Company Report

Recent sharp JPY movement is not material to the company’s fundamental and valuation. It has been all over recent news that the Yen has appreciated sharply against the USD as well as the VND due to the BOJ’s sudden rate hike. Specifically, we observe that from its trough, the JPY has appreciated by 9.5% against the VND to VND 172/yen. This has effectively erased all JPY depreciation YTD, and brought the JPY/VND back to the level at the beginning of 2024. In our view, even though the JPY movement is large and sudden, we do not see the impact as too material to ACV. Upgrade to BUY, maintain target price of VND136,000/share. The recent stock price movement is not exactly linked to the fundamentals of the company, and thus presents an attractive opportunity to accumulate the stock. In terms of fundamentals, we maintain our estimate that ACV’s PBT would grow by 38% YoY in 2024F and 20% YoY p.a. in 2025-26F as in our last report. We maintain our 12-month TP of VND136,000/sh (+23.7% upside potential) based on a 2025F EV/EBITDA target of 16x, and upgrade our rating for ACV to BUY (from OUTPERFORM) on valuation grounds.

FPT continued its impressive growth path during the first half of 2024, with revenue and NPAT achieving of VND 29.3 tn (+21.4% YoY) and VND 4.4 tn (+21.2% YoY), mainly driven by the technology segment.

Overall, the 1H24 results were in line with our expectations. Our respective 2024 and 2025 NPAT forecasts for FPT are VND9.3tn (+19% YoY) and VND11.1tn (+19% YoY). Our SOTP-based 12-month target price for FPT is VND142,800/share (from VND141,500) and we upgrade our rating to OUTPERFORM (from Market Perform).

During 2Q24, STK posted rather disappointing results where net sales and net losses reached VND 303 bn (-26% YoY, +14% QoQ) and -VND 56 bn (2Q23 net profit of VND 38 bn), respectively. This is mainly attributable to: (i) volume shortfall due to weak demand; (ii) failure in the operation of the automated product-checking and packaging lines; and (iii) unrealized FX losses of VND 42bn associated with the USD-denominated debt to fund the Unitex factory. During 1H24, the company reported net sales and net losses of VND 569 bn (-18% YoY) and -VND 55 bn (1H23 net profit of VND 39bn), respectively. During 2H24, the company expects to book net sales of VND 1.3 tn (+78% YoY and +128% vs. 1H24), assuming that sales volume will increase +110% vs. 1H24 and recycled yarn sales volume increases +192% during the period. For 2024, we expect STK to book net sales and net profit of VND 1.6 tn (+11% YoY) and VND 42 bn (-52% YoY), respectively. This is -14% and -70% lower than our previous net sales and net profit forecasts, respectively, following weaker-than-expected 1H24 results. For 2025, we expect net sales and net profit to reach VND 2.1 tn (+36% YoY) and VND 145 bn (+243% YoY), respectively. We expect STK to catch up with the sector’s recovering sales volume momentum during 2025. Our 1Y target price for the stock is VND 26,300/share (+6% upside). We rate the shares as MARKET PERFORM.

SAB posted 2Q24 business results, where net revenue reached VND 8.1 tn (-2.7% YoY) and NPAT reached VND 1.3 tn (+9% YoY). While this is rather disappointing as on-trade consumption remained weak during the Euro football season, we note that SAB did regain its market leadership position, as consumers have continued downtrading. Compared to the previous quarter, sales and NPAT advanced 12.6% and 28.8% QoQ, respectively. We note that 2Q is the high season for SAB, and that this quarter proved no different. SG&A/Sales reached 13.3% compared to 2Q23 of 16.4% and 1Q24 of 14.6%, as we believe that SAB intentionally delayed certain A&P expenses during the beer consumption slowdown, especially given the strict enforcement of zero tolerance drunk driving. During 1H24, the company recorded revenue of VND 15.3 tn (+5.1% YoY) and NPAT of VND 2.3 tn (+5.8% YoY), fulfilling 44.4% and 51.2% of the annual targets, respectively.

