Company Report

One-off earnings (negative goodwill of VND880bn) and a strong Techcombank (TCB) result in 3Q20 push us to raise our 2020E NPATMI from VND914bn to VND1.9tn (-65.7% YoY). For 2021E, we forecast NPATMI at VND2.8tn (+48.8% YoY), as we expect results from consumer retail platform (VCM), Masan Meatlife (MML) and the mining business (MHT) each improved, while MSN should benefit from lower interest costs from debt repayment. On the positive front, we see: (1) continued strong momentum in the consumer business (MCH), with sales advancing by 29% YoY in 9M20 combining with stable margins; (2) improving performance of MML following a recovery in the pig feed business in 3Q20, improving profit in the meat business in terms of EBITDA margins; and (3) VCM narrowed its EBITDA margin loss during 3Q20 of to -2.8%, vs. -5.6% in 1H20. On the other hand: (1) MHT continues to struggle with weak commodity prices; and (2) a high overall leverage ratio with net debt/EBITDA increasing to 4.5x at end-3Q20.

At VND84,900 per share, the shares of VCB trade at 2020E and 2021E P/B ratios of 3.28x and 2.61x, respectively, which is more than double the sector average of 1.45x and 1.31x. 

Our new 12-month target price of VND97,400 (previously VND89,200) is derived from our unchanged target P/B ratio of 3.0x applied to our 2021E BVPS (previously average 2020-21E BVPS) and implies upside potential of 14.7%. Our analysis does not take into account the cash dividend yield of 1.9% for 2019 and 2020 to be paid out in 2020-21. As a result, on valuation grounds we are upgrading our rating on the shares of VCB from Market Perform to Outperform. Key downside risk: higher-than-expected NPLs.

TPB reported its 3Q2020 earnings results, with TOI attaining VND 2.2 tn (+13.1% YoY) and a PBT of VND 989 bn (+26.1% YoY), rendering PBT through 9M2020 of VND 3.0 tn - fulfilling 74.3% of annual guidance. At VND 24,000 per share, TPB is trading at 2020F and 2021F P/B ratios of 1.26x and 1.02x, respectively, which is lower than sector average of 1.44x and 1.30x. Our 1Y share price target is VND 28,200, and we maintain our OUTPERFORM rating on the shares.

Maintaining Market Perform rating. We increase our estimated credit growth for 2020 to 22.1% (23% of the parent bank and 13% at HDSaison), reflecting parent bank credit growth of roughly +20% YTD through Oct 2020. As the bank continues to extend its restructured loan balance, the 2020 provisioning burden will be partially lifted and carried over to 2021 and onwards. Accordingly, PBT for 2020 and 2021 is expected to attain VND 6 tn (+18.1% YoY) and VND 7 tn (+17.7% YoY), respectively. Our target price for the stock is VND 29,000 and represents 13.7% upside. We reiterate our Market Perform rating.

Given the positive Q3 earnings surprise on cost savings at the parent company level and strong momentum of the newly acquired GTN and MCM, we raise VNM’s NPAT for 2020/2021 to VND 11.47tn/12.20tn, respectively – an increase of 8.7%/6.3% YoY. We believe VNM has navigated the Covid-19 pandemic well, while strengthening its competitive edge for future growth. Meanwhile, we raise our 12-month target price for VNM to VND 128,000/share (from VND112,500-adjusted for 20% stock dividend in September 2020) using the P/E and DCF method. This amounts to a return on investment of 23.1% (4.1% dividend yield), and we reiterate our Outperform rating. 

Better-than-expected recovery in restructured loans. The restructured loan balance declined -34% QoQ to VND 5.1 tn (1.9% of total loans), as MBB clients recovered strongly. Meanwhile, NPLs (before write-off) declined by -3 bps to 1.65%, and Group 2 loans were essentially flattish at 1.47% (vs 1.49% at the end of 2Q 2020), and within acceptable levels. Such a recovery came earlier and was even better than our expectation. This was in conjunction with earnings growth of +10% YoY in 3Q 2020. Upgrade to BUY rating. Given such a recovery, we lowered our credit cost assumptions from 2.6% and 2.8% for 2020 and 2021, respectively, to 2.31% and 2.45%.  As such, we revise our PBT for 2020 and 2021 forecasts to VND 10 tn (+0.15% YoY) and VND 11.7 tn (+17.1% YoY), respectively - a 6.7% and 8% increase from our previous forecast. With a 1 YR price target of VND 24,800 /share (36% upside), we upgrade the shares of MBB to a BUY rating. 

In 2020, DCM finalized its gas input formula with PVN. Accordingly, 90% of gas volume follows the formula 46% x Monthly Fuel Oil price + tariffs, while the remaining 10% of gas volume – 12.7% x Brent Oil price + tariffs. Tariffs are fixed at USD 1.09 USD/mmbtu. With the new floating price mechanism announced in June, the company delivered upbeat results through Q3 due to weaker global oil prices. While net sales rose at a moderate rate of 7.3% YoY to VND 5.3 tn, pretax profit jumped 47% YoY to VND 493 bn. 

