Company Report

Although VHC earnings began rebounding during 3Q24 after seven consecutive quarters of negative earnings growth, we are reducing our target P/E on the stock from 12x to 11x, as the ASP recovery has been slower than expected. While we expected a stronger recovery in ASP leading to margin expansion, the improvement in GPM this quarter primarily came from lower input costs. We believe segment share prices remain very sensitive to pangasius ASP. Despite the multiple reduction, we reiterate our OUTPERFORM rating on the shares, with a 1Y target price of VND 83,000/share (+15.4% upside) [previous target of VND 88,000/share]. Our estimates for 2024 and 2025 remain unchanged, as gross profit margin expansion remains on track. Sales for 2024 and 2025 are expected to reach VND 12 tn (+20% YoY) and VND 13.7 tn (+13% YoY), respectively, whereas NPATMI is expected to reach VND 1.2 tn (+34% YoY) and VND 1.58 tn (+29% YoY).

We maintain our PBT projection of VND 27.8 tn (+21.5% YoY) for 2024 and VND 32.3 tn (+16.2% YoY) for 2025. We believe that the pricing competition as well as the impact from the flexible pricing scheme for corporate clients will continue to impede NIM expansion despite credit growth remaining solid. As such, NIM is expected to reach 4.18% in 2024 before improving slightly to 4.22% in 2025. With that support, asset quality should be under control with NPL ratios at 1.2% for 2024 and 2025.

We believe that the property market is gradually recovering, starting from the Northern Vietnam, and focusing on project with healthy legal status, which will be a positive catalyst for TCB. However, we think that the high-end and luxury property segments will need more time to fully recover. Although the cash flow of property developers is still slow, we think the flexible pricing scheme will continue to support these clients fulfilling debt obligations. Therefore, we maintain OUTPERFORM rating and keep target P/B of 1.2x for TCB shares with 1Y TP of VND 28,700 – equivalent to an upside of 18.6%.

The expansion in international passenger volume is projected to significantly boost AST’s performance over the next three years. While we expect net profit to surpass 2019 levels in absolute terms by 2024, net margins are likely to remain compressed and adjust to a lower level due to increased rental fees.

In addition, dividends are expected to resume this year following the disruption caused by the pandemic, at VND 3,000-3,500 per share (yielding around 6%), equivalent to the payout ratio of around 75%. For 2024F and 2025F, we estimated NPAT at VND 217 bn (+44% YoY) and VND 252 bn (+16% YoY) translating to the P/E forward of 13x and 12x respectively. Based on the P/E target of 15x, our 1-year target price is VND 64,500/share, indicating a potential upside of 13% and an OUTPERFORM rating for the stock. We believe that revising target P/E down from 17x in our latest is reasonable, given the trend of thinner net margins moving forward.

We upgrade our rating for DGC from MARKET PERFORM to OUTPERFORM, with a target price of VND 137,000 per share (upside 19%) as we expect earnings of DGC to come back to positive growth territory from 2H24 (+23% YoY), a rebound in the making after 7 consecutive quarters of decline. Meanwhile, valuation now looks cheap for a commodities company operating a vertically integrated value chain, enabling DGC to command a much higher gross profit margin. Earnings rebound is to be fueled by (1) recovery in ASP and sales volume by fertilizer and semiconductor clients, (2) cost saving benefits by utilizing more in-house phosphate rock from Mine Site 25  and (3) the gradual transition into downstream products (such as LCD phosphoric acid, currently accounting for 10% of the phosphoric acid at the moment). 2024-2025 net income is estimated at VND 3.5 tn (+7% YoY) and VND 4.8 tn (+37% YoY). DGC stands amongst the prime candidates which could attract EM flows in case of FTSE Russell upgrade (expected in late 2025).

We lower our estimate of 2024 new BTS sites from 4,500 to 3,500 sites as 1) 8M24 respective progress (2,011 sites) is trailing our previous forecast (as well as CTR’s own 2024 target of 4,000-5,000 sites) and 2) the company’s focus on dealing with the aftermath of Typhoon Yagi in northern Vietnam during September might weigh on its further acceleration of BTS site construction in the remainder of the year. On the other hand, we maintain our respective estimate (4,500 BTS sites) for 2025 as we believe that the 1-month extension of deadline for discounting 2G-only service (through the Circular 10/2024/TT-BTTTT) will not create significant delay to the implementation of more advanced mobile technologies in Vietnam. We also maintain our view of 5G commencement during late 2024 or early 2025 to support the long-term growth potential. Hence, we forecast that NPATMI will experience a single-digit growth for 2024 (+7% YoY) but a double-digit growth (+18% YoY) for 2025, mainly be driven by the infrastructure leasing and construction segments (equivalent to 3%-4% lower 2024-2025 NPATMI estimates compared to previous projections).Despite earnings downward revision, we maintain our 12-month DCF target price of VND 135,000/share as we roll over to 2025 (from average 2024-2025). With 3% upside potential, we lower our rating from OUTPERFORM to MARKET PERFORM on the shares of CTR.

