Company Report

We expect VIB’s profit before tax to achieve VND 12 tn (+13.5% YoY) with NIM squeeze of 4.62% (-31 bps YoY) due to higher funding cost and asset quality deceleration. Given a high exposure to real estate sector, the ability to service loan could be hurt due to the high interest rate environment. Hence, we think that NPL ratio will pick up to 2.6% in 2023. As a result, we maintain our Market Perform rating for VIB, with a 1Y TP of VND 22,000.

MWG’s financial performance was worse-than-expected during 4Q22, with net income declining by 60% YoY due to: (i) lackluster demand in the context of macroeconomic headwinds; (ii) the 4Q21 high base when the company experienced pent-up consumer demand; (iii) slow delivery of the iPhone 14; and (iv) a sharp increase in interest expense. On the bright side, we estimate 4Q22 PBT margin at BHX to have improved by 0.9pp vs. that in 3Q22 and 2pp vs. that in 1H22. The improved profitability of the grocery segment and the absence of one-off expenses relating to grocery store closures should be the main earnings growth driver for 2023, while the ICT & CE segment should be impacted by rising inflation and unemployment. We forecast 2023E net income at VND4.4tn (+9% YoY, from VND4.7tn), as we factor in larger-than-expected losses from the pharmacy segment. With our revised 2023 financials, we derive a new SOTP-based 12-month target price of VND44,600 (from VND43,500) for the shares of MWG, and maintain our MARKET PERFORM rating.

We update NLG to Market Perform, with our 1Y target price of VND 29,200 (+15.6% potential upside). As such, we revised down our 1Y target price by -30% since our last report by revising the discount rate from 12% to 14% as well as extending the presale progress of NLG key projects such as Waterfront, Waterpoint, NLG Can Tho, among others. With a large percentage of real estate second tier city projects in the company land bank, homebuyer demand for these projects will continue to be affected due to high interest rate mortgages, as well as low transactional liquidity in the market. In 2023, sales and handover of multiple projects (including Akari and Mizuki Park, Izumi, and Southgate) will still be the key momentum for NLG business results. As such, we forecast 2023F net revenue of VND 5.5 tn ($234 mil USD, +26% YoY) and NPATMI of VND 930 bn ($39 mil, +7.6% YoY). With a strong backlog of nearly VND 17 tn ($723 million USD) at the end of 2022 (mostly coming from mid-end housing projects), NLG earnings should be gradually allocated over the next upcoming years (2023-2025).

We update KDH rating to Market Perform, with a revised 1Y target price of VND 30,500 (+19.8% potential upside). As such, we revised down our 1Y target price by -26% since our last report, as we revised the cash flow from sales progress of recurring real estate projects and apply a more prudent discount rate for potential projects in the future. Among our coverage, we determine that KDH has some advantages compared to other developers, such as the company’s land plots located in District 2, 9, and Thu Duc area, which usually has a higher absorption rate compared to other second tier areas. Not to mention, KDH project execution has been proved over the years which create a strong believe for home buyers. In addition, KDH clean bank legal status projects and good financial health, can also help the company to withstand difficult market conditions.

Continued double digit growth for third year in a row. For 2022, Traphaco posted revenue of VND 2.4 tn (USD 102 mn, +11% YoY), NPAT of VND 293 bn (USD 12 mn, +11% YoY), and NPATMI of VND 269 bn (USD 11mn, +11% YoY). Non-herbal medicine category grew at faster pace than herbal medicine. But we expect to see single-digit growth for 2023. Even though Traphaco possesses a strong product portfolio with potential for growth, we are concerned about weak economic conditions affecting sales of preventive medicine and supplements. We lowered our 2023 revenue forecast to VND 2.6 tn (USD 111 mn, +8% YoY) due to worries over weakening demand. NPATMI is expected to reach VND 306 bn (USD 13 mn, +13% YoY) with the assumption of slight increase in cost of goods and reduction in SG&A expense to conserve profit level. Our new target price is VND 95,000/share, which based on a mix of our DCF methodology and target P/E of 12x. Given the 8% potential ROI (counting 3% dividend yield), we maintain our MARKET PERFORM rating on the shares of TRA.

During 4Q22, VHC reported a net sales and net profit decline of -7.8% and -58.2% YoY, respectively – falling well short of our estimates as resultant of the accelerating pangasius ASP decline.

Near-term, we still expect exports to China will serve as the growth driver for the sector, while exports to other major markets, such as the US and EU, remain sluggish. During 2023, we expect VHC to post net sales and net profit of VND 11.1 tn (-16% YoY) and VND 1.4 tn (-28% YoY) respectively. Our 1Y target price for the shares is VND 63,000/share (+6% upside). We maintain our MARKET PERFORM rating for the shares of VHC.

Both HSG and NKG posted losses during 4Q22 of -VND 680 bn and -VND 356 bn, which were lower compared to 3Q22 losses due to reduced inventory provision pressure. However, the losses remained huge by historical standards resulting from low utilization rate of between 60%-65%, and a between 15%-18% QoQ decrease in ASP.

For 2023, we expect a decline in demand of finished-flat steel products due primarily to the export channel given the high base during the first half of 2022. The margin of steel companies can improve due to the recovery in HRC prices which should lead to a reversal in inventory losses. Nonetheless, weak demand could make it more difficult for steel companies to pass along the increase in input costs to output prices, like over the 2020-2021 period. 

