Company Report

Net profit in 3Q22 recorded a three-year high. BMP posted net sales and NPAT of VND 1.5 tn (+184% YoY, -4% QoQ) and VND 176 bn (+21% QoQ) respectively. Due to the COVID-19 lockdown, 3Q21 set a low base effect (a net loss of VND 26 bn). GPM increased to 28% in 3Q22, up from a low base of 4.5% in 3Q21 due to a drop in PVC input prices. ASP for BMP remained flat QoQ in 3Q22, while PVC resin prices fell -31% since 2Q22 to $900-1,000 USD/tonne, which is -35% lower than the average price in 2021. With lower PVC resin prices and a flat ASP, we believe BMP’s 4Q22 GPM will remain high. We forecast BMP net sales and NPAT in 2022 to be VND 5.7 tn (+26% YoY) and VND 655 tn (+206% YoY) respectively.

MWG reported revenue of VND32tn (+32% YoY, -7% QoQ) and net income of VND907bn (+15% YoY, -20% QoQ) for 3Q22. Given the 3Q21 low base when the company suffered from lockdown activities in provinces within Southern Vietnam, 3Q22 net income growth of 15% YoY was below our expectations. This could be attributed to the increase in financial and one-off expenses related to the closing of non-performing BHX stores. We expect financial expenses to rise in 4Q22 due to the: (1) trend of higher interest rates, (2) debt restructuring to longer maturity, and (3) VND depreciation. We forecast 4Q22F net income at VND1.67tn (+7% YoY). As such, we reduce our 2022F net income by 6% to VND5.16tn (+5% YoY, from VND5.48tn) and that for 2023F by 18% to VND5.86 (+14% YoY, from VND7.19tn). While earnings of the ICT & CE segments will likely be hurt next year, improvement in the grocery segment (due to the increase in sales and absence of one-off expenses) and smaller FX losses should secure decent earnings growth for 2023F. Despite rolling over our basis to 2023F (from average 2022-23F), we lower our SOTP-based 12-month TP to VND61,000 (from VND87,800) to reflect the cuts to our earnings and target multiples. With 44% upside potential to our new TP, we recommend investors to accumulate the stock despite possible periods of price weakness.  

FPT trades at an attractive FY22E and FY23E P/E of 15x and 12.7x, respectively, on the back of 22%  and 18%  EPS growth under our base case. Meanwhile, peers with an average of 6%  and 15%  EPS growth in 2022 and 2023, respectively, are trading at an average FY22E and FY23E P/E of 17x and 15x. While the IT spending weakness need to be monitored, in light of FPT’s low cost advantage, having the lowest exposure to the EU market compared to peers, a healthy interest coverage ratio, and an abundant net cash position, we remain positive on the stock. We call for Outperform rating on FPT with 12-month SOTP-based TP of VND95,400 representing 31% upside potential. Key risks: extreme recession could negatively impact the domestic & global IT services sector, as well as digital advertising segments.

The container shipping market has reverted to a down cycle after an unprecedented boom, and earnings levels of shipping companies are set to normalize. HAH may not escape this negative trend, as we expect NPATMI to slide through 2024. However, we estimate that the normalized earnings could be 5x higher than pre-Covid levels given the significant capacity expansion. The recent price correction has sent the shares of HAH to below its book value, which we believe to be an interesting entry point for a long-term investment. However, near-term upside would appear to be capped with few catalysts for the shares over the short term. As such, we lower our rating on the shares of HAH to MARKET PERFORM, with a 1Y-TP of VND 38,500/share (target P/E of 4x), implying only 16.8% upside.

According to the most recent update, sales volume of HPG’s construction steel during October dropped significantly to 210k tonnes, the lowest level since March 2021, whereby export and domestic volumes for the month dropped by 73% and 44% YoY, respectively. The volume of billet, pipe, and galvanized steel also dropped by 92%, 21%, and 40% YoY, respectively, to a respective 15k, 57k, and 27k tonnes for October. On the other hand, HRC volume for October remains strong at 269k tonnes (+30% YoY) but it could decrease near-term given the weak consumption of finished flat-steel products. Accordingly, the utilization rate of HPG blast furnaces during October was likely closer to 70%, based on sales volume. Given the rapid deterioration in the overall market, we revise down our 2022F net profit by 16% to VND10.2tn, implying a net loss of VND270bn in 4Q22F. In 2023F, we lower our net profit by 14% to VND10.88tn, which calls for 6.6% YoY growth thanks to a lower forex loss and the drop in coking coal price. 

PVD recently held its 3Q 2022 earnings call, and provided an outlook for the industry in 2023. Global and Vietnamese macroeconomic conditions have greatly evolved, with a higher interest rates and significant economic risks. With our changes in forecasts and discount rates, we arrive at a lower 1Y target price of VND 18,200/share (from VND 23,800/share), reflecting a 2022 and 2023 earnings revision and higher discount rate. We do, however, maintain our MARKET PERFORM rating on the shares of PVD.

In 3Q22, PHR consolidated net sales was flat at VND 523 bn, while PBT declined to VND 167 bn (-19% YoY).  Cumulatively, 9M22 net sales and PBT were VND 1.13 tn (-10% YoY) and VND 593 bn (+48% YoY).  9M22 revenue and PBT of the parent company were VND 864 bn (flat YoY) and VND 326 bn (+132% YoY), having accomplished 64% and 36% of the annual target. We expect PHR to recognize land compensation income of VND 691 bn in 2022 and VND 207 bn in 2023.  In October, PHR received VND 140 bn for land compensation income. We expect the company to receive the remaining tranche of VND 262 bn in November-December 2022. This should be the main growth driver for PHR this year. With such forecasts, 4Q22 PBT will be around VND 553 bn (+111% YoY), hence supporting the share price in short term. In 2023, earnings are estimated to drop by -31% YoY owing to lower land compensation income. 

