Company Report

Net profit over the first six months reached an all-time high due to a surge in the crack spread: BSR sales volume during 1H22 just increased slightly 1.3% YoY to 3.5 mn tons, but net profit for 1H22 experienced a much higher growth of 246% YoY, reaching an historical record of VND 12.3 tn driven by the remarkable expansion of the crack spread. However, with the correction in regional crack spread, the earnings in the coming time may normalize from the peak in the second quarter. According to prelim result, sales volume in 7M22 period is estimated at 3.9 mn tons, delivering revenue of VND 98.5 tn and PBT of VND 13.3 tn.

BSR is trading at a trailing P/E of 5.4x, which is quite close to that of regional peer. We do not recommend to buy the share at the current price, since BSR’s earnings is likely to have already peaked during the second quarter. As BSR’s sales volume is quite stable, its share price over the short term can be quite volatile following the movement of the crack spread.  We estimate that an increase/decrease by 10 USD/bbl in crack spread can result in an increase/decrease by around VND 3.5 tn in BSR’s net profit per quarter.

1H 2022 net income did not deliver as expected. Instead the company reported a loss of -149 bn VND, due to a lower than expected day rate and utilization rate of JU rigs. However, we still expect a positive improvement from the 2021 situation, and this improving trend should continue into 2H 2022.

The regional drilling market is warming up quickly since our last update. Large demand from Saudi Aramco has brought about a higher regional day rate and utilization rate, especially when we look into contracts set to start in 2023F.

Revised 1Y TP of VND 23,800/share (from VND 29,500/share) based on combination of DCF and P/B methods, with a lower 2022F forecast and Block B timeline pushed to 2024F. We reiterate our Market Perform rating for the stock. The stock is trading at P/B 2023F of 0.9x and 2023F P/E forward of 21x.

Investment summary: We reiterate our Market Perform rating for the shares of VIB, along with a 1Y TP of VND 30,900 (+18% upside). Higher funding costs should weigh on VIB’s NIM, while a low credit buffer will remain a challenge given the credit quality deterioration. Over the short-term, we are positive about VIB for an extension of credit limit from SBV, effective 2H22. 

In 2Q22, VIB posted a consolidated pretax profit of VND 2.7 tn (+27.8 YoY) and VND 5 tn (+27% YoY) for 1H22. This growth was driven by strong interest income (+25% YoY), as credit growth was 9.7% YTD. Cost control remained on solid ground. The loss from FX trading and investment securities weighed on core profit. Despite strong earnings growth and contracting restructured loans (-21% QoQ), the NPL ratio still rose 6 bps to 2.45% QoQ in 2Q22. However, loan loss coverage was 54% - the lowest by far in our coverage universe.

MWG posted weaker-than-expected 2Q22 results, with net income declining by 6.8% YoY due to slower-than-expected growth in the ICT & CE segment, coupled with one-off expenses arising from the closure of non-performing grocery stores. We hence reduce our 2022 earnings estimates by 14% to VND 5.48 tn (+12% YoY, lower than company guidance of VND 6.35 tn). With such a forecast, 2H22 earnings growth may still be higher than that of 1H22 (+24% YoY in 2H22 vs flat growth in 1H22), owing to the low base nature of 2H21. After store layout changes, we expect BHX monthly revenue per store to be maintained at VND 1.3 bn in 2H22 (vs. VND 900 mn in 1Q22 and VND 1.1 bn in 2Q22), hence improving the profit margin. We believe that profitability of BHX will be crucial bottom line growth driver for MWG from 2023, while the earnings growth of the ICT & CE segment will likely slow down due to high inflation and current high market share (>50% for mobile phones and >45% for consumer electronics). We project 2023 net income at VND 7.19 tn (+31% YoY).

We derive a new SOTP-based target price for MWG of VND 87,800 (from VND 99,000) after factoring in the stock dividends. With an upside potential of 32% from the current share price, we maintain our BUY recommendation.

Investment summary

We recently attended HCM’s 2022 AGM, and the 2022 capital raise was front and center. Such a focus was the result of the reluctance and restriction preventing one large shareholder, the state-owned HCMC financial investment company or HFIC. Indeed, HCM has lagged on the capital buffer front since last year, and its previous position has been somewhat whittled down. HCM went from a Top 5 brokerage company in total equity at 2019 to ranking ninth at June 2022.

