Company Report

Credit quality remained a challenge for CTG during 3Q 2021, with provisions remaining quite elevated. As a result, we are lowering our: (a) PBT forecast for 2021 and 2022 by 3% (to VND 17.7 tn, +3.6% YoY) and 14% (VND 21.6 tn, +22% YoY), respectively; (b) Target price on the shares to VND 39,700 (from VND 42,300) – implying 23% upside; and (c) Rating to OUTPERFORM from BUY. All three changes applied to the shares of CTG reflect our belief that the credit quality and restructured loans might be a challenge to profitability for CTG over the next couple of quarters. Downside risk: Higher-than-expected credit costs and NPL-formation. Upside potential: The divestment from Vietinbank Leasing and completion of the exclusive bancassurance contract with Manulife may support the bank’s profitability and its capital buffer.

As we roll forward our valuation basis to 2022, we increase our 1Y target price to VND 49,000/share (from the current VND 46,400/share), intimating just 14% potential upside. With such limited potential upside, we are lowering our rating on the shares of TPB from Buy to Market Perform, as the shares have risen 20% since our most recent upgrade in August. Although we remain positively pre-disposed to the shares of TPB, the shares have already priced-in the recent private placement and above peer earnings momentum. Pretax profit for 2021 and 2022 are projected at VND 5.8 tn (+33% YoY) and VND 7.2 tn (+23% YoY), respectively. Upside surprise: Stronger capitalization after the recent private placement (CAR improved to 14.63%), should be supportive for the bank to gain an even higher credit quota. Downside risk: Higher-than-expected NPL formation.

DGC’s 3Q21 net income jumped 107% YoY to VND 488 bn, exceeding our expectation of VND 430 bn, given higher than expected yellow phosphorus and downstream sales product prices. As a result, we raise both our 2021 and 2022 net income forecast 13% and 7%, respectively, to VND 2.0 tn (+109% YoY) and VND 2.8 tn (+40% YoY). Further, given the production restrictions China, the price of yellow phosphorus could peak in 4Q21. As such, we expect that 4Q21 net income will be abnormally high at VND 871 bn (+258% YoY). Over the longer-term, yellow phosphorous prices are more expected to increase at a high single-digit pace given the solid demand from the semiconductor industry. By applying an unchanged target P/E of 13x on 2022 revised financials, we derive a new target price of VND 190,000 per share (from VND 177,000). With an ROI of 23% (inclusive of a 1% dividend yield), we call for maintain our BUY rating. We note that Vinachem (owns 8.9% in DGC) has started divestment of its stake in DGC from November 8th with a starting minimum price of VND 152,100 (lower than the current price of VND 155,500). Given the low liquidity of the stock, the divestment may dampen the share price over the period of divestment (November 8th – December 7th). As such, we recommend to accumulate the stock on price weakness.

We reiterate our OUTPERFORM rating on the shares of DCM, as we raise our 1Y target price to VND 40,400 (from VND 31,500) – representing an ROI of 10% (inclusive of a 4% dividend yield). Our improved outlook is predicated on DCM’s 3Q21 pretax profit of VND 393 bn (+257% YoY). This result which well exceeded SSI Research’s estimate of VND 300 bn, as here to stay elevated urea prices drove DCM’s outperformance. We are increasing our 2021 and 2022 pretax profit 53% and 44%, respectively, to VND 1,559 bn (+118% YoY) and VND 1,588 bn (+2% YoY). The current coal shortage coupled with China limiting production should push up urea prices further amid the higher import demand from India. Higher oil/gas prices are also supportive of higher urea prices, although this may negatively impact production costs at DCM. On any short-term weakness in urea pricing, we would accumulate the shares. 

In 3Q21, PNJ posted net sales of VND 877 bn (-77% YoY) and a loss of -VND 159.5 bn (Q3’20 net profit of VND 202 bn), in line with our forecast. Although sales have been slow for the first two weeks of October, they did accelerate during the last half of the month, especially with its Vietnamese Women’s Day promotion on 20/10 when sales were at an all-time high. As a result, PNJ’s sales over recent weeks have surpassed management’s expectations despite slow recovery (total retail sales in October declined -19.5% YoY per GSO). We increase our 4Q21 and 2022 estimates by 5.6% and 7%, respectively, to VND 416 bn and VND 1.44 tn. As such, we increase our 1Y target price on the shares of PNJ from VND 101,300 to VND 117,300 (+13.9% upside) and reiterate our OUTPERFORM rating. 

We raise our 1Y TP on the shares of OCB by 16.2% to VND 32,300 (representing upside of 15.3%), and call for a Market Perform rating. OCB enjoyed robust earnings growth during 3Q 2021 of +71.1% YoY. 22% YoY (+10% YTD) credit growth, solid government bond trading gains of VND 463 bn (vs. VND 78 bn in 3Q 2020), and lower credit costs drove OCB’s bottom-line. What distinguished OCB from other banks during quarter was its credit metrics. While the rest of our coverage universe had experienced QoQ surge in past dues, OCB’s Group 2 loans dropped -51% and NPLs remained flat. However, restructured loans doubled to VND 2 tn (2% of total loans), which was in line with what we observed at many banks. We estimate that OCB will be able to post a robust PBT growth of +20% YoY (VND 5.3 tn) in 2021 before retreating to +16.5% YoY (VND 6.2 tn) in 2022. Downside risk: Higher-than-expected rise in government bond yields, which could impede trading gains; and higher than expected NPL formation.Upside surprise: Higher-than-expected pricing of the 70 mn share issuance; and higher-than-expected profitability of the government bond trading activities. 

