Company Report

We believe that gradual recovery in credit demand and NIM improvement during 2024 will paint a brighter picture for TPB, as the economy starts regaining its composure and high yield customer deposits expire . However, we are still concerned about credit risk derived from corporate bonds, real estate, and the construction sector (22.4% of total credit) which will still weigh heavy on credit costs during 2024 (1.65% vs. 1.86% in 2023). We maintain our Market Perform rating on the shares of TPB, along with our 1-year target price of VND 18,000/share.

DCM posted lower-than-expected 3Q23 results, as avg. urea ASP continues a slow recovery as well as higher-than-expected input gas price. The company continued to recognize gas input costs higher than actual costs, reflecting in the rise in provision for the increase in gas input costs. As of 3Q23, the said provision totaled VND 1.3 tn (vs VND 680 bn as of 2022YE and vs VND 1.29 tn as of 2Q23). We had initially expected that DCM to make a partial reversal of said provision in 2H23 as per the announcement of DCM at 2023 AGM, hence helping to reduce gas input costs in 2H23. However, Petrovietnam Group (the largest shareholder of DCM) has not finalized this matter yet. As the timeline for this issue is uncertain at the moment, and that the 3Q23 fuel oil price increased at a faster rate than our assumption, we increase our 2023-2024 gas input cost assumption.

3Q23 NPAT lower than expected due to weak consumption. VEA recorded VND 884 bn (-28% YoY) and VND 136 bn (-14% YoY) in net sales and gross profit respectively, as demand for its trucks and farm tractors remained weak. Income from JVs was VND 1.2 tn (-25% YoY, -18% QoQ) compared to the high base last year. VEA recorded 3Q23 and Q1-Q3 NPAT of VND 1.5 tn (-20% YoY) and 4.7 tn (-8% YoY) respectively, which is lower than our estimates due to weaker consumption from Honda and Toyota. Outlook should improve for cars and trucks. The 50% registration fee cut will end on Dec 31^st, giving more support for sales to achieve better QoQ results (4Q22 was a high base, so we are likely to witness a YoY decrease). We estimate total volume for cars during 2023 to decline 26% YoY and total volume for Honda motorbikes to decline 13% YoY.

GAS’s 3Q23 net income came in at VND 2.4 tn, a decline of -22.2% YoY and -24.8% YoY, primarily due to the decline in dry gas sales volume amid weaker demand and the depletion of old low-cost fields. 9M23 net income dropped -23.1% to VND 9 tn, equivalent to 73.4% of our 2023 forecast, but exceeded the 2023 conservative guidance by 38%. Dry gas volume declined over -10% YoY and -25% QoQ to around 1.6 bn m3 during the quarter due to the lower utilization rate of gas-fired power plants. Based on input from EVN, the electricity generation volume of gas-fired power plants is estimated to decline 18% YoY and 35% QoQ due to the maintenance of NT2 from early Sep to Oct, with better hydrological conditions leading to a surge in volume at the hydropower plant to 28.2 bn KwH (-10% YoY but +95% QoQ - accounting for 38% of domestic power volume during 3Q23), and the recovering of coal-fired power plant output by 30% YoY off the low base in 3Q22 amid high coal prices.

Our FY2023 forecasts for net revenue and NPATMI are VND 2.94 tn (-32.3% YoY) and VND 437.8 bn (-21.3% YoY), respectively. During 4Q23, revenue and NPATMI might witness a significant decrease compared to 4Q22 with VND 1.39 tn (-15% YoY) and VND 243.9 bn (-44% YoY), respectively, due to a higher units delivery in Southgate and Akari City projects in 4Q22 and the first 25% transfer of the Paragon Dai Phuoc project which had VND 244 bn in financial income. 