With a 12-month target price of VND 24,700 (equivalent to 26% upside potential), we upgrade our rating from MARKET PERFORM to BUY for the shares of NT2. We witnessed a higher-than-expected NPAT for 2Q24 due to higher-than-expected contracted volume (Qc) for June, which resulted in the quarter’s earnings nearly offsetting the loss of -VND 158 bn for 1Q24 (the company recorded a net loss of -VND 36 bn during H1 2024). At June 2024, EVNGenco 3’s (PGV: HOSE) gas price surpassed that of NT2. Therefore, we believe that NT2 could witness higher-than-expected volume for H2 2024 (vs. that being initially planned), benefiting from a potentially higher priority of electricity mobilization for the national power system. For 2025, we expect that the gas shortage issue will somehow ease in Southeast Vietnam and support an NT2 volume recovery. We project a profit of VND 20 bn for 2024 and VND 399 bn for 2025. Our earnings increase primarily came from our respective upward revisions of 2024 and 2025 volume, following our projection of higher-than-expected volume during H2 2024. We believe that NT2 could somehow achieve a profit during H2 2024, offsetting the H1 2024 loss.

During 2Q24, FMC reported net sales and net profit of VND 1.2tn (+20.3% YoY) and VND 83bn (+10% YoY), respectively. This is impressive considering Vietnam shrimp exports by value remained flat YoY during 2Q24. Largely due to the solid gross margin improvement, FMC earnings advanced +46% QoQ. We attribute FMC’s cost effectiveness to its new farming area in Vinh Thuan, which employed more efficient farming operations and resulted in greater fecundity. We note that FMC’s survival rate of its aquaculture is 80%, drastically higher than the Vietnam avg. of 50%. During 2H24, management expects higher volume and ASP compared to 1H24, due to seasonal impacts. For 2024, we expect net sales and NPATMI to reach VND 5.9tn (+16% YoY) and VND 312 bn (+13% YoY), respectively. For 2025, we expect net sales and NPATMI to reach VND 6.4 tn (+9.1% YoY) and VND 362 bn (+16% YoY), respectively. Our 1Y target price for FMC is VND 55,400/share (+16.5% upside), and reiterate our OUTPERFORM rating for the stock.

KBC’s business performance is heavily dependent on legal approvals of new projects, thus, even with a strong 35.8% upside from the current price, we upgrade our rating on the shares of KBC from MARKET PERFORM to OUTPERFORM, with a target price of VND 33,600/share. Although we lean toward our bear case for FY2024, the share price has decreased more than 19.6% since our previous report (17 May 2024), then, we upgrade our rating on the shares of KBC.

VNM posted impressive 2Q24 earnings, which exceeded preliminary consensus estimates. Net sales reached VND 16.7 tn (+9.6% YoY), breaking the all-time high record for sales during the quarter, driven by domestic and overseas sales growth of +6% and +30% YoY, respectively. Notably, overall market share increased by 1.2pp in 2Q24. The gross profit margin reached 42.4% (+170bps YoY), a solid improvement over the past ten quarters, resulting in net income advancing +21% YoY. During 1H24, net sales and net profit reached VND 30.8 tn (+5.7% YoY) and VND 4.9 tn (+18.6% YoY), respectively, completing 49% and 52% of the target for the year. As Q2-Q3 are VNM’s high seasons, management expects the strong sales momentum to continue over the next several months.

2Q24 earnings match our expectation, as its performance finally turnaround after 4 consecutive quarters of deceleration. Q2 earnings growth is led by the seaport and container shipping service while the chartering segment has not yet resulted in YoY earnings growth due to the high base in 2Q23. Overall, HAH reported 1H24 sales and NPATMI at VND 1.652 tn (+30% YoY) and VND 161 bn (-25% YoY), achieving 56% of company guidance for FY24 NPATMI.

In the spot market, typically represented by the WCI, a slowdown is occurring as tensions ease, while the time charter market, which generally lags behind the WCI, has maintained its upward momentum.

HPG’s 2Q24 net profit came in at VND 3.3 tn, achieving growth of 129% YoY and 16% QoQ, in line with our expectation of VND 3.1 tn. This impressive growth was driven by the steel sales volume with construction steel up 31% QoQ and 61% YoY given both market demand and the gain of market share. As 2Q24 earnings were in line with our expectation, we maintain our 2024 net profit forecast of VND12.8tn (+86.6% YoY). We assume that the company’s construction steel and HRC volume will reach 4.5 mn (+17.6% YoY) and 3.05 mn tonnes (+10% YoY), respectively, for 2024. Over the short-term, we expect 3Q24 net profit to decline QoQ from the 2Q level due to the correction of regional steel prices and lower volume amid the low season, before recovering in the final quarter. The YoY growth in 2H24 will likely slow down to 32% YoY from 233% in 1H24 due to a higher base in 2H23 and lower steel prices.

