Company Report

As net profit for 1Q24 was in line with our estimate, we maintain our 2024 net profit forecast of VND 407 bn (+250% YoY). We expect 2024 sales volume to increase 13.7% YoY to 982k tons driven by a 18% YOY growth in exports, while domestic volume should experience lower growth of +7% YoY due to the slow pace of construction activities in both the household and project channels. Management expects that the volume in 2Q can increase around 10% QoQ to 280k tons. We maintain our MARKET PERFORM rating on the shares of NKG, but lower our 1-year target price to VND 23,000/share (from 24,500) due to a downward revision of target multiples considering potential higher interest rate environment in the second half of 2024.

1Q24 NPAT recorded strong profit growth on a low base compared to the same period. 1Q24 revenue reached VND 213 bn (+2.49x YoY) thanks to strong IP revenue growth. Revenue from industrial land lease was VND 193 bn (+6.35x YoY) with let area of 8.5 ha (+6.2x YoY) at  $95 USD/m2 (+15% YoY), mainly from the lease contract of Sonadezi Corporation (UPCOM: SNZ), and partially from small investors (leased area is 1-2ha). Subsequently, net income reached VND 65 bn (+4.55x YoY).

Signed areas for lease and MOUs in 2023 is a combined 66.23 ha (+65% YoY), with the large customer being Electronic Tripod Vietnam (total investment capital of $250 mn, equivalent to VND 6.25 trillion) with a lease area of 20 ha, and leased price of $95 USD/m2/period

1Q24 EV deliveries stacked up to 10% of company’s annual 2024 target. During 1Q24, VFS delivered 9,689 EVs globally (+444% y/y, -28% q/q). For reference, 1Q23 was a low base as only two models were introduced and sold commercially since Sep 22. Of those delivered during 1Q24, 56% are to GSM, the taxi-hailing company owned by VinFast’ CEO Pham Nhat Vuong. Last year VFS delivered a total of 34,855 EVs globally (+374% y/y), with 70% to GSM. VFS previously shared that the break-even volume is between 150-200k/year at current capacity. The company recently delivered VF7 to initial customers in Vietnam last month and also introduced a new premium electric bike, Drgnfly, with listed price of $2,599.

FPT released its 1Q24 results, with revenue and NPAT achieving VND 14.1 tn (+20.6% YoY) and VND 2.2 tn (+19.4% YoY), respectively, which was line with our expectation. We mainly attribute this solid performance to technology sector, which accounts 60% of FPT’s revenue and 46% of FPT PBT (in line with our expectations).

We currently have an OUTPERFORM rating for FPT at the target price of VND 128,100/share.

2023 performance: Affected by the economic slowdown during the 2022-2023 period, real estate developers, such as DXG, were negatively impacted by project approval delay, and overall was held back as the market was recoiling from the real estate market crunch. Also, the real estate market was suffering from tight liquidity which impacted DXG’s brokerage services segment (DXS) during 2023.

For FY2024 Outlook, as per DXG management, the company is expected to continue to sell units in Gem Skyworld, the landed properties project in Dong Nai province and launch other two projects: DXH Riverside in Thu Duc City, HCMC; and Opal Luxury, Di An, Binh Duong province.  With good progress of these projects, we expect that the company will commence selling at DXH Riverside and Opal Luxury during 2H2024, given that the condo units can meet housing needs. Gems Skyworld, on the other hand, is more for investment with landed units where we expect a sales restart from 2025. Therefore, we estimate DXG presale value during 2024 will reach VND 5.4 tn from two projects: DXH Riverside and Opal Luxury.

The company held its 2024 AGM on 10 Apr 2024. Approved 2024 guidance for revenue and PBT was VND 61.9 tn (+17.5% YoY) and VND 10.9 tn (+18.2% YoY) respectively. Besides the impressive growth momentum of the global IT segment, FPT targets the continual expansion of its education segment during 2024-2025, as well as the recovery of the online advertising subsegment, with an expected jump from a 2023 low base. FPT also plans to launch its new data center during between late 2024 and early 2025, and expects the improving profit margin of domestic IT through the Made-by-FPT ecosystem. On the other hand, the 2023 cash dividend was also approved at VND 2,000/share (20% of charter capital). According to FPT, the company might maintain this cash dividend level (VND 2,000/share) due to the need to hold onto excess retained earnings to fund for investments to power its long-term growth.

