Company Report

Riding the tanker industry upcycle during 4Q 2023, PVT continued to post strong financial results as expected. Specifically, 4Q 2023 revenue was VND 2.7 tn, +12.9% YoY and 7.9% QoQ, while PBT was VND 357 bn, -1.2% YoY and -10.4% QoQ. Excluding one-off gains/losses, core PBT growth in 4Q 2023 reached 16.6% YoY. For FY2023, the company’s revenue was VND 9.4 tn +4.6% YoY and PBT was VND 1.55 tn (+10.6% YoY), which is quite close to our PBT forecast of VND 1.6 tn. Excluding one-off gains from vessel disposal in both years, 2023 core PBT reached VND 1.35 tn + 15% YoY. PVT has completed 227% of its 2023 PBT target, mostly due to its tendency to set an overly low target.

Despite NT2 not targeting any major maintenance schedule in 2024, which implies an opportunity for the company’s volume and earnings recovery, we are concerned that Vietnam Electricity Group (EVN) might reduce its reliance on gas-fired electricity in 2024 (including that of NT2) as 1) the current gas supply issue might not favor EVN to deploy gas-fired power as a stable source to meet the power demand and 2) EVN might very well prioritize cheaper power sources to endeavor to cut losses or at least breakeven in 2024, such as coal-fired electricity, hydropower and renewables. Therefore, we expect that NT2 should face another year of volume decline (-54.4% YoY per our estimate). With such lower utilization compared to 2023, we project a loss of VND 261 bn for the company in 2024. With a 12-month target price of VND 22,900 (equivalent to a 8% downside potential) (based on DCF and EV/EBITDA valuation methods), we issue a SELL rating for the stock.

PTB operates at a higher growth rate than the wood industry thanks to its large customers (Masterband, and Melissa & Doug, GigaCloud). In addition, the company’s stable earnings reflect optimized labor productivity – allowing the wood segment’s gross profit margin to exceed the industry average by 3% to 4%. We see stone production recovering in both 2024-2025, energized by public investment projects such as expanding terminal T3 of Tan Son Nhat Airport and Long Thanh Airport with a total value of VND 600 bn. PTB trades at a 2024 and 2025 forward P/E of 12.6x and 10.8x respectively, which are slightly lower than peers (12.8x in 2024). Using a blended average P/E for the wood industry of 12x and the stone industry of 11x, we derive a 1Y target price for PTB of VND 64,800/share (downside -1%). We maintain our MARKET PERFORM rating.

4Q23 earnings updates: During 4Q 2023, PC1 reported sales of VND 2.6 tn (+11% YoY, reaching 113% of our forecast) and net earnings of VND 137 bn (-50% YoY, reaching 86% of our forecast). Gross profit margin was YoY thinner, at 17.2%, (vs. 21.7% of 4Q22), given the lower margin of construction segment associated with higher weight of public power projects.

Outlook: PC1 continues to diversify its sales mix. We expect FY24 sales to reach approximately VND 9,008 bn (+ 15.4% YoY) while NPAT is projected to reach VND 135 bn.

Within the aim to keep gaining new clients, PNJ did not raise prices amid rising gold input costs during the period, hence the gross profit margin was compressed in the short term. However, we believe the company may eventually adjust its prices in tune with the increase in gold prices, and we believe it is able to do so given its leading position in jewelry retail business, not to mention that the Vietnamese public appreciates gold’s property as a store of value. In addition, PNJ frequently releases new jewelry collections, whereby the company will likely increase sticker prices to offset the increase in the price of gold. We hence maintain 2024 revenue and net income estimates of VND 37.7 tn (+14% YoY) and VND 2.3 tn (+17% YoY). We introduce 2025 estimates with revenue and net income at VND 41.5 tn (+10% YoY) and VND 2.57 tn (+12% YoY). Earnings growth in 2025 is driven by full year operation of stores opened in 2024 (+9%), on top of the expected increase in overall jewelry consumption (+5% YoY). With an unchanged target P/E of 17x on average 2024F-2025F financials (from 2024F), we derive a new target price at VND 114,000 per share (from VND 107,500). With 16% upside potential, we maintain an OUTPERFORM rating for PNJ.