DBC should benefit from higher hog price. As 2H is usually high season and a consumption recovery is expected, we believe that the price may not dip to last year’s level of between VND 52,000-56,000/kg.

Farming business witnessed low feed costs and higher sow productivity (from the import of new pig breeds from France). Average production costs at DBC are c. VND 50,000 /kg (down from VND 55,000/kg in 2022), with new farms in Thanh Hoa province achieving as low as VND 48,000/kg, according to management.

With assumptions of continued favorable pork prices through year-end and low production costs, we expect that 2024 revenue and net profit will be VND 11.7 tn (+6% y/y) and VND 472 bn (+1,789% y/y), respectively. While DBC has improved protection against ASF, we are more conservative than management given the unpredictability of disease post-typhoon. For 2025, we forecast revenue and net profit of VND 12.9 tn (+10% y/y) and VND 721 bn (+53% y/y), given the continued expansion of 3F’s operations and a GPM increase due to higher productivity breeds.

Due to high capital expenditures, the free cash flow for 2024-2025 is relatively small compared to the period from 2026 onward. Consequently, changes in earnings and cashflow forecast, primarily in the 2024-2025 period, only resulted in a modest 0.5% increase in our target price compared to our latest estimates.  Our DCF model now projects a 1-year target price of VND 47,200 per share, indicating an 16.7% upside. We maintain our OUTPERFORM rating for the stock.

GVR holds a unique advantage of possessing a vast rubber land bank of 394,782 ha spreading across various provinces in Vietnam, including Binh Duong, Dong Nai, Ba Ria Vung Tau, Tây Ninh, et al. For the long run, the conversion of over 23,000 ha of rubber plantation land to industrial park land between 2025-2030 will enable the company to record significant earnings from land conversation, which we have counted in our forecasts. However, the stock price has increased by 68% YTD to reflect those future earnings. Therefore, we reiterate our MARKET PERFORM rating with 1-year target price for GVR of VND 36,100/share (+1.5% upside) based on SOTP method.

HDB shares have risen 21.7% from our latest report, reaching our previous target price of VND 27,700, and might have partially reflected the strong earnings growth & improved fundamentals in 2Q24. For 2H24, we believe the YoY growth in pretax profit of the bank might cool down to +4.3% YoY compared to +49% YoY in 1H24 due to the high base in 2H23 as well as a narrower NIM under a higher CoF environment. We, hence, lower our rating for HDB to MARKET PERFORM (from Outperform) with a revised 1Y TP of VND 29,800 per share (+10.2% upside), equivalent to target PB of 1.4x vs. sector P/B of 1.37x. The higher 1Y TP was a result of removing the discount related to asset quality risk as we notice NPLs amongst retail clients showed improvement in 2Q24.

Earnings for 2Q24 were in line with our estimates, and we maintain our 2024 net profit forecast for GAS at VND 11.1 tn (-3.7% YoY), based on dry gas volume of 6.9 bn m3 (-7% YoY) and a slight price increase of 2% YoY. For 2025, we expect earnings to decline -5% due to a -3.6% YoY drop in dry gas sales volume due to the depletion of the old fields, although the increase in LNG consumption can help to partially offset the decline in total dry gas volume. GAS is finalizing a GSA with POW for the Nhon Trach 3 & 4 power plants, which have achieved 87% progress of the EPC contract and are expected to commence operation during the first half of 2025.

We maintain our MARKET PERFORM rating on the shares of GAS, with a 1-year target price of VND 79,000/share (from VND 84,000/share before the cash dividend of VND 6,000/share paid in Sept) now based on our 2025 EPS forecasts (previously average 2024-2025 EPS forecasts) and an unchanged 1-year target PE of 17.5x. Over the short-term, the decline in gas prices follows the decline in oil prices and could exert pressure on the company’s earnings and share price over the near-term. In addition, the mobilization from gas-fired power plants in Q3 and Q4 is usually lower than in the second quarter, which can also lead to lower dry-gas demand in the coming quarter.