Net profit target for 2024 has been approved at VND10tn, an increase of 46.3% YoY. Management expects 2024 to be a good year after the trough during 2023, but does not expect the steel industry to achieve an impressive recovery, due to the weak state of the property market in China. Profit margin continues to expand for 1Q24, driven by the HRC segment: According to preliminary results, revenue and net profit for 1Q24 came in at VND31tn (+15% YoY) and VND2.8tn (+631% YoY), which has already factored in the forex loss of VND200bn. The net margin was around 9.0%, the highest level since 3Q22 due to sales volume growth and high average HRC prices (+5.5% QoQ). Sales volume of construction steel for 1Q24 was 956k tonnes, an increase of 10.1% YoY driven by 156% YoY growth in export volume, while the domestic sales slid by 15% YoY. HRC volume remained at an historically high level of 805k tonnes, posting solid growth of 67% YoY. Management expects HPG’s profit margin to improve near term as the company has cleared its high-cost inventory during the first quarter.

Bulk sales helped to quell the negative impact of the ebb cycle in the real estate market in 2023. After adoption of a bulk sales strategy in 2019, Vinhomes (VHM: HOSE) has implemented this strategy successfully to develop its megaprojects. During 2023, VHM achieved VND 87 tn (- 32% YoY) in contracted sales value, of which bulk sales accounted for 51% of total contracted sales value, equivalent to VND 44.37 tn (- 7% YoY; US$ 1.8 bn) while retail sales value was hit by the slowdown of the real estate sector with only VND 42.63 tn (-47% YoY; US$1.72 bn). Active bidding for more projects: During 2023 to early 2024, Vinhomes & its subsidiaries applied and received some important legal approvals for several large projects in the second-tier cities, including Haiphong, Long An province, and Tuyen Quang province. If all projects are approved, Vinhomes will increase its land bank by an additional 2,200 ha, adding to current land bank of 19,600 ha as of 31 December 2023, further cementing in its leading position in the real estate market.

While sales volume of radial tires continued to increase in 2023 thanks to capacity addition, DRC earnings have been hurt in 2023 (-20% YoY) due to the sharp decline in bias tire sales volume (-26% YoY) on weak demand and the transition from bias tires to radial tires on the domestic market. Due to intense competition from Chinese radial tire producers on the domestic market, the increase in radial tire sales volume could not compensate for the reduction in bias tire sales volume on the domestic market. As Chinese competitors mainly produce radial tires rather than bias tires, DRC faced more intense competition on the domestic market as end-users are switching from bias tires to radial tires. Looking forward into 2024, while the transition from bias tires to radial tires may still persist, (1) the gradual recovery in demand on both domestic and overseas market, (2) full year contribution of the new product (passenger car radial tire or PCR tire, introduced back in 2Q23) from last year low base and (3) capacity addition of truck bus radial tire (TBR tire, from 1Q24) will help DRC to post 15% YoY net income growth (VND 286 bn, from our previous estimate of  VND 281 bn). For 2025, we expect both PCR and TBR plants to run at full capacity, hence raising earnings further by 20% YoY (VND 344 bn). 

Guidance issued by the company set a growth target of 17% in sales and 11% in NPAT, while estimate for 1Q24 sales and NPAT are VND 670 bn (+25% YoY) and VND 109 bn (+33% YoY), respectively. Our estimates sales and net earnings are VND 3.1 tn (+16.3% YoY) and VND 364 bn (flat vs. YoY), respectively, in which sales should witness growth in both segments of construction and BOT toll collection. Those big projects mainly contributing to construction sales are the Quang Ngai - Hoai Nhon highway, the Dong Dang – Tra Linh and Huu Nghi – Chi Lang highways. However, we expected that gross margin of this segment will be thinner than 2023 given the reduction in complexity of those projects. Meanwhile, greater-than-organic sales growth of BOT companies should mainly be attributed to higher toll fees rather than growth in car counts, while profit margin should not witness any significant changes.