On 18 Mar 2024, Vingroup Jsc, the parent company of VRE decided to fully divest from SDI Trading Development and Investment Company Limited (“SDI”). SDI owns more than 99% of charter capital of Sado Trading Commercial Jsc (“Sado”) – which in turn is a significantly large shareholder of VRE with a 40.5% stake (41.5% effective holding due to VRE having 56.5 million treasury shares). The transaction is expected to be completed in the third quarter this year. With the new major shareholders, we expect VRE will operate more effectively when having more contributions from upcoming shareholders who have consumer retail experience. Also, VRE still works with Vingroup and its ecosystem as the strategic partner. We reiterate our BUY rating for VRE, while bumping up our target price to VND 33,600/share (+29% upside), which is slightly higher than our previous target price of VND 31,300/share as we roll forward our valuation.

We upgrade our rating on the shares of QNS to Outperform (from Market Perform) with a target price of VND 57,400/share, representing +19% upside (total ROI 23%). We believe that QNS is capable of maintaining single-digit earnings growth through 2025, as the sugar business maintains its profit level, the soymilk segment returns to normal, and the company’s financial income grows due to its substantial net cash balance (24% of market capitalization). Further, QNS's unforeseen earnings surge during 2023 resulted in a 50% net profit distribution. We note that QNS paid between 60-80% of net profit between 2020 and 2022. Thus, given the strong earnings level, we anticipate that QNS likely will increase cash dividends for 2025, which is expected at between VND 4,500-5,000/share (10-11% dividend yield for 2025).

We maintain our MARKET PERFORM rating on the shares of BMP. Our new target price for BMP is VND 112,000/share (from VND 103,400/share), as we revise up the 2024F NPAT by 8% compared to our previous forecast, representing a +1% upside (dividend yield of 10%). 4Q23 results: BMP posted net sales and NPAT of VND 1.5 tn (+3% YoY, +57% QoQ) and VND 257 bn (+3% YoY, +23% QoQ), respectively, which are in line with our expectations. We estimate that the sales volume during 4Q23 reached 24k tons (+2% YoY, +57% QoQ), as BMP sold at discounted prices to distributors during the second half of 4Q23. The ASP was flat QoQ and YoY. The gross profit margin reached 40.6% during 4Q23, compared to 43% and 33.7% during 3Q23 and 4Q22, respectively. During 4Q23, the expense-to-sales ratio increased to 15.4% compared to 12.8% during 3Q23. For 2023, BMP reported net sales of VND 5.2 tn (-11% YoY) and NPAT of VND 1 tn (+50% YoY).

We raise our rating on the shares of KDH to OUTPERFORM, along with our new target price of VND 41,300 (+11.3% upside) [previous target price of VND 30,950/share]. This reflects a change in our assumptions of market value of Tan Tao Township and Green Village Urban Area, which are expected to launch over the next two years. That being said, FY 2023 marked the third year of downtrend for KDH’s financial performance, with net revenue of VND 2.09 tn (-28.1% YoY) and NPAT of VND 730.5 bn (-32.5% YoY). This is much lower than our 2023 forecasts of VND 2.39 tn and VND 1.03 tn, respectively.  The shortfall was due to lower actual property sales recognition in the Classia project in HCMC.

We upgrade our rating for HDB shares to Outperform with a 1Y TP of VND 27,700/share as we revise upward our forecast for 2024 PBT by 5% to VND 16.4 tn (+25.8% YoY) and apply a higher target P/B of 1.4x (from 1.0x) to reflect the positive impact from strong credit growth (over 20% YoY) that could continue in the medium-term, allowing HDB to (i) improve its market share, (ii) retain NIM at above 5%, and (iii) withhold NPLs at a reasonable level (less than 2%). However, we reckon that the acceleration of loan growth, particularly in the property sector, could pose certain credit risks to asset quality if the market recovers more slowly than expected.  

The 2024FY business plan received shareholder approval, with two scenarios just as for the previous year: Lower bound net profit for 2024FY is targeted at VND 400 bn (+13x YoY), whereby sales volume is assumed to increase 13.3% to 1.63 mn tons. For the upper-bound plan, net income is targeted to increase by 17x YoY to VND 500 bn if sales volume increases by a higher rate of 20.7% to 1.73 mn tons. ASP is assumed to decline 5.2% YoY during the first case and by 5.7% YoY during the second case, primarily due to the high base during the first quarters of the last fiscal year. Returning to cash dividends: After many years of stock dividends, HSG is poised to begin the payment of cash dividends for FY 2023 at 5% on par (VND 500/share – equivalent to a dividend yield of 2.3%).

