Company Report

In 2Q 2023, SCS recorded revenue of VND 172 bn (-17.4% YoY) and PBT of VND 147 bn (-10% YoY), continuing the declining trend since 4Q 2022 and in line with our estimates. However, looking to the QoQ comparison, things look brighter with clear recovery in all financial attributes from previous quarters:  revenue growth of 6.4% QoQ and PBT growth of 14% QoQ.

With these results, 1H 2023 revenue reached VND 334 bn (-26.5% YoY) and PBT reached VND 277 bn (-24% YoY). However, such results do not register as a surprise to us, and overall performance during 1H 2023 has closely matched with our current estimates for 2023 and passed the halfway point for the year, which we find to be an encouraging sign.

2Q23 revenue reached VND 288 bn (+10% YoY), while Q2 NPAT recorded the best performance in two years. This result is in line with our forecast when the SZC MOU contract was announced at the end of 2022. Revenue from leased industrial park land was VND 263 bn (+3.9% YoY), having rented 15 ha to the Sonadezi Corporation (owns 46.8% of SZC) at USD 72/m2 (+17% YoY). The gross profit margin jumped from 36.4% in 2Q22 to 53.9% due primarily to increase in average lease prices, which cushioned SZC’s earlier actions of booking additional land costs for the remaining land in the fully-owned Chau Duc Industrial Park since 1Q22. In addition, shophouse sales in the Sonadezi Huu Phuoc Residential Area reached VND 11.7 bn, while there was no revenue in 2Q22. Interest expense increased 21% YoY due to the recognition of loan from the golf course which came on line. General and administrative expenses decreased -30% YoY due primarily to the reduction cost of salaries. Net income reached VND 95.9 bn (+56% YoY).

Our last rating on DRC was MARKET PERFORM, as we believe that 2023 earnings will likely decline due to weak demand, which forced DRC to reduce prices charged to its customers in order to protect sales volume, hence effectively squeezing the profit margin. Q2 earnings (-39% YoY) came out even worse than company guidance (pretax profit of VND 63 bn vs company guidance of VND 80 bn). Earnings may start to recover in 2H23 (+57% HoH, -28% YoY) thanks to (i) the second half of the year traditionally being the high season and (ii) a gradual recovery in demand in both the domestic and export market.

We reiterate our Outperform rating on the shares of QNS, citing our improved outlook on the company. We revise up estimated 2023 NPAT by 35% compared to our previous forecast, encouraged by higher domestic sugar prices and higher refined sugar (RS) production volume. Our target price for QNS is VND 65,000/share (from VND 58,000/share), representing a +22% upside (total ROI 27%).

During 2Q23, STK reported net sales and net profit of VND 407 bn (-23% YoY; +41% QoQ) and VND 38 bn (-47% YoY) respectively, beating our estimates. Going forward, the company is confident that orders will continue to improve in terms of volume during 3Q23 and 4Q23 on QoQ basis. The declining trend of average PET chip prices should continue to help widen the price gap, and lead to a higher GPM during 2H23. During 2023, we expect net sales and net profit to reach VND 1.8 tn (-14.7% YoY) and VND 167 bn (-31% YoY), respectively. During 2024, net sales and net profit are estimated to reach VND 2.2 tn (+19.7% YoY) and VND 225 bn (+34.4% YoY), respectively. We applied the  historical average P/E of 14x to 2024 EPS to reach our new target price for the shares of VND 33,400/share (up from VND 26,800/share), indicating upside of 5%. We reiterate our MARKET PERFORM rating. As STK operates in the upper stream of the sector value chain, we expect sales results to be the first sign of a sector recovery, followed by other garment manufacturers. 

ACB announced a prelim PBT of VND 4.83 tn (-1.7% YoY) for 2Q23 which turned into 1H23 PBT of VND 10 tn, exceeding our expectations and accomplishing 50% of the AGM’s profit plan. This earnings growth slowdown was caused by NIM shrinkage, the provision burden, and weak fee-based earnings. Whilst credit growth rebounded during 2Q23 at 4.6% YTD (vs. -0.6% YTD for 1Q23), total deposit growth was 4.2% YTD. The NPL ratio increased to 1.07% (vs. 0.96% for 1Q23). Given that the LDR (79%) and short-term funding for medium- and long-term loans (19%) were well below the cap, we believe that funding pressure will not be the primary impediment for ACB to stimulate credit growth during 2H23.    

After receiving a large one-off land compensation income in 2022, PHR earnings are expected to decline in 2023-2024, due to: (i) the lack of land compensation income, (ii) less land available for lease in Tan Binh 1 Industrial Park, and (iii) less land tracts with aged rubber trees which can be cut down and sold as raw wood. We estimate 2023-2024 consolidated pretax profit at VND 696 bn (-38% YoY) and VND 607 bn (-13% YoY). While Nam Tan Uyen 3 IP and VSIP 3 IP may deliver profit from 2024, it may not be adequate to offset the reduction in income from Tan Binh 1 IP and from rubber tree disposal, and the absence of one-off land compensation income. We expect income from those 2 IPs may only aid earnings growth from 2025 onwards.

