Company Report

On the other hand, we think the current price has discounted the bad news. Saigon beer remains the dominant brand in Vietnam and we expect SAB to post growth when the sector recovers. SAB is trading at a 2024E P/E of 18x, which is 1SD lower than its past-5-year average (23x). Our revised 12-month target price is VND63,900/share (from VND76,000/share), based on a mix of DCF methodology (WACC: 9.53%, growth: 2%) and a lower PER of 20x (from 23x). With potential upside of 10% to our new TP, we maintain our MARKET PERFORM rating.

While other retailer earnings lost their luster during 2023, PNJ managed to outshine with net income of VND 1.97 tn (+9% YoY) for the year. This was made possible by market share gains associated with new outlets and tapping a new customer demographic, along with gross profit margin improvement. During 2024, we expect that the macroeconomic headwinds to subside, which should further boost jewelry purchases. We expect PNJ’s retail sales growth to increase at a faster pace (+17% YoY) than the jewelry industry’s expected recovery during 2024 due to market share gains. PNJ’s net income during 2024 is estimated at VND 2.3 tn (+17% YoY, from VND 2.17 tn). During  2024, we expect PNJ to open 35 new gold stores (increasing store count 9%). 

HAH is trading at 2024F forward P/E forward of 12x, which is relatively high compared to its historical P/E range of between 6x-9x. We believe that the current valuation is justified by the improvement in the industry fundamentals due to Red Sea and geopolitical tensions increasing TEU-mile demand for the whole industry, as well as long-term contribution of the new capacity from 2024.

We utilize the DCF method to fully reflect the potential of HAH (while our previous valuation applies the P/E method). Considering the earnings outlook from 2024, our forecast results in a target price of VND 45,100 per share (reflecting 7.5% upside), and assign a MARKET PERFORM rating. The stock price has partially priced this that we would recommend buying on dips. 

For 2024E, we expect net sales and net profit to reach VND63.7tn (+5.6% YoY) and VND10.1tn (+12.1% YoY), respectively. This is 2% and 3% lower than our previous net sales and net profit forecasts. We are still optimistic about a 2H24 recovery but reduce our forecasted gross margin improvement from 250bps to 160bps, as well as assuming no price increase during 2024. The selling expenses/sales ratio is expected to stay at c.21.5%, while financial income is expected to decrease given the lower interest rate environment. VNM is trading at a 2024E P/E of 17x. Our new 12-month target price is VND82,000/share (from VND87,400/share), based on our unchanged DCF and P/E methodology. With upside potential of 15% to our new TP, we reiterate our OUTPERFORM rating.

4Q 2023 revenue of VND 1.7 tn, +19.8% YoY and +26.5% QoQ due to higher day and utilization rates of rigs. 4Q 2023 NPATMI: VND 195 bn, +261% YoY (due to low base) and 29.6% QoQ due to a higher day rate. This brings 2023 NPATMI to VND 575 bn (compared to a loss of VND 96 bn for 2022) and 10% higher than our estimate of VND 507 bn due to earlier than expected improvements in the 4Q23 day rate. On investment: The company turned its attention from a newer USD 130 mn rig to an older USD 90 mn rig (15 years old), which can be put into operation at year-end 2024 if the company proceeds with this purchase

Net profit during 1Q24 came in at a sterling VND 103 bn, turning the tables on the prev. loss of VND 680 bn at 1Q23. However, it declined -76% QoQ from the high base of the previous quarter due to a drop in export price and higher SG&A expenses. The company’s sales volume increased 16.3% QoQ and 33.7% YoY to 454k tons during 1Q24, the highest level since 2Q22, in which domestic sales volume increased 18.6% QoQ and 24.8% YoY to 250k tons, while export also increased 45.7% YoY and 13.1% QoQ to 202k tons. We maintain our FY2024 earnings forecast for HSG at VND 775 bn (+24.8x YoY). We expect the company’s sales volume to increase 14.6% YoY to 1.6 mn tons for FY 2024, whereby export and domestic volume are expected to increase 16% and 13% YoY to 891k tons and 711k tons, respectively. The FY2024 gross margin to improve to 11.3% from 9.7% during FY2023 due to: (1) the low base of 1Q23 with a loss of VND 680 bn, as mentioned earlier; (2) improvement in the capacity utilization rate from 58% to 67%; and (3) a slight increase in the contribution of the domestic channel from 55% during FY2023 to 56% for FY2024.

