Company Report

Net profit for 1Q24 fell 25.6% YoY to VND 2.5 tn primarily due to the decline in sales volume amid the depletion of outstanding gas fields in Cuu Long & Nam Con Son 1 &2 basins. According to management, Jan-May PBT is estimated at VND 5.2 tn. This translates to a PBT in Apr-May of VND 1 tn/month, equivalent to the average monthly level for 1Q24, and -20% lower than the average level of 2Q23.

As GAS’s earnings for 1Q24 were in line with our estimates, we maintain our 2024 net profit forecast of VND 11.1 tn (-3.7% YoY) based on dry gas volume of 6.95 bn m3 (-6% YoY) and a slight price increase of 2% YoY.  We expect the company’s earnings to remain flat in 2025 given that the contribution of LNG and the new fields should offset the depletion of old fields.

Earnings of DPM plunged by 90% YoY in 2023 due to: (1) the sharp correction in urea prices (-39% YoY); (2) an increase in gas input costs (USD10.60/mmbtu, +22% YoY) as DPM had to source natural gas from more expensive sources; and (3) a deterioration in gross margin from trading and NPK fertilizer in the context of the sharp correction in fertilizer prices in 1H23. For 2024-25F, we expect global demand for fertilizer to recover gradually after being hit by severe El Nino in 2023, enabling improved fertilizer prices. This, together with the normalization in profit margin of trading activities and NPK fertilizer from the low base in 2023, should help earnings rebound to VND875bn (+61% YoY, from previous estimate of VND 1.1 tn) and VND1tn (+15% YoY) for 2024F and 2025F, respectively.

We see significant potential in DPR’s large land bank, which can be converted into industrial parks – a major opportunity for the company to unlock value and revenue. The increase in the demand for industrial parks is particularly pronounced in Binh Phuoc province, given that occupancy rates of Binh Duong and Dong Nai industrial parks have reached 94% and 92%, respectively, and the convenient connecting infrastructure, including North - South expressway in  Gia Nghia - Chon Thanh; Ho Chi Minh City - Thu Dau Mot - Chon Thanh; and Dong Phu road - Binh Duong. We believe that the traditional natural rubber business line will continue to benefit from higher market prices near-term. We rate the shares Outperform with a 1-year target price of VND 47,600/share (up 4% due to an increase in rubber prices of 18% vs 12% from our previous report).

Our 2024-25F revenue are estimated at VND23.9tn (+19.4% YoY) and VND27.5tn (+15% YoY), while 2024-25F PBT are estimated at VND14.5tn (+38% YoY) and VND17.6tn (+21.5% YoY) which is a historical high level, based on assumed 14% YoY of total passenger growth in 2024F and normalized long-term growth of 10% YoY in 2025F. We have an OUTPERFORM rating, with a higher 12-month target price of VND136,000/share, based on an unchanged target multiple of 16x applied to our 2025F EV/EBITDA (from 2024F). Short-term catalyst would be continuation of strong growth based on passenger recovery, lower airline-related provisions, and ACV getting approval to pay pending stock dividends from 2019 until now.

As we increase our 12-month target price from VND84,800/share to VND93,400/share (20% upside potential) – rolling over our SOTP valuation to mid-2025E and reflecting SSI’s higher valuation for TCB, we also upgrade the shares of MSN to OUTPERFORM (from Market Perform). 2024-25 should be an eventful period for MSN group: Upcoming milestones include the divestment from mineral processing unit H.C. Starck, the plan to list Masan Consumer Corporation (MCH: currently trading on UPCoM) on HOSE, and the possible stake sales. These recent moves/plans suggest that the Group is actively restructuring to focus on its core consumer business. During 2024, we expect a broad-based recovery across all segments. We believe that revenue growth from its consumer retail chain subsidiary, Wincommerce (WCM), will be achieved via rapid new store openings, a payoff from the restructuring during the 2022-23 period, and a recovery in consumer spend. Subsidiary Masan Consumer (MCH) has consistently proven resilience, having outperformed peer since 2019 (CAGR of 10% in revenue and 11% in NPAT). We believe that the company will maintain this momentum through 2024, leveraging synergies of the retail platform (WCM) and other product innovations.