GAS is trading at 2024F PE of 15.5x. We maintain our MARKET PERFORM rating for the shares of GAS and raise our 12-month target price to VND106,000/share (from VND 103,000/share), based on 2024F EPS (from 2023F EPS) and an unchanged 1-year target PE of 16.5x. Key upside/ downside risks to our call include: stronger-/weaker-than-expected dry-gas volume; and higher/lower-than-expected fuel prices.

Becamex (HOSE: BCM) remains a leading industrial park developer, with total available land of 888.5 ha for lease. At the same time, the commercial land area is 1,250 ha in Binh Duong New City (100% owned by Becamex), and profit margin at 43%, according to Capitaland. The VSIP-Warburg Pincus joint venture is forecasted to be quite profitable due to the growth in leasing demand for land and factories. Using RNAV method, we rate the shares of BCM as OUTPERFORM, with a target price of VND 88,700/share (upside 9.6%). Over the short-term, information about the transfer of land to sub-developers in the Binh Duong New City project and the start of Cay Truong Industrial Park should support the share price going forward.

Although we are not raising our earnings forecasts for 2023-2024, we are now more positive on VNM versus the overall market given the impact of lower input costs as well as a lower WACC in our DCF valuation. Therefore, we are upgrading the shares of VNM from Market Perform to Outperform, and increasing our target price to VND 82,000/share (from VND 74,700/share), which represents an upside of 14%. We are of the opinion that the share price has already priced in previous difficulties, and therefore might have bottomed out. Looking ahead, a likely return to profit growth in coming quarters and demand recovery in 2024 support our view on VNM.

Given the uncertainty of a full recovery and an upside of just 2% (VND 36,700/share price target) based on our new target price, we downgrade our rating on the shares of ANV from Outperform to Market Perform. At the AGM, management provided net revenue and PBT guidance for 2023 of VND 5.2 tn (+6% YoY) and VND 300 bn (-61% YoY), respectively. PBT guidance was revised down 40% from VND 500 bn (-35% YoY) during April 2023 to VND 300 bn (-61% YoY) during the June 2023 meeting, reflecting management's much less sanguine view on the recovery of fishery exports and gross profit margin contraction in less than two months. Reflecting management’s perception, we too lower our 2023 NPAT forecast 34%  given the: (1) longer-than-expected ASP recovery; and (2) lower-than-expected order volume from the Chinese market.

Despite weak auto consumption, VEA remains attractive due to its unique advantage of being affiliated with top auto manufacturers including Toyota, Honda, and Ford, and its generous dividend (100% dividend payout, with a dividend yield of 11% last year). For this year we expect VEA to post lower income from JVs but high interest income through its strong cash reserves. Our 2023 estimate for consolidated revenue and net profit is VND 4.3 tn (USD 182 mn, -14% YoY) and VND 7 tn (USD 299 mn, -8% YoY). We also introduce our 2024 estimate, which assumes lower interest income and a slight recovery in auto consumption. Our 2024F consolidated revenue and net profit is at VND 4.3 tn (USD 184 mn, +0.5% YoY) and VND 7.1 tn (USD 305 mn, -1% YoY), respectively.

After the sharp drop of -30% in 1Q23, the company’s urea price continued to decline in 2Q23. DPM urea price now stood at VND 9,000/kg (vs VND 9,600/kg in 1Q23). We believe the urea price is to stabilize around this level throughout 3Q23, before rebounding moderately in 4Q23 when the high season approaches. Having said that, we forecast earnings of DPM to set a trough in 2Q23 in terms of absolute value, but recovery is rather slow. As such, 2023 net income is estimated to drop to VND 1.18 tn (-79% YoY, from VND 1.23 tn estimated previously, lower than the company guidance) due to (1) urea price downtrend, (2) sluggish urea demand and (3) increase in gas transportation tariff. In 2024, net income may increase to VND 1.27 tn (+8% YoY, from VND 1.32tn estimated previously) thanks to the recovery in sales volume. As DPM may have passed the earnings trough period (2Q23), we roll over to 2024 and use higher target multiples to derive a new target price of VND 34,700 per share (from VND 30,600). With an ROI of 10%, we maintain our MARKET PERFORM rating.

Reiterate OUTPERFORM, with new 1Y TP of VND 52,900/share. Raise 2024F NPATMI estimates to VND 554 bn, flat YoY given the recent positive development and expectation of further reocvery of freight rates, leading to a possible re-rating for the industry. AGM set target for NPATMI 2023F of VND 490 bn, - 40% YoY, 10% lower than our estimates. Industry see some positive developments on charter rates (+15-20% from trough) so we expect inventory de-stocking to end around 3Q2023 and industry fundamental to improve from that point on.