In 4Q23, DGC achieved net sales and net income of VND 2.39 tn (-23% YoY) and VND 746 bn (-34% YoY), falling short of our forecasts due to slower than expected recovery in ASP and the increase in electricity costs. Even though global semiconductor sales have shown early recovery signals in 4Q23 (+5% YoY), it may need some more time for yellow phosphorus prices to regain in tandem with semiconductor demand. We hence lower our 2024 net income estimates to VND 4.23 tn (+30% YoY, from VND 4.34 tn) on lower yellow phosphorus ASP (VND 118 mn/ton, + 12% YoY, from VND 123 mn/ton). We introduce our 2025 net income estimates (VND 5.7 tn, +35% YoY), driven by (1) 7-23% YoY sales volume growth, (2) 4% YoY increase in ASP and (3) lower raw materials costs, thanks to higher usage of in-house phosphate rock (80%/90%/100% in 2023/2024/2025) on the back of Mine Site 25 expansion. As such, 2024-2025 earnings growth will be primarily determined by (1) sales volume and ASP recovery of phosphorus-related finished products and (2) reduction in phosphate rock material costs. Despite lowering 2024F earnings, we increase our 1 year target price to VND 142,000/share (from VND 100,000/share) as we apply a higher target P/E (12x, from 10x) and roll over to average 2024F-2025F earnings (from 2024F). As the stock price has rallied recently, we call for MARKET PERFORM rating on DGC.

Poor 4Q results as people skip hospital visits during economic slowdown. For 4Q23, TNH recorded unaudited revenue and net profit decrease of 7% and 24% YoY, respectively. For 2023, TNH recorded unaudited revenue and net profit of VND 532 bn (+15% YoY) and VND 133 bn (-6% YoY), which is 9% higher than our revenue estimate but 15% lower than our NPAT estimate. If excluding one-off revenue, core revenue increased 3% only, which is 3% lower than our estimate. According to management, total outpatient visits saw 5% decrease while inpatient visits saw 9% increase compared to 2022. Continued expansion projects laid out for medium- to long-term. Management expects the commencement of its 3^rd hospital TNH Viet Yen during 2Q24. The fourth hospital - TNH Lang Son - also saw groundbreaking during Feb 24, which was faster than expected. The new hospital is expected go into operation during 4Q25.

For residential development, KBC still works towards determining calculation of the land use right fee (LUR) payment for Phuc Ninh Urban Area in Bac Ninh province. We expect that this may be delayed through 2025, thus 10 ha of saleable land which KBC sold before would be recorded during 2025 only. As such, we expect KBC to lease around 102 ha of industrial land in total in 2024, of which 30 ha has been secured to lease by new investors during 2023, 50 ha from Trang Due 3 IP and 22 ha from Tan Phu Trung IP. Accordingly, KBC is forecast to achieve VND 4.92 tn (-12.8% YoY) in net revenue and VND 1.36 tn (-38.5% YoY) in NPAT for FY2024. This forecast is lower than our previous forecast of the optimistic case due to the delay of revenue recognition from residential sales in Phuc Ninh Urban Area to 2025 as discussed above.

During the final quarter of 2023, PLX’ PBT reached VND 850 bn - a decline of 48.5% from the high base in 4Q22 and 28% QoQ mainly due to the petroleum segment. Domestic petroleum sales volume during 4Q23 dropped 11% YoY to 2.6 mn m3/tons compared to the peak in 4Q22, of which retail sales volume dropped -7.7% YoY to 1.7 mn m3/tons. Earnings from the petroleum segment declined 55% YoY and 33% QoQ to VND 322 bn due to the drop of petroleum prices of over 10% during the quarter which had a negative impact on the company’s trading activities. Cumulatively, 2023 PBT was VND 3.93 tn, recovering 73.2% YoY and exceeding company guidance 22%. The volume from the retail channel increased 6.9 % YoY to 7.02 mn m3/tons, increasing 40% over 2021.