Company Report

At the current price, HSG is trading at 2019 PE, PB and EV/EBITDA metrics of 10.2x, 0.6x and 6.3x respectively. We update our rating for the stock from Underperform to Market Perform, with a 1-year target price of VND 8,300/share based on target PE, PB and EV/EBITDA of 7x, 0.6x and 6.5x respectively. We are of the opinion that the company’s business results may recover in the long term given the company’s willingness to execute cost-cutting measures and others in order to improve the company’s financial health. In addition, we think that domestic competitive pressure can gradually be mitigated in 2020, especially when factoring in that less new capacity is coming online in the domestic market during the next year. However, we still remain concerned about the company’s loss of market share and high interest expenses. We will closely monitor the company’s sales volume and financial health, and provide an update in later reports.

Net sales recorded at VND 823.6 bn (+12.3% YoY), accomplishing 20% of 2019 target. Bias sales volume drop by -13% YoY as customer are still unfamiliar with the new Euro 4 compatible tire, while radial sales volume surged by 38% YoY thanks to the contribution from radial II factory. Gross profit margin remained fairly flat at 10%. Pretax profit arrived at VND 21 bn (-19% YoY), fulfilling only 13% of 2019 target. In 1Q19, selling expenses increased by 23% YoY, higher than +12.3% rise in net sales as the company booked several expenses for the following quarter. At the current price of VND 22,000/share, DRC is being traded at 2019 PER of 19.1x which is expensive given 2019-2020 single digit growth. The current high valuation reflects the market expectation upon the Vinachem divestment from 50.5% to 36% this year.

At VND 21,500 per share, MBB is traded at 2019E PBR of 1.3x. In general, management’s plan is along line with our expectations. Besides, the fact that the management expect to issue new shares at a higher valuation is a positive sign to the market. We reiterate our BUY recommendation, with a 1-year target price of VND 32,000 per share, equivalent to 2019E PBR of 2x.

At the current price of VND 19,050/share, VPB is trading at a 2019F PBR of 1.09x based on the bank’s plan of 2019F PBT at VND 9.5 tn, at 3.3% YoY. The PBR is lower than peers average of 1.5x. 

The revenue target for 2019 has been approved at the AGM at VND 16.7 tn, an increase by 22% YoY. However, the PBT target is set to drop by -10% YoY to VND 1.38 tn, which is also -14% lower than our current estimates for 2019 PBT of VND 1.602 tn (+4% YoY). At the current price, GEX is trading at 2019 PE forward of 11x. We maintain our Market Perform rating of GEX with 1-year target price of VND 24,200/share.

At the current price, PAC is trading at 2019 PE forward of 11.7x. Our rating for the stock is market perform with 1-year target price of VND 40,200/shared based on consistent PE of 12.5x. We think that the short term outlook of PAC is positive thanks to the low level of lead price and the company’s effort to address the capacity limitation of CMF battery line. However, amid the rising competition pressure and the change in market demand toward more modern product lines such as CMF or battery for electric vehicle, the long term prospect of the company would depend on the success of the company’s technology innovation to catch up the overall trend.

We maintain our BUY recommendation for PTB, with an upside of 28%. Our unchanged 1Y-target price is VND 83,300 / share using sum of the parts methodology. At a current price of VND64,800 / share, PTB is being traded at 2019F-2020F of 7.1x and 6.2x, which is considered low in our view. In addition, given the 2019 cash dividend worth VND 3,200/share, the current dividend yield is 4.9%, which is high for a growth stock. Our target price using sum of the parts is equivalent to a 2019F PER of 9.6x.

We raise our 12-month TP to VND 128,000 (from VDN 106,000) on our upward earnings revision anchored on unchanged target P/E of 17x and EV/EBITDA of 10.5x, which is 21% higher than current market price. Thus, we upgrade our rating from Market Perform to BUY. In addition, we expect GAS to pay high cash dividend for 2019 should it post strong earnings for the year. Recall that for 2018 its cash dividend was 53% on par, and it plans for only 30% on par for 2019.