The shares have rebounded over 64% since bottoming in late June. As of Aug 22, 2022, HCM is trading at VND 27,700 per share, with a 2022 forward P/E of 10.5x and P/B of 1.5x, which is in line with its historical valuation. All catalysts, in our view, are now priced mostly into the shares. In the long-term, the complicated relationship between HFIC and HCM’s BOD might restrict HCM in expanding its business activities. 

We are lowering our rating on the share of TCB to Outperform from Buy, reflecting our 1 YR target price reduction to VND 51,200/share (from VND 64,000/share). Our downgrades reflect both the concentration risk of TCB and the rising rate environment. While we have confidence in the long-term outlook of Vietnam’s real estate industry and TCB, the potential legal changes at the moment are likely to create some disruption to the growth trajectory both to the sector industry and TCB specifically over the short-term. Given that TCB focuses on the affluent segment, its efforts to diversify away from corporate-bond-related fees provides abundant revenue opportunities with other services (such as wealth management). However, this will take time to be reflected in quarterly results.

Investment view. We reiterate our BUY recommendation on the shares, and maintain our 1-year target price of VND 70,800/share. IDC is one of the largest industrial park developers in Vietnam, having 754 ha of land available for lease. IDC’s properties are located in the urban areas of Long An, Ba Ria Vung Tau and Thai Binh, where the compensation process related to land clearance has been completed. Given that demand for lettable land is strong in these areas, and that compensation and clearance costs are high, we believe that IDC’s existing IP gross profit margin will remain above 50%. Meanwhile, the Huu Thanh Industrial Park is expected to be the driving force for behind IDC’s growth over the next 3-5 years.

FRT posted net sales and net income of VND 6.2 tn (+43% YoY) and VND 47 bn (+55% YoY) in 2Q22. Earnings growth slowed down compared with that of 1Q22 (+448% YoY), as prescription pharmaceutical and laptop sales normalized after the abnormal high set in both 4Q22 and 1Q22. As normalization continues in 2H22, we estimate 2H22 earnings to contract (-12% YoY). Net income in 2022 is hence estimated at VND 549 (+24% YoY). For 2023, we estimate net income to increase by 15% YoY, in which net income of FPT Shop and Long Chau rose by 10% and 43% YoY (PBT of VND 112 bn in 2022 to PBT of VND 160 bn in 2023). In the longer term, FRT earnings growth will be driven by the Long Chau pharmacy chain, while earnings growth of FPT Shop may sustain at low-teen growth. We expect the modern pharmacy chain to continue gaining market share from small drugstores. FRT aims to have 3,000 Long Chau stores in the next 5 years, hence aiding growth further. Our target price for FRT is VND 91,500 based on 2023 financials. With an upside of 6% from the current price, we call for a MARKET PERFORM rating.

Short term view: 2H22 negative earnings growth is expected to be negative, hence triggering profit taking.

DPM delivered net sales of VND 5 tn (+71% YoY) and PBT of VND 1.6 tn (+101% YoY) in 2Q22. Despite the strong earnings, the growth pace has decelerated compared with the surge of 1,496% YoY in 4Q21, and 1,088% YoY in 1Q22. We think that the growth pace of earnings will continue to decelerate in 3Q22, and earnings may even decline in 4Q22. We estimate 2022 net income at VND 5.1 tn (+61% YoY). For 2023, we assume that urea input will decline from the high base set this year, and that Russia & China will both increase exports, which would weigh down on the urea ASP. We reduce our 2023 net income estimate to VND 4 tn (-22% YoY, from VND 4.1 tn). We also roll forward our valuation basis to 2023E. As such, we derive a new 12-month target price of VND 48,000 (from VND 59,600). We maintain our Market Perform rating.