We maintain our Market Perform ratings on the shares of VHC, with a target price of VND 78,500/share (unchanged). We believe that earnings recovery will be slow and VHC currently trades at a 2024 and 2025 P/E of 13x and 10x, respectively, (average 10-year P/E of 10x). During 1Q24, VHC post net sales and NPATMI of VND 2.9 tn (+29% YoY, +19% QoQ) and VND 170 bn (-23% YoY, +256% QoQ), respectively, which is in line with expectations. During April 2024, sales reached VND 1.1 tn (+26% YoY, flat MoM) with pangasius sales of VND 635 bn (+22% YoY, +6% MoM). Sales to the US led the recovery at VND 411 bn (+33% YoY, +30% MoM). Other regions are still experiencing a weak recovery with sales to EU and China reaching VND 202 bn (+46% YoY, -23% MoM) and VND 53 bn (-52% YoY, -40% MoM), respectively.

We reiterate our Outperform rating on the shares of ACB and roll forward our valuation to mid-2025 with a 1Y TP of VND 36,000 per share, representing upside of 21%. While we believe that unfavorable market conditions will negatively impact asset quality during 2024 and 2025, ACB’s asset quality remains top-notch due to a healthy customer base, and conservative lending practices. Further, ACB is equipped with competitive funding costs, enabling the bank to stabilize NIM in the longer term. Given that ROE remains above 20% for the medium-term along with healthy NIM and asset quality, we believe that ACB is one of the best choices in this turbulent market.

Although we anticipated a turnaround from Q2 to Q3 in our latest update, year-to-date import-export data indicates that the volume recovery of the operating segment may exceed our expectations. Meanwhile, global containership freight rates continue to be firm in both spot and chartering markets. It is notable that the WCI has entered the pandemic-level territory, while 1700-TEU time charter rate is up by 65% YTD. This higher-for-longer shipping rate situation should continue to lead to further YoY upward revision of charter contracts for the period of from 4Q24 onwards, as well as spot freight on domestic routes, which has yet to have strong pickup since early 2024. We think the QoQ turnaround in terms of earnings performance should appear from this Q2, given the favorable shipping freight environment and demand growth that recently reflected in import-export data in April and mid-May.

We believe that POW’s earnings witnessed a low base during 1Q24, unlikely to be replicated in the upcoming quarters. In fact, we observe that the company suffered the lowest volume and NPAT in 1Q24 compared to the same quarter during 2018-2023 as: 1) Nhon Trach 2 plant (NT2: HOSE) was assigned insignificant contracted volume (Qc) (at 1 mn kWh vs 750-1,000 mn kWh for every first quarter during 2018-2023); and 2) the Hua Na (HNA: HOSE) and Dakdrinh plants had to undergo limited operations to reserve adequate water levels for peak power demand season. Specifically, compared to 2018-2023 period, Hua Na’s 1Q24 volume was only higher than that of 1Q20, and this figure for Dakdrinh was higher than that of 1Q19 and 1Q20. Nevertheless, the company’s 1Q24 results were in line with our expectations. Hence, our 2024 earnings forecast remains nearly unchanged. For 2025, due to the successful compensation negotiation related Vung Ang 1’s Generator 1 technical issue, we assume/factor a compensation amount of ~VND 1 tn to be recorded during 2025-2026. Specifically, we expect a 22% YoY decline for 2024 (vs 50% YoY fall for 2023) and 104% YoY recovery for 2025 from 2024 low base for NPATMI. We change our rating for POW to OUTPERFORM (from MARKET PERFORM), with a 12-month target price of VND 13,900/share (equivalent to 14.9% upside potential; based on DCF and EV/EBITDA multiple valuation methods).

