Company Report

During 4Q 2023, Saigon Cargo Service (HOSE: SCS) posted revenue of VND 198.8 bn (+1.7% YoY and +15.9% QoQ) and profit before tax of VND 146.1 bn (-13.8% YoY and +0.2% QoQ), meeting our in-house expectations. It is notable that 4Q 2023 witnessed a 6% YoY increase in international cargo volume, marking the first quarter since 4Q2022 to experience YoY growth. 2024 should be an optimistic year for SCS as they have secured a 3-year contract of cargo handling services at Tan Son Nhat International Airport for Qatar Airways, commencing from this quarter (i.e. Feb 2024). This contract should boost both SCS’ market share (from 35% to nearly 50%) and earnings. This deal should contribute around 25%-30% of 2024 PBT. We do not expect any significant changes to cost structure, but a slight increase in concession fees from 1.5% to 2% from 2H24.

We maintain our 2024 net profit forecast at VND 11.2 tn, implying an increase of 64% YoY and driven by the recovery in both sales volume and steel prices. We assume that the company’s construction steel and HRC volume will reach 4.5 mn tons (+17.8% YoY) and 3 mn tons (+8.3% YoY), respectively, for 2024. Over the longer-term, we expect that the company’s earnings will achieve average growth of over 30%/year between 2025 to 2027. This should be driven by the commencement of Dung Quat 2 project, which would allow HRC sales volume to more than double from 2.8 mn tons during 2023 to 7.5 mn tons for 2027. The current domestic supply shortage between 4-5 mn tons/year, along with the more recent growth in exports should enable the company to boost its HRC segment after the project commences operation.

In 1Q FY24, CTD reported revenue of VND4.124tn (+14.1% QoQ and +32.5% YoY) and pre-tax earnings of VND86bn (+118.9% QoQ, despite incurring a loss in 1Q FY23). In terms of profitability, CTD achieved a gross profit margin of 2.4% and a pre-tax margin of 2.1% in 1Q FY24. In the face of challenging conditions, the growth of the backlog in 1Q FY24 demonstrates strong resilience, indicating a potential recovery in FY24. The company’s total backlog has consistently reached VND24tn, including 40% for residential and 20% for industrial construction. In addition, CTD aims to target the international market, and the net margin is expected to be at most 3%.

Taseco Land (TAL) was established in 2009 with its main business in real estate development. In early 2018, TAL restructured the organization and increased the chartered capital to VND 900 bn. Thanks to profit retained in the last several years along with capital raising from current shareholders, currently, the charter capital of TAL stands at VND 2.97 tn (US$123 mn). For FY2023, we estimate the Company will achieve VND 3.29 tn in revenue and VND 480 bn in NPAT. For FY2024, we expect the Company will i) launch for sale in residential area in Hai Yen Resettlement area, Nghi Son town, ii) sale continuation in the Alacarte Ha Long, Central Riverside and Luong Son Riverview project and iii) recognition of unbilled bookings revenue in N01-T6 apartment building in Hanoi and one-off financial income from the divestment of office building in land lot B2-CC4, Starlake Urban Area, Hanoi. As a result, TAL is expected to achieve revenue and PAT for FY2024 of VND 3.37 tn (+3% YoY) and VND 631 bn (+31% YoY) respectively.

For 2024, we estimate revenue at VND 5.2 tn (+12% YoY, from VND 5.08 tn) and net income at VND 281 bn (+15% YoY, from VND 250 bn). While we expect the demand in export market to be warmer in 2024, the gross profit margin may not improve much as the depreciation expense from the new radial production line kicks in. Our new 2024 earnings estimates are 12% higher than the previous as we take into account the recent increase in sales order from the US market (from 22K units/month to 25K units/month, accounting for 33% of the total radial tire sales volume), while the sales order from the Brazil market is to be remained unchanged (35K units/month, accounting for 47% of the total radial tire sales volume). With an unchanged target P/E of 12x on 2024F revised financials, we derive a new target price for DRC at VND 28,400 per share (from VND 25,300). We maintain MARKET PERFORM rating on DRC.

