Company Report

Guidance issued by the company set a growth target of 17% in sales and 11% in NPAT, while estimate for 1Q24 sales and NPAT are VND 670 bn (+25% YoY) and VND 109 bn (+33% YoY), respectively. Our estimates sales and net earnings are VND 3.1 tn (+16.3% YoY) and VND 364 bn (flat vs. YoY), respectively, in which sales should witness growth in both segments of construction and BOT toll collection. Those big projects mainly contributing to construction sales are the Quang Ngai - Hoai Nhon highway, the Dong Dang – Tra Linh and Huu Nghi – Chi Lang highways. However, we expected that gross margin of this segment will be thinner than 2023 given the reduction in complexity of those projects. Meanwhile, greater-than-organic sales growth of BOT companies should mainly be attributed to higher toll fees rather than growth in car counts, while profit margin should not witness any significant changes.

For the first two months of 2024, VHC’s net sales reached VND 1.7 tn (+40% YoY), with pangasius sales increasing 25% YoY, outperforming the sector due to the US market recovery. Pangasius sales growth reflects domestic market sales of VND 535 bn (+64% YoY), which accounted for 31% of sales (from 27% during 2M23). US and EU market sales reached VND 407 bn (+30% YoY) and VND 292 bn (+16% YoY), respectively. The Wellness segment witnessed a recovery with sales reaching VND 130 bn (+26% YoY). According to VASEP, Vietnamese pangasius exports during 1Q24 reached 424 mn USD (+0.4% YoY). We maintain our Market Perform rating on the shares of VHC, with a target price of VND 78,500/share (from VND 64,500/share), as we roll our forecast to mid-2015. We increase our target P/E for VHC to 12x (10x previously), as we believe that earnings have bottomed out during 2023, coupled with a low-interest rate environment. Thus, our new target price represents an upside of 2.3% and VHC currently trades at a 2024 P/E of 14x and 2025 P/E of 10x, which is at the 10-year historical average range of between 6x-19x.

With lower-than-expected 1Q24 results, we revise down our yellow phosphorus ASP for 2024-2025 to VND 113 mn/ton (+7% YoY, from VND 118 mn/ton) and VND 121 mn/ton (+7% YoY, from VND 123 mn/ton). Net income are hence estimated at VND 3.79 tn (+16% YoY) and VND 5.47 tn (+44% YoY) for 2024-2025. Projected 2024-2025 earnings growth will be primarily determined by (i) sales volume and ASP recovery of phosphorus-related finished products and (ii) reduction in phosphate rock material costs on higher usage of in-house phosphate rock (80% in 2023, 90% in 2024, 100% in 2025).  We apply our unchanged target P/E of 12x on revised 2024-2025 earnings estimates, and derive a new target price at VND 133,000 per share (from VND 142,000). We maintain our MARKET PERFORM rating. Pullback in earnings during 1H24 may weigh on share price performance after a period of strong price rally, though we believe that price weaknesses should present opportunity to accumulate the stock for investors with a long investment horizon.

For 2024, we expect a broad-based recovery across all segments.  We believe that revenue growth from consumer retail chain subsidiary, Wincommerce (WCM), could come from rapid new store openings, restructuring during the 2022-23 period that should start yielding fruit, and a recovery in consumer spend. Subsidiary Masan Consumer (HOSE: MCH) has consistently proven resilience and outperformed peers since 2019 (CAGR of 10% in revenue and 11% in NPAT). We believe that the company will maintain this momentum through 2024, levering synergies of the retail platform (WCM) and the innovative product innovations.