We upgrade our rating on BID to OUTPERFORM from Market Perform, and raising our target price to VND 47,100/share (from 43,650/share) – representing 20% upside. Our upgrade reflects both the reality that COVID-19 has not been nearly as severe as initially forecast, and a positive outlook for NIM in the upcoming quarters thanks to a more favourable interest-spread environment. This is best reflected in BID’s 3Q 2020 PBT of VND 2.7 tn (up 16.6% YoY) which was slightly higher than our forecast. In addition, BID’s non-interest income was quite robust given the favorable market environment for foreign exchange and fixed income. As a result, we have increased our pretax profit forecasts by +5.1% and +2.4% for 2020 and 2021, respectively, to VND 9.1 tn (-14.8% YoY) and VND 13.2 tn (+44.4% YoY). 

Reflecting a hydropower recovery from 3Q ’20 onwards, we lift our 2020 and 2021 NPATMI forecasts by 14% and 9%, respectively, under our base case.  As such, we increase our 1Y TP 11% to VND 46,200, which implies a 13% ROI (including 4% dividend yield). Additionally, given upside surprises for our earnings forecast under best case, we see that the 2021 NPATMI growth will potentially register 14.1% YoY if La Nina expands until the end of 2021. We reiterate our Outperform rating on the shares of REE.  

We upgrade our rating on the shares of STK to BUY from Market Perform. Via a stable P/E target of 7.0 applied to 2021F EPS, our target price for STK arrives at 21,400 VND per share (+32% from previous TP), representing an upside of 18.9%.  Our upgrades are predicated on the continued strong recovery since September. This is especially true for recycled yarn and value-added yarn – the two product lines which differentiate STK from most other local yarn producers.

After the resilient 3Q20 results, we raise our 2020-21E net income by 15-37%. Our 2020E net sales and net income now rise to VND112.4tn (+10% YoY) and VND3.872tn (+1% YoY), respectively. For 2021E, we are raising our top line to VND140.8tn (+25% YoY), while we expect strong net income, up by 36% YoY to VND5.3tn, to be driven by: (1) the recovery in discretionary spending; (2) additional market share gained in the ICT segment during the pandemic; and (3) continuous improvement in profitability of the grocery segment. At the current price of VND106,800, MWG trades at 2020-21E PERs of 12.3x and 9.3 x, respectively, which we consider attractive. Using unchanged target multiples (PER of 9x for the ICT segment and P/S of 0.3x for grocery segment), and rolling over our valuation basis to 2021E earnings, we derive our new SOTP-based 12-month target price of VND147,000 (previously VND113,700), which implies 38% upside potential. Hence, we are reiterating our BUY rating on the shares.

We are upgrading the shares of VHC to OUTPERFORM from Market Perform, reflecting both a rollover to 2021 EPS forecasts and the application of our SoTP methodology. As such, we are raising our 1 year target price on the shares to VND 48,200 – which represents 16.1% upside. Our upgrade is also supported by the continued recovery in the pangasius segment, as well as the continued strength in VHC’s wellness segment – which has grown to 8.5% of the top-line through 9M20 (2019: 6.5% in top-line). Further, we find that VHC has outperformed peer during the 2020 pandemic chaos with quite stable Q3 net sales, as it remains on track to meet plan. 

Earnings beat. Profit through Q3 amounted to VND 6.4 tn, increasing +15% YoY. This translates into a robust Q3 PBT growth of +34% YoY to VND 2.6 tn. This impressive result was led by YTD increases of +10.6% and +8.5%, respectively, in credit and deposit growth. The NIM also expanded 28 bps QoQ to 3.7% and was disciplined with expenses. We are, however, concerned that ACB’s over the LLCR decline from 175% to 113% since 2019. PBT revised upwards by 3.7% and 4.3% for 2020 and 2021 to VND 8.2 tn and VND 9.5 tn. Rationale for such revision include credit growth acceleration of 300 bps to 14.75% (the new credit growth quota granted by the SBV). Further, the NIM was fine-tuned 20 bps to 3.58% due to better-than-expected savings in funding costs YTD. Upgrading to Buy. An exclusive bancassurance deal is currently under negotiation, and we are incorporating upfront fees paid which should boost equity during 2021. We also increase our target P/B multiple from 1.3x to 1.5x, given the drop in market interest rates. Accordingly, the target price for ACB is VND 30,800/share, which is equivalent to a Buy rating.

We are upgrading the shares of DRC from OUTPERFORM to BUY, as we increase our 1-year target price 21% to VND 23,500 per share – representing a 21% return on investment (inclusive of a 7.7% dividend yield). Our upgrades reflect  increases to our 2020 and 2021 net sales estimates to VND 3.2 tn (-17% YoY) and VND 3.5 tn (+8% YoY), respectively, and our pretax profit estimates to VND 268 bn (-14% YoY) and VND 421 bn (+57% YoY). We have grown more positive on the shares of DRC given that depreciation expense is declining more than expected while radial export sales recovered by an impressive 37% QoQ – which are very supportive to future earnings. From a 3Q20 perspective, however, results were in line with SSI Research, as net sales and pretax profit declined -2.5% YoY and -24.9% YoY. Yet, the earnings decline was a bit less when compared to Q2 (-39% YoY).