Between 2022-2023, the real estate revenue stream was solely supported by the handover of sold units of the Hado Charm Villas. At 1Q24, HDG sold and handed over 420 units (out of 528 units of the project). HDG also targeted to launch the third phase sales of this project to sell the remaining 108 units during H2 2024. We forecast this phase to start realizing revenue during 2025. Meanwhile, we are concerned that legal issues related to Hado Green Lane and Hado Minh Long could take longer to be resolved and expect that these projects will realize revenue from 2026. For the electricity segment, we may not have significant surprises during 2024, as hydropower plants in Vietnam continue to face unfavorable weather. Further, according to HDG, its 7A wind power plant is seeing poorer wind conditions compared to 2023, which has led to a 28% YoY volume decrease during 1Q24. However, we believe that the electricity segment should generate the most stable cash flows and earnings compared to other segments. We also expect lower interest costs due to HDG’s repayment of electricity segment-related debt. 2025 NPAT growth is estimated at 112% YoY, due primarily to the recognition of Hado Charm Villas Phase 3. We arrive at 1-year TP of VND 36,900/share, implying a 12% upside from current market price, and reiterate our OUTPERFORM rating on the shares of HDG.

We rate the shares of VCB at OUTPERFORM, with a 1Y TP of VND 111,800/share. The bank has been underperforming peer since late 2023 due to weak credit growth and muted news on private placement progress. However, we believe these issues are just short-term hiccups while fundamentals of the bank remain solid. The deposit franchise and asset quality remain top notch. Credit growth should rebound in line with the disbursement for certain large infrastructure projects and stronger economic recovery toward year end. We expect 2024-25 PBT to attain VND 45.2 tn (+10% YoY) and VND 52.3 tn (+16% YoY). Further, we believe that the unnamed Weak Bank transaction could be an interesting catalyst for the shares.  

We reiterate our Outperform rating on the shares of TPB and roll forward our valuation to mid-2025 with 1Y TP of VND 22,700/share, presenting an upside of 23.7%. We expect that bad debt will not increase strongly in the near-term due to the bank's debt restructuring policy and proactive bad debt resolution. This should allow TPB to reduce its provisioning for both 2024 and 2025. Although the NIM will be under pressure during 2024, we believe that the turnaround story will be clearer during 2025 with a higher NIM and lower NPL ratio. For the medium period, we believe that the business environment will be more supportive and enable TPB to improve ROE to around 16%.

We are lowering our rating on TCB shares to Market Perform from Outperform, as the shares have risen 10% over the past month alone. We are, however, maintaining our 1Y TP at VND 54,700/share. The 1Q24 result was strong with improvement in the NIM (+19 bps QoQ) and controlled asset quality (NPL 1.13%, LLCR 106%). Despite the increase in accruals during 1Q24, we believe the risk to asset quality is mitigated given the 1-2 year tenure of bullet payment loans. Therefore, with a better-than-expected NIM in 1Q24, we revise our NIM assumption for TCB by 40 bps and 35 bps for 2024 and 2025 respectively. We also adjust non-NII upward to reflect the one-off Govt bond trading gain in 1Q24. On the other hand, we increase the credit cost assumption given the higher-than-expected risk from NPL from CIC across the system. Accordingly, PBT for 2024-25 is finetuned by 5-8% to VND 28.6 tn (+25% YoY) and VND 33.7 tn (+18% YoY) respectively.

We maintain our cautious view for 2024, with consumption continuing to be impacted by the zero-tolerance legislation for drunk driving, a slower rate of change for consumer habits, and consumers tightening their belts. However, we increased our 2024E net sales and NPAT forecasts to VND 32.2 tn (+5.8% YoY) and VND 4.6 tn (+9% YoY), respectively, given the better-than-expected Q1 sales results and small increase in ASP in the first few months. These forecasts are 8.5% and 4% higher than our previous revenue and profit forecasts respectively. We also introduce our 2025F forecast for net revenue at VND 33 tn (+3% YoY) and net profit at VND 4.97 tn (+7% YoY). We assume that the 2025 GPM will increase, while A&P spend will continue to be tightly controlled given the uncertainty surrounding the beer sector’s growth.