DBD reported modest revenue growth in 2Q24, with VND 433 billion (+5% YoY). Prescription drugs grew by 7% YoY, while trading products declined by 23% YoY. Net income fell short of expectations, decreasing by 3% YoY. The net profit margin contracted by 130 basis points (from 18% to 16.7%) compared to 2Q23. We revised down its revenue and NPAT estimates by 6% due to weaker performance in 1H24 and expected slight improvement in 2H24. Revised 2024 forecast for revenue is VND 1.74 trillion (+6% YoY) and for NPAT is VND 284 billion (+6% YoY). For 2025, we forecast net revenue of VND 1.9 trillion (+9% YoY) and NPAT of VND 318 billion (+12% YoY), expecting growth in both Rx and OTC channels to exceed 2024 levels. Improved GPM is anticipated, aided by tax waiver for cancer drugs manufactured at the newly opened factory. We increase our target price to VND 45,000/share (from VND 43,500/share post issuance), as we roll forward our valuation to 2025. With only 8% potential upside (no dividend), we maintain our MARKET PERFORM rating on the shares of DBD.

2Q results are lower than our expectation due to higher labor and material cost. During 2Q, the top line continued its upward trend with 60% YoY and 28% QoQ growth. Both the drilling segment (59% YoY) and services segment (43% YoY) were solid contributors toward strong revenue growth. The average day rate for jack-up rigs during 2Q 2024 is USD 98k/day (+5% QoQ, +25% YoY), 10% higher than our assumption due to the inclusion of the new hired rigs. 2Q 2024 and 1H 2024 results were lower than our expectations, especially in terms of profitability (gross margin of 23% during 1H compared to 29% for our full year estimate), due to higher operating cost.

Reiterate OUTPERFORM rating for the stock, with revised TP of VND 32,000/share, based on 3 upcoming potential catalysts: Block B reaching a final investment decision (FID), PVD’s finalizing rig investment and their long-term contracting. Recommend to accumulate on dip to minimize downside risk from current oil price decline trend.

For 2024, along with the revenue recognition from Vinhomes OCP 2 and 3, Vinhomes Royal Island is expected to hand over its first units to retail buyers during the second half of 2024. We anticipate VHM to achieve revenue of VND 81.6 tn (-21.2% YoY) and NPATMI of VND 35.2 tn (+5.5% YoY), surpassing the company’s 2024 business plan targets and our previous NPATMI forecast of VND27.1 tn due to higher revenue recognition from Vinhomes Royal Island. For FY2025, revenue and NPATMI are forecast to be VND 92.4 tn (+13.3% YoY) and VND 40.9 tn (+16.2% YoY), respectively, with major earnings streams from Vinhomes Co Loa and Royal Island. We arrive at a valuation for VHM of VND 55,400/share, which lower than our previous valuation of VND 69,400/share due to a change in our valuation method. We reiterate our OUTPERFORM rating on the shares of VHM.

As the 2Q24 earnings are higher than our expectation, we revise up our 2024 PBT estimate 12% to VND 4.95 tn (+25% YoY) mainly due to our profit margin increase. We maintain our forecast of domestic petroleum sales volume at 10.76 mn tons (+4.1% YoY) and retail sales volume at 7.3 mn tons (+4.5% YoY). For 2025, we expect PBT to increase 6% to VND 5.25 tn (+12.7% from previous esimate) on the back of an increase of 4.1% in petroleum sales. Earnings growth may decelerate due to the high base of this year.  We maintain our Market Perform rating for the stock, with 1-year target price of VND 48,000/share (previously VND 40,800/share as we increase earnings and roll our valuation base to 2025). Over the short-term, the correction in petroleum price over -9% between Jul-Aug exert pressure on both the company’s earnings and its share price the third quarter.

In 2024-2025, we expect global demand for fertilizer to recover gradually after being hit by a severe El Nino weather pattern during 2023, enabling fertilizer prices to increase over 2023 prices. While revenue is projected to grow by 11% YoY to VND 14 tn in 2024 on both sales volume and ASP growth, the reduction in depreciation expense and one-off income related to the acquisition of Han Viet Fertilizer should help earnings of DCM to rebound significantly during 2024 (net income of VND 1.98 tn, +82% YoY). Revenue in 2025 will likely remain flat at VND 14.3 tn (+2% YoY), as urea sales volume may decline due to maintenance, while the increase in NPK revenue is quite small (12-14% of the 2024-2025 revenue). Meanwhile, 2025 net income may decline to VND 1.85 tn (-6% YoY) due to the absence of one-off income. Our new target price now is VND 39,000/share (from VND 38,700). With an upside of 5% and ROI of 10% (including 5% dividend yield), we maintain a MARKET PERFORM (unchanged) rating.