In 9M 2023 BCM’s PAT decreased sharply. BCM posted revenue and PAT of VND 3.012 tn (-46.5% YoY) and VND 264 bn (-84.1% YoY), respectively, completing 31.8% and 14% of the company's respective targets. BCM’s earnings decreased sharply, due to: (1) the demand for leased land decreased; (2) Cay Truong IP's operating start date was delayed from 3Q23 to 2024; and (3) profit from joint venture companies decreased 97% YoY. Profit after tax is forecast to increase sharply in 4Q23. We estimate that 4Q23 revenue and profit after tax at VND 7.601 tn (+7.5x YoY) and VND 2.386 tn (+344x YoY) respectively, mainly from recognizing land sales of 18.9 ha at Binh Duong New City project for Capitaland, with revenue reaching VND 5.05 tn and gross profit reaching VND 2.102 tn.

We also increase our 2024 earnings forecast from VND 10.78 tn to VND 11.2 tn (+82% YoY), due primarily to the adjustment in our volume forecast. We assume that the company’s construction steel and HRC volume will reach 3.68 mn tons (-14.2% YoY) and 2.77 mn tons (+5.6% YoY) during 2023, respectively, and 4.24 mn tons (+15.3% YoY) and 2.9 mn tons (+4.7% YoY) for 2024. We expect the steel segment to turn around in 2024 on the very low base of 2023, and HPG’s NPAT to grow at 82.3% YoY. Accordingly, we reiterate our Outperform rating on the shares of HPG, and raise our 1-year target price to VND 30,000/share based on target PE and EV/EBITDA multiples of 15.5x and 8x, respectively (from 14.5x and 8x previously). 

As large construction deals signed during 2022 begin realizing revenue, we believe that the construction segment will be the main driver of 2023 YoY growth (45% YoY revenue growth with 31% revenue contribution per our estimate).  We expect lower YoY NPATMI growth for 2024 (+13.4% YoY vs +17.2% YoY of 2023) as the YoY growth driver likely will come from operation, integrated solutions, and infrastructure leasing segments. Construction segment growth should normalize. Aiming an auction for between 2,500-2,600 MHz waveband usage rights during December 2023, the Ministry of Information and Communications (MIC) targets a 5G rollout during 2024. We believe that enhancing 3G/4G coverage followed by the continuing 2G shutdown and 5G implementation will require more BTS sites, which should benefit CTR’s infrastructure leasing segment during 2024. We call for an OUTPERFORM rating on CTR’s shares with a 12-month DCF target price of VND 102,400 (equivalent to 14% upside potential).

PVS growth momentum slowed down in 3Q 2023 with revenue and NPATMI reaching just VND 4.2 tn (+19.2% YoY, -11.4% QoQ) and VND 140 bn (-27% YoY,   -37% QoQ), respectively. 9M 2023 consolidated revenue reached VND 12.6 tn (+13.6% YoY), whereas NPATMI reached VND 580 bn (+40% YoY), equivalent to 72% and 70% of our top-line and bottom-line estimates. This suggests that PVS is likely to meet our 2023F estimates for consolidated revenue and NPATMI of VND 17 trillion and VND 828 bn respectively.

We downgrade our rating to Market Perform (from Outperform) on the shares of VHC, with a target price of VND 77,300/share (from VND 94,700/share), as we cut earnings forecast for 2023 and 2024 by 25% and 17% respectively. The reason is that the ASP recovery pace has been slower-than-expected. Our new target price represents an upside of 13% and VHC now trades at a 2024 P/E of 9x, which is well within the 10-year range of between 6x-12x.

For 3Q23, DBD posted net sales and net profit of VND 411 bn (+4% YoY) and VND 67 bn (+24% YoY), respectively, which is in line with expectations. Both prescription (Rx) and OTC drugs witnessed decelerated growth relative to last year and last quarter. The gross profit margin decreased 260 bp YoY due to lower Rx prices within the hospital channel, higher ingredient costs, and foreign exchange losses. For 9M23, NPAT reached VND 210 bn (+28% YoY), with the NPAT margin increasing YoY from 15% to 17%. The company has reached 67% and 84% of their 2023 net sales and net profit annual targets, respectively. Medium-term risk due to temporary registration ban. A fault in production led to a recall of oncology drug Methotrexat 50mg/2ml during Dec ’21 and eventual suspension during Nov’ 23. Drug Administration of Vietnam (DAV) decided that DBD will not be able to apply and/or renew any of their drug registration until Nov ‘24. Any application currently under review will also be terminated. DBD noted that about 300 of its registrations either are extended until Dec 31^st, 2024 under Resolution 80/2023/QH15 or just renewed (until between 2027-2028). As a result, they remain eligible to produce most of their drugs in 2024. However, we note that some renewals still run the risk of not being approved on time when the effect of the resolution ends, thus may affect approximately 5% of registration portfolio during 2025 (according to our estimates). Renewal usually takes around 3 months.