We reiterate our Outperform rating on the shares of HDB, with a 1Y TP of VND 32,300/share (vs. VND 31,100/share) - representing potential upside of 28% as we increase our 2022 PBT estimate 4%. HDB posted better-than-expected PBT results in 2Q22 of VND 2.8 tn, up +32.6% YoY. 1H22 pretax profit was VND 5.3 tn, achieving 54% of our current estimate. Growth was driven by vigorous performance in both NII (+31% YoY) and income from fee-based services (+54% YoY). Meanwhile, there was harmonization between balance sheet growth (+14.8% YTD credit growth) and quality. Group 2, NPLs, and restructured loans all declined (to 3.61%, 1.33% and 0.05% respectively), while NPL provision  aggregated 93%.

Recently, HDB has sought shareholder approval to support a weak bank. While details have not yet been made public, we are fairly positive on this plan despite the initial capital contribution of VND 9 tn. Observing recent proposals related to these weak banks, it appears that large enough incentives are needed in each case. With respect to HDB, we are of the view that the net rewards will be backloaded unlike was the case with VCB and MBB.

We reiterate our Outperform rating on the shares of CTG, despite lowering our target price to VND 35,300 per share (from VND 39,700), as we cut our target P/B to 1.6x (vs. 1.8x) resultant of the rising interest rate environment. Despite limited space to issue additional credit in 2Q22, CTG was able to maximize its paltry SBV credit allocation to achieve stellar results. Earnings grew +107% YoY on the back of moderate TOI expansion, improved CIR, and lower provisioning. PBT during 1H22 was VND 11.6 tn (+7% YoY), equivalent to 51% of SSI Research's earnings forecast. However, balance sheet quality underperformed, as both Group 2 loans and other NPLs rose to 1.25% and 1.35% (vs. 1.1% and 1.25% at the end of 1Q22), respectively, intimating that loss provisions could weigh on CTG’s earnings going forward.

Investment summary: We maintain our Outperform rating on the shares MSB. However, we are lowering our 1Y TP to VND 23,000 (from VND 28,400). Our reduced TP reflects: (1) excluding the FCCOM divestment in our forecast; and (2) the reduction of our target P/B to 1.3x (from 1.5x), reflecting the bank’s relatively high exposure to real estate developers. In short-term, we hold a positive view for MSB with strong PBT growth in 2H22 from low base level (+48% YoY), 30% stock dividend in 2H22, and a potential credit extension. During 1H22, MSB posted a pretax profit of VND 3.3 tn (+6.9% YoY), despite declining -6.6% YoY in 2Q22 to VND 1.8 tn. Excluding the one-off bancassurance fees in 2Q21, core profit grew 395% YoY during 2Q22. NII growth jumped +39.5% YoY as credit growth was robust at +8.5% YTD, whilst earnings from FX and securities trading activities were strong. Asset quality improvement exceeded our expectation (NPLs dropped 29 bps to 1.5%), causing a credit provision reversal of VND 115 bn in 2Q22. However, unfavorable results of foreclosed assets liquidation somewhat offset MSB’s earnings during 1H22.

We expect that the company’s plan to re-enter the US market this month will keep 2022 general ASP at a high level of $2.80 USD/kg (from $2.10 USD/kg in 2021) and sales volume growth at 20% YoY (volume growth of 26% YoY in 2H 2022). As a result, we forecast ANV net revenue and net profit to be VND 5.4 tn (+54% YoY) and VND 870 bn (+576% YoY) respectively in 2022, translating into an earnings growth of 948% YoY in 2H22, as 2H21 was a low base due to high cost of COVID-19 prevention. However, the pangasius price might have peaked in 2Q 2022. Accordingly, we forecast ASP to drop to $2.40 USD/kg (-15% YoY) and sales volume growth at 15% YoY in 2023. This leads to GPM decreasing to 21% in 2023 from 29% in 2022.  In 2023, we estimate ANV to post net revenue and net profit at VND 5.3 tn (-1% YoY) and VND 615 billion (-29% YoY). Therefore, 2022/2023 EPS would be VND 6,823/share (+576% YoY) and VND 4,824/share (-29% YoY).

ANV is trading at 2022 and 2023F P/E of 7.6x and 10.7x, respectively, which are fair, in our view, considering ANV earnings will decelerate in 2023. Our target price for ANV arrives at VND 47,700/share based on 2022EPS and a target P/E of 7.0x. Our target price represents a mild 7% downside from current market level. We thus issue a Market Perform rating for ANV.