 technical issue, we assume/factor a compensation amount of ~VND 1 tn to be recorded during 2025-2026. Specifically, we expect a 22% YoY decline for 2024 (vs 50% YoY fall for 2023) and 104% YoY recovery for 2025 from 2024 low base for NPATMI. We change our rating for POW to OUTPERFORM (from MARKET PERFORM), with a 12-month target price of VND 13,900/share (equivalent to 14.9% upside potential; based on DCF and EV/EBITDA multiple valuation methods).

Between 2022-2023, the real estate revenue stream was solely supported by the handover of sold units of the Hado Charm Villas. At 1Q24, HDG sold and handed over 420 units (out of 528 units of the project). HDG also targeted to launch the third phase sales of this project to sell the remaining 108 units during H2 2024. We forecast this phase to start realizing revenue during 2025. Meanwhile, we are concerned that legal issues related to Hado Green Lane and Hado Minh Long could take longer to be resolved and expect that these projects will realize revenue from 2026. For the electricity segment, we may not have significant surprises during 2024, as hydropower plants in Vietnam continue to face unfavorable weather. Further, according to HDG, its 7A wind power plant is seeing poorer wind conditions compared to 2023, which has led to a 28% YoY volume decrease during 1Q24. However, we believe that the electricity segment should generate the most stable cash flows and earnings compared to other segments. We also expect lower interest costs due to HDG’s repayment of electricity segment-related debt. 2025 NPAT growth is estimated at 112% YoY, due primarily to the recognition of Hado Charm Villas Phase 3. We arrive at 1-year TP of VND 36,900/share, implying a 12% upside from current market price, and reiterate our OUTPERFORM rating on the shares of HDG.

We rate the shares of VCB at OUTPERFORM, with a 1Y TP of VND 111,800/share. The bank has been underperforming peer since late 2023 due to weak credit growth and muted news on private placement progress. However, we believe these issues are just short-term hiccups while fundamentals of the bank remain solid. The deposit franchise and asset quality remain top notch. Credit growth should rebound in line with the disbursement for certain large infrastructure projects and stronger economic recovery toward year end. We expect 2024-25 PBT to attain VND 45.2 tn (+10% YoY) and VND 52.3 tn (+16% YoY). Further, we believe that the unnamed Weak Bank transaction could be an interesting catalyst for the shares.  

We reiterate our Outperform rating on the shares of TPB and roll forward our valuation to mid-2025 with 1Y TP of VND 22,700/share, presenting an upside of 23.7%. We expect that bad debt will not increase strongly in the near-term due to the bank's debt restructuring policy and proactive bad debt resolution. This should allow TPB to reduce its provisioning for both 2024 and 2025. Although the NIM will be under pressure during 2024, we believe that the turnaround story will be clearer during 2025 with a higher NIM and lower NPL ratio. For the medium period, we believe that the business environment will be more supportive and enable TPB to improve ROE to around 16%.

We are lowering our rating on TCB shares to Market Perform from Outperform, as the shares have risen 10% over the past month alone. We are, however, maintaining our 1Y TP at VND 54,700/share. The 1Q24 result was strong with improvement in the NIM (+19 bps QoQ) and controlled asset quality (NPL 1.13%, LLCR 106%). Despite the increase in accruals during 1Q24, we believe the risk to asset quality is mitigated given the 1-2 year tenure of bullet payment loans. Therefore, with a better-than-expected NIM in 1Q24, we revise our NIM assumption for TCB by 40 bps and 35 bps for 2024 and 2025 respectively. We also adjust non-NII upward to reflect the one-off Govt bond trading gain in 1Q24. On the other hand, we increase the credit cost assumption given the higher-than-expected risk from NPL from CIC across the system. Accordingly, PBT for 2024-25 is finetuned by 5-8% to VND 28.6 tn (+25% YoY) and VND 33.7 tn (+18% YoY) respectively.

We maintain our cautious view for 2024, with consumption continuing to be impacted by the zero-tolerance legislation for drunk driving, a slower rate of change for consumer habits, and consumers tightening their belts. However, we increased our 2024E net sales and NPAT forecasts to VND 32.2 tn (+5.8% YoY) and VND 4.6 tn (+9% YoY), respectively, given the better-than-expected Q1 sales results and small increase in ASP in the first few months. These forecasts are 8.5% and 4% higher than our previous revenue and profit forecasts respectively. We also introduce our 2025F forecast for net revenue at VND 33 tn (+3% YoY) and net profit at VND 4.97 tn (+7% YoY). We assume that the 2025 GPM will increase, while A&P spend will continue to be tightly controlled given the uncertainty surrounding the beer sector’s growth.

Despite the above, overall KBC reported poor financial results for 1Q2024, with net sales totaling VND 152 bn (-93.1% YoY & -82% QoQ) and net loss of VND 76.7 bn, reversal from high net profit during 1Q23 and 4Q23. The lack of industrial land leases (which were recorded during 1Q24) is the main reason for the poor results. For FY2024, we expect KBC to lease around 102 ha of industrial land in total, of which 30 ha was secured to lease by new investors during 2023, 50 ha from Trang Due 3 Industrial Park, and 22 ha from the Tan Phu  Trung Industrial Park. Accordingly, KBC is forecast to achieve VND 4.92 tn (-12.8% YoY) in net revenue and VND 1.36 tn (-38.5% YoY) in NPAT for FY2024.

2024 business plan: For 2024, PLX set conservative PBT guidance at VND 2.9tn, implying a decline of 29% YoY. However, it should be noted that PLX’s actual results have usually exceeded the guidances for the past nine years with the exception of 2020 amid the response to Covid-19.  