HT1 recorded 3Q22 revenue of VND 2.3 tn (-5% QoQ, +118% YoY from the low base set in 3Q21). NPAT came to VND 37 bn (-73% QoQ, whereas Q3 2021 saw a loss of 20 bn VND). GPM fell from 13.4% in 2Q22 to 8.4% in 3Q22, due to an 11% QoQ increase in coal prices. We believe that the high level of coal prices will place additional pressure on the company's 4Q22 gross profit margin, as cement companies will find it difficult to raise cement prices further in the face of weaker domestic demand. As a result, we expect that HT1 net sales and NPAT in 2022 will be VND 8.7 tn (+24% YoY) and VND 261 bn (-37% YoY) respectively.

We estimate that HT1 net profit will rebound to VND 400 bn (+54% YoY) in 2023, based on the assumption that coal will fall -10% from its peak in 2022. We maintain our Market Perform rating on HT1, with a one-year target price of VND 10,190/share (+1% upside). We think the stock in the short-term can be supported by the positive news of lower coal prices that could result in positive earnings growth in 4Q22 (+19% YoY), and a public investment boom expected in 2023.

For 3Q22, VHC reported net sales and net profit of VND 3.3 tn (+46.2% YoY) and VND 460 bn (+80% YoY), respectively. Although having achieved strong growth from the prior year’s low base, VHC recorded its lowest quarterly net profit since 4Q21 in terms of both absolute value and growth in 3Q22. This is due to the US (VHC’s most important export market) exhibiting declining sales of -41% QoQ, reflecting high inventories and persistent inflation. Going forward, we expect that demand will continue to decelerate, while ASP has reached its peak. For 2023, we expect net sales and net income to reach VND 12.9 tn (-8% YoY) and VND 1.7 tn (-27% YoY), respectively. At VND 73,000/share, VHC trades at a 2022 and 2023 P/E of 5.8x and 7.9x, respectively. Our rating for the shares of VHC is MARKET PERFORM, and our 1Y target price is VND 76,400 (+5% upside).

HPG posted a 3Q22 loss of VND 1.79 tn – the first such loss since 4Q18 was driven by a steel business line loss of VND 2.56 tn, due to falling steel prices, higher-cost inventory, and the impact of forex loss. Although steel price volatility can be mitigated, weak demand in both global and domestic markets could remain a challenge for HPG, going forward. As such, we downgrade HPG to Market Perform from Outperform reflecting our significantly reduced 1-year target price of VND 18,000/share (from VND 27,600/share). We cut our 2022 net profit forecast to VND 12.2 tn, a drop of 65% YoY from the peak in 2021. 2023 net profit is expected to be flattish at VND 12.6 tn (+3.3% YoY). While the impact of high-cost inventory could fade over the near-term, we believe the decline in steel prices along with weak demand is likely to cause a negative earnings growth on an YoY basis until the first half of 2023.

In 3Q 2022, PVT revenue grew impressively by 38.7% YoY to VND 2.33 tn while PBT growth is even more impressive at 143% YoY to reach VND 481 bn, including an one-off gain from PVT Athena’s disposal of VND 211 bn. This result has been in line with our expectation so far, benefiting from the higher charter rate of its vessels in the international market, while domestic market is stable. From our discussion with the company, we expect this favorable condition for tanker owners to continue into upcoming quarters, since we do not see any improvement from the Russia-Ukraine conflict in the short-term and the tanker market is still in uptrend. There might be some impact on forex loss in 4Q 2022, but that should be offset by higher earnings from better charter market condition. Thus we maintain our previous forecast for PVT as in our previous report (here), while we revise down our 1Y target price to VND 24,000/share (from VND 26,200/share) based on a lower P/E target of 10x (from 11x) to reflect our overall market lower rating. We maintain our OUTPERFORM rating for the stock on the base of stock price upside and positive outlook into 2023.

In 3-6 months, we see core earnings of 4Q 2022 to improve further when more charter contracts are renewed at a more favorable price, which should be the main catalyst for the stock price in the coming time. Also, there should be further gain on asset disposals from 2 vessels (PVT Eagle, PVT Dragon) in the upcoming quarters, which should be another catalyst to watch.

Investment highlights: We attended PNJ’s analyst meeting on Oct 25, 2022, and came away with the following. Strong sales and net profit growth of 104% and 132% YoY, respectively, during 3Q22 came in as we expected given the prior year’s low base and continued pent-up jewelry demand since the beginning of the year. Management noted that sales hit record highs on Vietnamese Women’s Day during October. While management must closely monitor demand over the near-term, PNJ anticipates demand to due to decelerate in 2023 due to inflationary pressures. Meanwhile, PNJ expects to continue its store expansion plan for next year (approx. between 30-40 new stores in 2023), since this is PNJ’s key long-term growth driver. We did, however, lower our 1Y TP to of VND 117,300/share from VND 136,800/share, reflecting decelerating earnings growth for 2023. Nonetheless, we maintain our OUTPERFORM rating on the shares of PNJ.

SCS is trading at P/E 2022 and 2023 forward of 11.5x and 10.8x respectively, which is at the lowest level in its historical range. This de-rating reflects slower growth prospects in the coming time, coupled with a high dependence of the company on the currently weak external demand side, which is reasonable in our view. On the good side, SCS stands out as a beneficiary of USD appreciation as most of its revenue is denominated in USD terms, while its costs are all in VND. Our DCF model points to a 1-year target price of VND 71,900/share (~1.4% upside), meaning an UNDERPERFORM rating for the stock.  In the short term, 4Q 2022 earnings would be muted compared to high base last year, as this year high retailer’s inventory level coupled with lower demand leads to no high season for the year end.