We reiterate our OUTPERFORM rating on VHC given the strong earnings recovery prospects for 2H24 (+215% YoY) and 2025 (+29% YoY). We fully expect earnings to recover during 3Q24 after seven consecutive quarters of decelerating growth.

In 2Q24, VHC posted net sales and net profit of VND 3.2 tn (+17.3% YoY and +12% QoQ) and VND 336 bn (-26.4% YoY and +78% QoQ) respectively. While net sales exceeded our expectations brought on by strong sales volume recovery (+26% YoY and +10% QoQ per our estimates), net profit is in line with industry consensus, given 2Q23 was a high base for the company due to the high pangasius ASP recorded. We noted that VHC strongly outperformed its peers. As a whole, Vietnamese pangasius exports value only increased +6% YoY in 2Q24, and VHC clearly passed that bar with flying colors. ANV posted net sales +11% YoY while net profit declined -134% YoYin 2Q24.

Given the recent share price increase of 9% since our last report, we lower our rating for HSG from Outperform to MARKET PERFORM. Over the short-term, we anticipate that the weaker expected near-term earnings and earnings growth deceleration for FY25 will place downward pressure on the stock. We maintain our target price of VND 24,500/share. Net profit in 3Q24 was closely in line with our estimate, increasing strongly over 19x YoY to VND 273.4 bn driven by strong sales volume (especially for domestic sales). Compared to the previous quarter, net profit dropped by 14.4%, mainly due to the reduction in forex gain to VND 4 bn from 124 bn in 2Q24.

A slow start for 2024, as Tet holiday fell during mid-Q1. For 1Q24, TNH recorded a revenue and net profit decrease of -13% and -39% YoY, respectively. While outpatient visits increased 11%, inpatient visits decreased -8% YoY, as Tet holiday is later and consumption tightening continued . Gross profit declined due to both increased material costs and pre-operating costs associated with TNH Viet Yen (training and payroll for doctors). Net income reached VND 15 bn (-33% YoY), with net income margin decreasing -500 bps and completing 10% of TNH’s 2024 target.

National expansion plan revealed. Shareholders voted for a name change from TNH Thai Nguyen Hospital to TNH Hospital – in preparation of nationwide expansion (targeting Hanoi, Danang, HCMC etc…). Shareholders also approved an increase of foreign ownership from 49% to 70%, which should leave the door open for possible M&A.

The company’s leverage is FRT’s main concern. However, the financial pressure of FRT has eased, reflected in the improvement in the interest coverage ratio (2.5x at 1Q24 vs 0.5x at 4Q23 and 1.0x at 1Q23) on the back of lower borrowing costs (-350 bps YoY and -100 bps QoQ in  1Q24) and improved earnings. With lower borrowing costs, Long Chau can speed up new openings of vaccine centers. FRT also plans to raise capital to scale the vaccine business. The company aims to raise a 10% stake via private placement during late 2024. We now apply higher multiples for the ICT business (from 9x to 11x) on narrower loss and a safer inventory level during 1Q24. As Long Chau now delivers sustainable profit, and the chain is the key growth driver for FRT in the long term, we now use DCF to value the chain. We derive a new target price for the shares of FRT at VND 211,000 (from VND 139,000), and reiterate our OUTPERFORM rating. Long Chau chain accounts for 98% of FRT valuation and 91% of 2025 earnings (vs only 10% in 2022). As such, we view FRT as a pharmacy retail company.

Proposed supportive measures to be approved. During May 2024, the Ministry of Finance proposed a couple of ways to support domestic automobile industry (extending excise tax payment deadline, registration fee reduction from Aug 24 to Jan 25). These measures were quite effective during 2020 (+50% increase in monthly sales after policy was in place) and 2022 (+20% YoY increase in sales volume), but were not as successful during 2H23, which, in retrospect, was the height of the recent consumer belt tightening in Vietnam. So far, excise tax payments extension has been approve, but the registration fee waiver should be approved soon as well.

We maintain our view that total volume for cars during 2024 will increase 9% YoY, but lower our total volume projections for Honda motorbikes to only 2% YoY (from 4% YoY) due to weak performance during Jan-May ‘24.