Decreasing net debt/equity ratio could save QTP from the risk of rising borrowing costs.  At 2022, the total debt balance dropped significantly to VND 1 tn from VND 2.2 tn at 2021. An estimated -47% YoY decline in interest costs due to a reduced debt load is supportive for solid earnings for 2023. With +3.6% NPAT growth estimate for 2023, QTP has a safe dividend yield of 10%. The first payment of 5% on par will be made in 09-Mar-2023 and the ex-dividend date was 23-Feb-2023. Coupled with a 1Y TP of VND17,900, the shares of QTP offer an upside of 20% allowing us to reiterate our Outperform rating on the shares.

QNS posted 2022 net revenue and NPAT of VND 8.3 tn (+13% YoY) and VND 1.3 tn (+3% YoY), respectively, achieving 103% and 101% of our 2022 forecasts.

During 4Q22, QNS reported net sales and NPAT of VND 1.9 tn (+25% YoY, -15% QoQ) and VND 427 bn (+11% YoY, +34% QoQ), respectively. Sugar was the main driver of revenue growth, with net sales during the quarter reaching VND 523 bn (+51% YoY, -14% QoQ) as QNS benefited from higher sugarcane volume yield during FY 2022/23. The sugar segment’s GPM fell from 32.8% during 4Q21 to 26.0% during 4Q22, owing to: (i) an increase in the ratio of refined extra sugar to total sugar consumption; and (ii) the sugarcane input price hike outweighing the sugar ASP increase. The biomass segment continued to post a slight profit, while the soymilk segment reached VND 915 bn (+8% YoY, -27% QoQ) in net sales. Soymilk consumption decreased 12% YoY during 3Q22 and 4% YoY during 4Q22 - indicating weak demand for the nutrition market. The soymilk segment’s GPM reached 36.7% during 4Q22 compared to 37.4% during 4Q21 due to rising input costs (soybean, sugar, packaging, etc.). Accordingly, QNS’ overall GPM decreased from 32.1% during 4Q21 to 30.2% during 4Q22.

For 2022, MSN reported a net revenue and NPATMI of VND 76.2 tn (-14% YoY) and VND 3.6 tn (-58.3% YoY). If we exclude the one-off sale of MML’s feed business to DeHeus during 2021, core NPATMI would have remained flat YoY. In our view, all business lines will remain impacted by weak macro conditions. During Q4, MCH revenue declined -16.5% YoY due to tight consumer spend and the high base effect of Q4 2021 (as the company aggressively pushed sales to distributors during Q4 2021). WCM’s revenue during Q4 was also lower QoQ, despite the early Tet holiday (part of Tet sales were recorded during Q4 2022). On the cost front, financial expenses increased 11% YoY during 2022 (Q4 standalone financial expense rose 16.7% YoY) due to a higher debt balance and interest rates. Given the high gearing ratio (D/E of 1.9x by 2022-end), we expect high interest costs to be a theme throughout 2023 should the group fail to de-lever.

We are downgrading our rating on the shares of VNM from OUTPERFORM to MARKET PERFORM, reflecting only 9% upside potential to our lower PER/DCF-based 12-month target price of VND82,900/share (from VND85,000). VNM’s disappointing 4Q22 results were the result of a net sales and net profit decline of 5% YoY and 16% YoY, respectively, while the gross margin was the lowest recorded since 2015. While the price of raw milk powder has declined significantly YoY, VNM’s relatively high-cost inventory is expected to last through the year. Nevertheless, 2023 is marginally more hopeful, as we forecast net sales and net profit growth of 6.4% and 10.3% YoY, respectively – but still off of a low base. Management expects significant gross margin improvement from 3Q23 due primarily to the recent hedging contract for raw milk powder at lower prices. Meanwhile, we are not as optimistic for domestic sales growth, given the inflationary pressure and intense competition. Upside risk: fall in raw material prices; downside risk: loss of market share.

Net income during 2022 increased sharply due to retrospective one-time revenue from Nhon Trach V Industrial Park (IP), and an accounting change from an annual basis to a one-time booking at Phu My II, Phu My II expanded and the Huu Thanh IP. Net revenue reached VND 8.2 tn (+91.6% YoY), whereby IP real estate revenue reached VND 4.2 tn (+5.35x YoY), including the retrospective one-time revenue of Nhon Trach V IP of VND 1.5 tn and a record one-time gain from Phu My II, Phu My II expanded and the Huu Thanh IPs with a lettable area of 91.5 ha. Gross profit margin increased sharply to 43% (+26% YoY), where the Nhon Trach V Industrial Park profit margin reached 84%. NPAT during 2022 reached VND 2.5 tn (3.9x YoY), which is equivalent EPS is VND 7,001/share for IDC.

We have reduced our 1Y target price for the shares of DPM to VND 38,700 per share (from VND 46,300) – representing 10% downside. As a result, we are downgrading our rating from Market Perform to UNDERPERFORM. Not surprisingly, Q4 net income dropped 32% YoY despite stellar earnings growth of 194% YoY during the first three quarters of 2022, as urea prices plunged. During January 2023, urea prices dropped to approx. VND 12,000/kg (vs VND 14,200 during 4Q22).

PVD reported a profitable bottom line figure after 3 consecutive loss quarters, with NPATMI reaching VND 54 bn in 4Q 2022. Our prediction held true that there would be a turnaround in PVD performance from the end of 2022, as we continue to see higher day rate and utilization rate for its Jack-up (JU) fleet, and no more impact from forex loss. The company finished 2022 with consolidated revenue of VND 5.4 trillion (+34% YoY) and NPATMI of VND -99 bn (compared with a profit of VND 19 bn in 2021)