PNJ posted a decline of -6% YoY in net sales but managed to deliver flat net income YoY in 3Q23 thanks to improved gross profit margin. In October 2023, net sales growth came back to positive territory (+2% YoY) in which retail sales rose by +4% YoY. Of note, October 2022 retail sales was high base (increasing by 47% vs the average in 2020-2021). As such, we view the 4% YoY increase in October 2023 retail sales as encouraging. Meanwhile net income surged by 32% YoY thanks to improved gross profit margin and normalized corporate tax expense from last year high base. While the overall jewelry consumption may still take time to regain growth, retail sales of PNJ has picked up before the market recovery thanks to market share gain supported by various long term strategies, such as targeting younger customer group and pioneering proposal trend in Vietnam. We now forecast 2023-2024 net income at VND 1.85 tn (+2.6% YoY, from VND 1.84 tn) and VND 2.17 tn (+17.2% YoY, from VND 2.04 tn). With unchanged target P/E of 16x on revised 2024 earnings, we increase our 1-year target price to VND 96,200 (from VND 90,200) and maintain OUTPERFORM rating (21% upside). 

We expect that the company's performance in 2024 will show a significant improvement compared to the previous year's low earnings (NPATMI growth in 2023/2024 are estimated at -57.9%/+79.1% respectively). This growth is projected to primarily come from increased investments in national grid projects, particularly benefiting the grid construction sector of PC1. Meanwhile, the minerals segment (started to contribute revenue from 3Q23) is conservatively forecasted at growth rate of 18% in revenue in 2024 due to concern of global economy slowdown impacting nickel demand. Power generation and property are expected to deliver moderate growth in 2024 due to less intense El-Nino weather condition and nearly full utilization of the industrial zone.

We lower our 1Y TP to VND 104,000/share (from VND 105,900/share) on the shares of VCB, reflecting our tweak of 2023 and 2024 profit before tax of -8% and -5%, respectively, to VND 40.7 tn (+9% YoY) and VND 46.5 tn (+14% YoY). Our adjustment reflects the sluggish credit demand during the Q1-Q3 period (+3.8% YTD). Nonetheless, we remain bullish on the shares, and reiterate our Outperform rating. We have always liked VCB for its prudent lending practices and more conservative approach. However, this seemed to cause more pain than gain during 3Q23, as excess liquidity (deposit growth outpaced credit growth at +7.5% vs. +3.8% YTD) led to lower profitability. The NIM missed the mark, reaching a mere 2.96% (-24 bps QoQ). Accordingly, NII declined -10% QoQ or -8% YoY, and PBT was VND 9 tn (-2.4% QoQ and +20% YoY). Over the long run, we believe that this approach will ultimately pay off with a clean balance sheet with high quality assets.

PLX’s PBT during 3Q23 was VND 1.18 tn, an increase of 277% YoY and 14.6% QoQ. Cumulatively, the company’s PBT during 9M23 was VND 3.08 tn (+402% YoY), accomplishing 95% of annual guidance. PLX’s petroleum sales volume was well maintained at 2.6 mn m3, an increase of 3.2% YoY, of which the retail channel contributed 1.7 mn m3 (+4.9% YoY). Earnings within the petroleum segment remained flat QoQ at VND 483 bn, but showed significant improvement compared to a loss of -VND 199 bn during 3Q22. However, we note that the parent company has booked an inventory provision of VND 777 bn during the quarter due to the correction in oil price, which can be reversed in the coming quarters if the oil price stabilizes.