Given the weaker-than-expected 9M23 results, we slash our NPATMI estimate to VND608bn (-83% YoY; from VND2.05tn) for 2023, due primarily to the underperformance of the retail, meat, and mining business lines. For 2024, we expect a broad-based recovery across all segments.  We believe that revenue growth from WCM (consumer retail chain) could come from a rapid pace of new store openings during 2022-23 that should start yielding fruit, along with the recovery in consumer spending. For the mining business, we admit that uncertainty in ore grade poses too much of a challenge to estimate MSR’s margin - prompting us to take a more conservative view. Associate TCB is estimated to post 15% PBT growth for 2024, with encouraging credit growth and a higher NIM. Meanwhile, interest expenses have already established a high base for 2023 and will likely not increase during 2024 (as we expect MSN will partly reduce its outstanding debt). Our 2024F net sales and NPATMI estimates are set at VND90.1tn (+9.3% YoY) and VND1.58tn (+160% YoY), respectively.

We reiterate our MARKET PERFORM rating for the shares of BMP. Our new target price for the shares of BMP is VND 103,400/share (from VND 99,200/share), as we apply a target P/E 2024F of 10x (unchanged) - representing 2.6% downside. BMP posted net sales and NPAT of VND 926 bn (-38% YoY, -31% QoQ) and VND 209 bn (+19% YoY, -29% QoQ), respectively, off from its 2Q23 historical high due to a significant decline in sales volume. We estimate that 3Q23 sales volume decreased -38% YoY while ASP remained flat YoY due to a slowdown in construction activities and rising competition. Gross profit margin increased to 43% during 3Q23, compared to 42.8% for 2Q23 and 28.3% for 3Q22, owing to a drop in PVC input prices. During 3Q23, the expense-to-sales ratio remained stable at 12.8% compared to 13% for 2Q23, but staged an increase from the 8.8% at 3Q22.

Highly leveraged position has been the main concern for FRT, especially in the rising interest rate environment (4Q22 and 1Q23). The funding pressure of FRT has eased with borrowing costs in 3Q23 declined by 200 bps from the peak and improved profitability from the pharmacy chain. With lower borrowing costs, FRT can speed up new openings for Long Chau chain to gain market share in the context that competitor An Khang and Pharmacity are still struggling with their business model. Larger scale should eventually help to enlarge the profit margin for Long Chau over the long term. As such, the reduction in borrowing costs is meaningful for a highly levered company like FRT, we hence raise P/S target multiple for the pharmacy chain from 0.8x to 1x. We hence lift our 1-year target price to VND 117,000/share (from VND 105,000). As FRT share price has increased by 35% since our last BUY call, we now call for OUTPERFORM rating on FRT shares with 13.5% upside.

In 9M2023, we witnessed a YoY decline in power volume from all of POW-owned&operated power plants, except for the Vung Ang and Ca Mau plants. We attribute this to unfavorable weather conditions weighing on hydropower plant utilization rates. Furthermore, the gas shortage in Southeast Vietnam led to Nhon Trach 1 and Nhon Trach 2 (NT2: HOSE) failing to meet power demand and running the plants on expensive diesel oil. For 2024, after a 2023 major maintenance schedule for Ca Mau 2, Vung Ang’s Generator 1, Nhon Trach 2 and Dakdrinh’s Generator H2, we anticipate a recovery in terms of both volume (14% YoY in 2024 vs 3% of 2023) and NPAT (+19% YoY vs -52% YoY of 2023) per our estimates. Aside from the long-term gas shortage issue due to depleting gas fields, we see the delay risk of Nhon Trach 3&4 LNG-fired project’s commercial operation date and expect two plants will come online in the foreseeable future: Nhon Trach 3 in H2 2025 and Nhon Trach 4 in H2 2026. We call for a MARKET PERFORM rating for POW, with a 12-month target price of VND 12,980/share (equivalent to 16.4% upside potential; based on DCF and EV/EBITDA multiple valuation methods).