4Q23 performance missed estimates. DBD posted 4Q23 revenue and NPAT of VND 444 bn (-4.4% YoY) and VND 59 bn (-25% YoY), respectively, which were 10% and 40% lower than our estimates. The company saw lower sales as consumers skipped OTC drugs/supplements, as well as increased competition from imported brands. For FY23, the company recorded net sales and NPAT of VND 1.65tn (+6% YoY) and VND 269bn (+11% YoY), respectively. This result is 3% and 8% lower than our estimates. The increase is largely credited to the robust performance in the prescription drugs, including antibiotics and cancer drugs. Significant facility upgrades underway mobilizing aggressive growth plan. As DBD aims to reach VND 2.6tn in manufactured drug revenue before 2026 and 4.5tn before 2030 (from current revenue of VND 1.65tn), the company has been investing heavily in its production capabilities. DBD recently broke ground on the construction of a small volume injection drug factory (Nov 2023), focusing on production of new dosage forms/packaging such as sterile injectable and eye drops. Scheduled for completion during 2025, the factory aims to commence production before 2027.

Riding the tanker industry upcycle during 4Q 2023, PVT continued to post strong financial results as expected. Specifically, 4Q 2023 revenue was VND 2.7 tn, +12.9% YoY and 7.9% QoQ, while PBT was VND 357 bn, -1.2% YoY and -10.4% QoQ. Excluding one-off gains/losses, core PBT growth in 4Q 2023 reached 16.6% YoY. For FY2023, the company’s revenue was VND 9.4 tn +4.6% YoY and PBT was VND 1.55 tn (+10.6% YoY), which is quite close to our PBT forecast of VND 1.6 tn. Excluding one-off gains from vessel disposal in both years, 2023 core PBT reached VND 1.35 tn + 15% YoY. PVT has completed 227% of its 2023 PBT target, mostly due to its tendency to set an overly low target.

Despite NT2 not targeting any major maintenance schedule in 2024, which implies an opportunity for the company’s volume and earnings recovery, we are concerned that Vietnam Electricity Group (EVN) might reduce its reliance on gas-fired electricity in 2024 (including that of NT2) as 1) the current gas supply issue might not favor EVN to deploy gas-fired power as a stable source to meet the power demand and 2) EVN might very well prioritize cheaper power sources to endeavor to cut losses or at least breakeven in 2024, such as coal-fired electricity, hydropower and renewables. Therefore, we expect that NT2 should face another year of volume decline (-54.4% YoY per our estimate). With such lower utilization compared to 2023, we project a loss of VND 261 bn for the company in 2024. With a 12-month target price of VND 22,900 (equivalent to a 8% downside potential) (based on DCF and EV/EBITDA valuation methods), we issue a SELL rating for the stock.

PTB operates at a higher growth rate than the wood industry thanks to its large customers (Masterband, and Melissa & Doug, GigaCloud). In addition, the company’s stable earnings reflect optimized labor productivity – allowing the wood segment’s gross profit margin to exceed the industry average by 3% to 4%. We see stone production recovering in both 2024-2025, energized by public investment projects such as expanding terminal T3 of Tan Son Nhat Airport and Long Thanh Airport with a total value of VND 600 bn. PTB trades at a 2024 and 2025 forward P/E of 12.6x and 10.8x respectively, which are slightly lower than peers (12.8x in 2024). Using a blended average P/E for the wood industry of 12x and the stone industry of 11x, we derive a 1Y target price for PTB of VND 64,800/share (downside -1%). We maintain our MARKET PERFORM rating.

4Q23 earnings updates: During 4Q 2023, PC1 reported sales of VND 2.6 tn (+11% YoY, reaching 113% of our forecast) and net earnings of VND 137 bn (-50% YoY, reaching 86% of our forecast). Gross profit margin was YoY thinner, at 17.2%, (vs. 21.7% of 4Q22), given the lower margin of construction segment associated with higher weight of public power projects.

Outlook: PC1 continues to diversify its sales mix. We expect FY24 sales to reach approximately VND 9,008 bn (+ 15.4% YoY) while NPAT is projected to reach VND 135 bn.