1Q24 achieved impressive results driven by the petroleum segment: PBT soared 72% YoY and 70% QoQ to VND 1.44 tn, already accomplishing 50% of the 2024 guidance. Most notably, gross profit increased a considerable 31.2% YoY to a record-high of VND 4.67 tn, fueled by the petroleum segment.  Domestic petroleum sales volume arrived at 2.6 mn tons, increasing slighly by 2% compared to the relatively high base of 1Q23, while still increasing 2.4% QoQ. However, earnings for the segment soared 260% YoY to VND 1.06 tn driven by a 9% increase in petroleum prices during the quarter which benefited the company through low-cost inventory, and the shortening of price adjustment cycle from 10 days to 7 days from the end of 2023.

We lower our rating to MARKET PERFORM for the shares MSB and roll forward our valuation to mid-2025 with 1Y TP of VND 16,200/share, presenting an upside of 13%. As asset quality remains a key concern (especially from retail loans, including mortgage and credit card), we believe that 2024 and 2025 will afford MSB the opportunity to clear out various bad debt with higher provisions. Therefore, we do not believe that pretax profit will grow strongly during this time, making ROE likely to hover around 15%. However, we believe that the clear recovery signal should start from 2025 due to NIM recovery, a lower NPL ratio, and reduced credit costs.

We maintain our MARKET PERFORM rating on the shares of BMP. We apply a target P/E of 10x (unchanged), as the company maintains a high cash dividend payout and high earnings level. We raise our target price for BMP to VND 115,900/share, as we roll forward our valuation basis to mid-2025F, representing upside potential of 2% (total ROI of 12%, included 10% dividend yield).

We maintain our MARKET PERFORM rating on the shares of IDC. We increase our 1-year target price of VND 62,300/share (up 15%) due to higher lease prices at Huu Thanh Industrial Park, as guided in the Analyst Meeting on 7 May and the reduction of the discount rate from 12% to 10.5%.  As such, we believe that IDC will maintain its cash dividend at 40% on par value through 2024, which represents an attractive dividend yield of 6.7%. IDC is one of the largest industrial park developers in Vietnam, with 554 ha of available leasable land in Long An, Ba Ria Vung Tau, and Thai Binh province. Low compensation and clearance costs should enable IDC to maintain the industrial park segment gross profit margin above 42% through 2026. 

KDH recorded net sales of VND 334 bn (-21.5% YoY, -28.9% QoQ) and NPAT of VND 64 bn (-68.4% YoY, +1.9% QoQ). Fewer units in the Classia project were handed over during 1Q24. The Classia project has been on sales and delivered since September 2022 with a total of 176 units, and at 1Q24, the Classia project only has between 10-15 units left for sales. Also, we understand KDH sold some land plots in its inventory to other investors which KDH acquired before, and recorded revenue from these sales with a lower margin when compared with retail sales.  As per the 2024 AGM, KDH management is expected to hand over units sold from The Privia project during 4Q24. From now until 4Q24, KDH will have only a few units in The Classia project left for sales and record revenue following the sales. Thus, from Q2 through Q3 2024, we expect KDH to achieve minimal business performance in term of revenue and profit until 4Q24, when KDH is expected to deliver units in The Privia project and record this revenue from the project. As a result, we expect KDH to achieve 2024 revenue and NPATMI of VND 3.47 tn (+66.1% YoY) and VND 825 bn (+15.3% YoY) respectively.

April 2024 sales were better than expected. VNM reported 4% y/y growth in sales for 4M24 (including +16% y/y for exports), and growth of 10% y/y in sales specifically for April. For reference, 1Q24 revenue and NPAT rose by 1.4% (VND14.1tn) and 15.8% y/y (VND2.2tn), respectively (slightly better than our estimate of a 15% y/y NPAT increase). The Vietnam dairy sector recorded a pullback of 2.8% y/y in terms of value during 1Q24, with the infant-formula-milk category decreasing c.20% y/y, according to AC Nielsen. Through 1Q24, VNM has completed 22% and 24% of its annual respective net sales and net income targets. We maintain our forecast for 2024F net sales and net profit of VND63.7tn (+6% YoY) and VND10.1tn (+12% YoY), respectively. We are still optimistic about VNM’s ability to grow despite headwinds, and are assuming lower ingredient prices and restructuring efforts to improve the bottom line. The selling expense/sales ratio is expected to remain at around 21.5% to allow for business development activities (ie, rebranding, e-commerce), while financial income is likely to decrease given the lower interest rate environment. We introduce our 2025F forecast for net sales and net profit to increase at 6% (VND67.5tn) and 7.5% y/y (VND11tn), respectively, with the assumption that consumption should recover more firmly and operating margins will be better optimized via digital transformation process.

1Q24 results were within our expectation as volume in the quarter declined 86% YoY, which weighed on NT2’s performance accordingly. We expect this output figure will somehow improve QoQ in 2Q24, supported by the peak power demand season in Vietnam. Nevertheless, due to the limited contracted volume (Qc) (at ~1 bn kWh) (the actual Qc might change, depending on the actual electricity mobilization conditions) planned by the National Load Dispatch Center (NLDC), we are concerned such improvement might not help NT2 to breakeven in 2024. We project a loss of VND 255 bn (nearly unchanged compared to our previous update) for the company in 2024. After our SELL recommendation on 29 Mar 2024, stock price declined by 12%.  With a 12-month target price of VND 23,000 (equivalent to a 5% upside potential) (based on DCF and EV/EBITDA valuation methods), we upgrade our rating to MARKET PERFORM for the stock.