VCB’s 3Q21 results were better-than-expected, with PBT reaching VND5.7tn (+15% YoY). Solid credit growth (+11.6% YTD, or +19.4% YoY) and a NIM of 3.15% (-35bps QoQ, but +14 bps YoY) buoyed results. Despite the scale of the support package, the pace of QoQ NIM contraction at VCB was on par with other bank results. In 4Q21, we expect the NIM will trend lower still, as the bank continues to maintain low yields for customer support without much room for improvement on the funding front. Nevertheless, we modestly increase our 2021E PBT by 3% to VND25tn (+8.6% YoY). Rolling forward our valuation basis to 2022E (from average 2021-22E) and applying an unchanged 3.0x PBR, we lift our 12-month target price for the shares of VCB to VND117,000/share (from VND111,500 /share), implying 20% upside potential. Despite our more sanguine outlook on VCB’s medium and long-term prospects, we believe earnings growth over the next couple of quarters could disappoint - impeding near-term performance of the shares. We maintain our Market Perform rating, and prefer to see continued execution on earnings delivery before getting more constructive on the shares. 

We are upgrading VNM from Market Perform to Outperform, as we raise our target price to VND 106,000/share (from VND 103,000/share) based on a blended DCF and 21x 2022E PER valuation methodology (previously 21x avg 2021-22E PER) - implying 17% upside potential. Our positive outlook on VNM reflects a return to growth - Q3 sales (+3.7% YoY) and parent-company sales +4.5% YoY, after three consecutive quarters of contraction. Notably, according to management, sales growth accelerated to above +20% YoY in October. In addition, VNM expects Q4 sales growth in the range of 10%-15% YoY, as last year’s result was impacted by heavy floods in the central region. Downside risk: Lower than expected sales/higher than expected raw material prices.

We upgrade our rating on the shares of MSB from Market Perform to Outperform, and raise our 1Y TP to VND 28,400/share (from VND 23,000/share) - representing upside of 13%. Our upgrade reflects our 2021E and 2022E PBT increase of 16% and 19% vs. previous estimates, respectively. Specifically, we forecast that MSB will post +95% YoY PBT growth in 2021 - fueled by robust credit growth and NIM expansion. Meanwhile, 2022 PBT is expected to increase +25.8% YoY. Even when we exclude the one-off income for 2021 (bancassurance upfront fee) and 2022 (divestment of FCCom and bancassurance upfront fee), core PBT growth is projected at 43% and 20% YoY, respectively. Downside risk: Higher-than-expected NPL formation rate.

We maintain our Market Perform rating for the shares of BID, despite the increase in our 12-month TP to VND50,000 (from VND48,000). 3Q21 results exceeded expectations from a credit growth, NIM sustainability (at 2.97%), and bad debt perspective. The bank wrote off VND5.4tn in bad debt during 3Q21, on top of providing an additional VND7.5tn against problem loans. This caused PBT to inch lower by 1% YoY to VND2.7tn, although asset quality metrics have clearly stabilized. Through 9M21, pretax profit for BID reached VND10.7tn (+52% YoY), completing 79% of our in-house full-year estimate. As restructured loans have more than doubled in 3Q21, we still see some pressure on credit costs going forward which likely will impact the bottom line. We maintain our PBT estimates for 2021E and 2022E at VND13.5tn (+50% YoY), and VND15.5tn (+14% YoY), respectively. An upside risk to our call would be a better-than-expected recovery in restructured loans, as well as any firm progress in its new share issuance of 8.5% pre-money charter capital. Improved capital would enable the bank better growth potential. We also expect that the stock dividend will be finalized by December. Downside risks include macroeconomic weakness.

Given KBC’s share price increase of 44% since our last report (26 May 2021) coupled with the dilution arising from the recent private placement, we are lowering our rating on the shares of KBC from BUY to MARKET PERFORM. Considering that KBC’s 9M21 results fulfilled only 37% of the year’s PAT target, we have lowered our FY2021 net sales and net profit forecasts to VND 4.8 tn (-16%) and VND 1.2 tn (-35%), respectively. Despite our downgrade, we nevertheless raise our 1-year target price 13% to VND 50,000/share, reflecting the strength of land prices in Haiphong and Bac Ninh. Our current valuation does not take early-stage projects into account, such as industrial parks in Long An, or the residential project in Vung Tau.

The company recently announced its 3Q21 earnings results. In light of these quarterly earnings, along with significant progress in the cement industry, we expect net sales and net profit to reach VND 4.14 tn (-4% YoY) and VND 155 bn (+2% YoY) in 2021. For 2022, we expect net sales and net profit to reach VND 4.06 tn (-2% YoY) and VND 168 bn (+9% YoY) respectively. Reflecting our estimates, we derive a 12-month target price for BCC of VND 15,200, combined from the 2022 target P/E of 10x, P/B of 0.8x, and EV/EBITDA of 4.0x, which equates to a downside of -38% from the current price. Outlook is currently threatened by: (i) increasingly fierce competition, with new capacity launched in the region (ii) weaker demand when the export market normalizes (iii) further hike in price of coal, electricity, and clinker export tax, (iv) an abnormally high valuation compared to industry peers, due to an overly optimistic market outlook. We thus issue a SELL recommendation for BCC.

SAB reported 3Q21 net sales and net profit of VND 4.3 tn (-47% YoY) and VND 472 bn (-68% YoY), respectively, the lowest level since 2014. Depressed results were due to the prolonged lockdown restrictions which caused distribution to be grounded for the majority of Q3. The company, however, is guiding for an improved outlook and is confident of GPM expansion in 2022. Positive forward-looking factors include a rebound in production volumes, a marginal increase in ASPs, and effective hedging of raw materials. After the recent share price run up of +9%, we downgrade our rating on the shares of SAB from BUY to OUTPERFORM, with an unchanged 1Y target price of VND 190,000/share (+10% upside potential).