Within the aim to keep gaining new clients, PNJ did not raise prices amid rising gold input costs during the period, hence the gross profit margin was compressed in the short term. However, we believe the company may eventually adjust its prices in tune with the increase in gold prices, and we believe it is able to do so given its leading position in jewelry retail business, not to mention that the Vietnamese public appreciates gold’s property as a store of value. In addition, PNJ frequently releases new jewelry collections, whereby the company will likely increase sticker prices to offset the increase in the price of gold. We hence maintain 2024 revenue and net income estimates of VND 37.7 tn (+14% YoY) and VND 2.3 tn (+17% YoY). We introduce 2025 estimates with revenue and net income at VND 41.5 tn (+10% YoY) and VND 2.57 tn (+12% YoY). Earnings growth in 2025 is driven by full year operation of stores opened in 2024 (+9%), on top of the expected increase in overall jewelry consumption (+5% YoY). With an unchanged target P/E of 17x on average 2024F-2025F financials (from 2024F), we derive a new target price at VND 114,000 per share (from VND 107,500). With 16% upside potential, we maintain an OUTPERFORM rating for PNJ.

On 18 Mar 2024, Vingroup Jsc, the parent company of VRE decided to fully divest from SDI Trading Development and Investment Company Limited (“SDI”). SDI owns more than 99% of charter capital of Sado Trading Commercial Jsc (“Sado”) – which in turn is a significantly large shareholder of VRE with a 40.5% stake (41.5% effective holding due to VRE having 56.5 million treasury shares). The transaction is expected to be completed in the third quarter this year. With the new major shareholders, we expect VRE will operate more effectively when having more contributions from upcoming shareholders who have consumer retail experience. Also, VRE still works with Vingroup and its ecosystem as the strategic partner. We reiterate our BUY rating for VRE, while bumping up our target price to VND 33,600/share (+29% upside), which is slightly higher than our previous target price of VND 31,300/share as we roll forward our valuation.

We upgrade our rating on the shares of QNS to Outperform (from Market Perform) with a target price of VND 57,400/share, representing +19% upside (total ROI 23%). We believe that QNS is capable of maintaining single-digit earnings growth through 2025, as the sugar business maintains its profit level, the soymilk segment returns to normal, and the company’s financial income grows due to its substantial net cash balance (24% of market capitalization). Further, QNS's unforeseen earnings surge during 2023 resulted in a 50% net profit distribution. We note that QNS paid between 60-80% of net profit between 2020 and 2022. Thus, given the strong earnings level, we anticipate that QNS likely will increase cash dividends for 2025, which is expected at between VND 4,500-5,000/share (10-11% dividend yield for 2025).

We maintain our MARKET PERFORM rating on the shares of BMP. Our new target price for BMP is VND 112,000/share (from VND 103,400/share), as we revise up the 2024F NPAT by 8% compared to our previous forecast, representing a +1% upside (dividend yield of 10%). 4Q23 results: BMP posted net sales and NPAT of VND 1.5 tn (+3% YoY, +57% QoQ) and VND 257 bn (+3% YoY, +23% QoQ), respectively, which are in line with our expectations. We estimate that the sales volume during 4Q23 reached 24k tons (+2% YoY, +57% QoQ), as BMP sold at discounted prices to distributors during the second half of 4Q23. The ASP was flat QoQ and YoY. The gross profit margin reached 40.6% during 4Q23, compared to 43% and 33.7% during 3Q23 and 4Q22, respectively. During 4Q23, the expense-to-sales ratio increased to 15.4% compared to 12.8% during 3Q23. For 2023, BMP reported net sales of VND 5.2 tn (-11% YoY) and NPAT of VND 1 tn (+50% YoY).

We raise our rating on the shares of KDH to OUTPERFORM, along with our new target price of VND 41,300 (+11.3% upside) [previous target price of VND 30,950/share]. This reflects a change in our assumptions of market value of Tan Tao Township and Green Village Urban Area, which are expected to launch over the next two years. That being said, FY 2023 marked the third year of downtrend for KDH’s financial performance, with net revenue of VND 2.09 tn (-28.1% YoY) and NPAT of VND 730.5 bn (-32.5% YoY). This is much lower than our 2023 forecasts of VND 2.39 tn and VND 1.03 tn, respectively.  The shortfall was due to lower actual property sales recognition in the Classia project in HCMC.