For the first two months of 2024, VHC’s net sales reached VND 1.7 tn (+40% YoY), with pangasius sales increasing 25% YoY, outperforming the sector due to the US market recovery. Pangasius sales growth reflects domestic market sales of VND 535 bn (+64% YoY), which accounted for 31% of sales (from 27% during 2M23). US and EU market sales reached VND 407 bn (+30% YoY) and VND 292 bn (+16% YoY), respectively. The Wellness segment witnessed a recovery with sales reaching VND 130 bn (+26% YoY). According to VASEP, Vietnamese pangasius exports during 1Q24 reached 424 mn USD (+0.4% YoY). We maintain our Market Perform rating on the shares of VHC, with a target price of VND 78,500/share (from VND 64,500/share), as we roll our forecast to mid-2015. We increase our target P/E for VHC to 12x (10x previously), as we believe that earnings have bottomed out during 2023, coupled with a low-interest rate environment. Thus, our new target price represents an upside of 2.3% and VHC currently trades at a 2024 P/E of 14x and 2025 P/E of 10x, which is at the 10-year historical average range of between 6x-19x.

With lower-than-expected 1Q24 results, we revise down our yellow phosphorus ASP for 2024-2025 to VND 113 mn/ton (+7% YoY, from VND 118 mn/ton) and VND 121 mn/ton (+7% YoY, from VND 123 mn/ton). Net income are hence estimated at VND 3.79 tn (+16% YoY) and VND 5.47 tn (+44% YoY) for 2024-2025. Projected 2024-2025 earnings growth will be primarily determined by (i) sales volume and ASP recovery of phosphorus-related finished products and (ii) reduction in phosphate rock material costs on higher usage of in-house phosphate rock (80% in 2023, 90% in 2024, 100% in 2025).  We apply our unchanged target P/E of 12x on revised 2024-2025 earnings estimates, and derive a new target price at VND 133,000 per share (from VND 142,000). We maintain our MARKET PERFORM rating. Pullback in earnings during 1H24 may weigh on share price performance after a period of strong price rally, though we believe that price weaknesses should present opportunity to accumulate the stock for investors with a long investment horizon.

For 2024, we expect a broad-based recovery across all segments.  We believe that revenue growth from consumer retail chain subsidiary, Wincommerce (WCM), could come from rapid new store openings, restructuring during the 2022-23 period that should start yielding fruit, and a recovery in consumer spend. Subsidiary Masan Consumer (HOSE: MCH) has consistently proven resilience and outperformed peers since 2019 (CAGR of 10% in revenue and 11% in NPAT). We believe that the company will maintain this momentum through 2024, levering synergies of the retail platform (WCM) and the innovative product innovations.

4Q23 performance missed estimates. DBD posted 4Q23 revenue and NPAT of VND 444 bn (-4.4% YoY) and VND 59 bn (-25% YoY), respectively, which were 10% and 40% lower than our estimates. The company saw lower sales as consumers skipped OTC drugs/supplements, as well as increased competition from imported brands. For FY23, the company recorded net sales and NPAT of VND 1.65tn (+6% YoY) and VND 269bn (+11% YoY), respectively. This result is 3% and 8% lower than our estimates. The increase is largely credited to the robust performance in the prescription drugs, including antibiotics and cancer drugs. Significant facility upgrades underway mobilizing aggressive growth plan. As DBD aims to reach VND 2.6tn in manufactured drug revenue before 2026 and 4.5tn before 2030 (from current revenue of VND 1.65tn), the company has been investing heavily in its production capabilities. DBD recently broke ground on the construction of a small volume injection drug factory (Nov 2023), focusing on production of new dosage forms/packaging such as sterile injectable and eye drops. Scheduled for completion during 2025, the factory aims to commence production before 2027.