We maintain our Market Perform rating on the shares for HT1, projecting that cement demand is expected to continue to weaken during 1H24 with the possibility of a rebound during 2H24. Our target price for the shares of HT1 is VND 11,300/share (from VND 12,600/share), as we apply a target P/E of 15x and EV/EBITDA of 7x for 2024.

HT1 recorded a net loss of VND 10 bn during 3Q23 (compared to a net profit of VND 37 bn during 3Q22) due to poor sales volume. Net sales reached VND 1.6 tn (-30% YoY, -21% QoQ), with sales volume of 1.2 mn tons (-27% YoY, -19% QoQ), amid weak demand resulting from weakened construction combined with the rainy season. GPM increased from 8.4% for 3Q22 to 9.0% for 3Q23 due to lower coal input prices. For 9M23, HT1 net sales reached VND 5.3 tn (-20% YoY) and net losses reached VND 37 bn (-119% YoY), lower than our expectation.

During 3Q 2023, Viettel Post continued to record positive results. Consolidated revenue was VND 4.8 bn ( -7% YoY) and NPATMI of VND 103 bn (+82% YoY and +5% QoQ). Core delivery revenue grew 25% YoY to VND 2.6 tn for 3Q 2023, as it capitalized on both e-commerce industry growth and an increase in market share. ASP still under pressure. We expect VTP’s 2023F and 2024F profit before tax to reach VND 471 bn (+46% YoY) and VND 560 bn (+18.8% YoY), respectively. Our estimate for 2023F is on par with the company’s PBT target of VND 470 bn. This translates to 4Q 2023F PBT estimate of VND 135 bn (compared with breakeven PBT in 4Q 2022).

We maintain our MARKET PERFORM rating for KDH, while nudging up our target price to VND 30,950/share (+2% upside), which is slightly higher than our previous target price of VND 30,500/share. This reflects our change of assumptions regarding sales launch performance for The Clarita, The Emeria, and The Solina, which are expected to launch later than previously assumed and we roll forward our valuation to FY2024.

NKG’s Q3 net profit was VND 24 bn, improving from the record loss of VND 419 bn for 3Q22, but a decline of -81% QoQ due to the drop in sales volume and the average steel prices. Cumulative, total net profit in 9M23 declined -65.5% YoY to VND 100 bn, accomplishing 25% of annual guidance. NKG sales volume for 3Q23 was 208k tons, improving 18.9% YoY off of the three year bottom of 3Q22, but fell -12.1% QoQ due to the -19.2% QoQ drop in exports. 9M23 sales volume dropped by -7.9% to 638k tons, in which export and domestic volume dropped by -6.1% and -10.3% YoY respectively. The gross margin also contracted to 4.8% from 9% in 2Q23 due to the steel price correction especially in export markets.

2023 prelim earnings in line with expectations: According to preliminary results, GAS net profit is estimated at over VND 11.6 tn in 2023, which is quite in line with our forecast of VND 12 tn. The estimated result would fall by around -23% YoY but still exceed the company’s conservative guidance by 77%. Revenue is estimated to drop by around -7.5% to over VND  93.2 tn. Dry gas sales volume is estimated at around 7.3 bn m3, a decline by roughly -5% YoY, while LPG sales volume is estimate to increase by around 20% to a historical high of nearly 2.5 mn tons, in which domestic and export volume are 1.6 mn tons and 900k tons respectively.

Earnings increased by double digits mainly driven by the industrial park leasing segment. In 3Q23, revenue and net income reached VND 3.4 tn (+ 8% YoY) and VND 434 bn (+64% YoY) respectively. Significant growth in net profit was mainly driven by the industrial park leasing segment. In 9M2023, net revenue totaled VND 10.17 tn (-11% YoY) and NPAT reached VND 1.2 tn (-30% YoY) - having completed 131% of the company plan. Given such better than expected earnings results posted in 9M23 (mainly from the industrial park leasing).