During 4Q 2023, Saigon Cargo Service (HOSE: SCS) posted revenue of VND 198.8 bn (+1.7% YoY and +15.9% QoQ) and profit before tax of VND 146.1 bn (-13.8% YoY and +0.2% QoQ), meeting our in-house expectations. It is notable that 4Q 2023 witnessed a 6% YoY increase in international cargo volume, marking the first quarter since 4Q2022 to experience YoY growth. 2024 should be an optimistic year for SCS as they have secured a 3-year contract of cargo handling services at Tan Son Nhat International Airport for Qatar Airways, commencing from this quarter (i.e. Feb 2024). This contract should boost both SCS’ market share (from 35% to nearly 50%) and earnings. This deal should contribute around 25%-30% of 2024 PBT. We do not expect any significant changes to cost structure, but a slight increase in concession fees from 1.5% to 2% from 2H24.

We maintain our 2024 net profit forecast at VND 11.2 tn, implying an increase of 64% YoY and driven by the recovery in both sales volume and steel prices. We assume that the company’s construction steel and HRC volume will reach 4.5 mn tons (+17.8% YoY) and 3 mn tons (+8.3% YoY), respectively, for 2024. Over the longer-term, we expect that the company’s earnings will achieve average growth of over 30%/year between 2025 to 2027. This should be driven by the commencement of Dung Quat 2 project, which would allow HRC sales volume to more than double from 2.8 mn tons during 2023 to 7.5 mn tons for 2027. The current domestic supply shortage between 4-5 mn tons/year, along with the more recent growth in exports should enable the company to boost its HRC segment after the project commences operation.

In 1Q FY24, CTD reported revenue of VND4.124tn (+14.1% QoQ and +32.5% YoY) and pre-tax earnings of VND86bn (+118.9% QoQ, despite incurring a loss in 1Q FY23). In terms of profitability, CTD achieved a gross profit margin of 2.4% and a pre-tax margin of 2.1% in 1Q FY24. In the face of challenging conditions, the growth of the backlog in 1Q FY24 demonstrates strong resilience, indicating a potential recovery in FY24. The company’s total backlog has consistently reached VND24tn, including 40% for residential and 20% for industrial construction. In addition, CTD aims to target the international market, and the net margin is expected to be at most 3%.

Taseco Land (TAL) was established in 2009 with its main business in real estate development. In early 2018, TAL restructured the organization and increased the chartered capital to VND 900 bn. Thanks to profit retained in the last several years along with capital raising from current shareholders, currently, the charter capital of TAL stands at VND 2.97 tn (US$123 mn). For FY2023, we estimate the Company will achieve VND 3.29 tn in revenue and VND 480 bn in NPAT. For FY2024, we expect the Company will i) launch for sale in residential area in Hai Yen Resettlement area, Nghi Son town, ii) sale continuation in the Alacarte Ha Long, Central Riverside and Luong Son Riverview project and iii) recognition of unbilled bookings revenue in N01-T6 apartment building in Hanoi and one-off financial income from the divestment of office building in land lot B2-CC4, Starlake Urban Area, Hanoi. As a result, TAL is expected to achieve revenue and PAT for FY2024 of VND 3.37 tn (+3% YoY) and VND 631 bn (+31% YoY) respectively.

For 2024, we estimate revenue at VND 5.2 tn (+12% YoY, from VND 5.08 tn) and net income at VND 281 bn (+15% YoY, from VND 250 bn). While we expect the demand in export market to be warmer in 2024, the gross profit margin may not improve much as the depreciation expense from the new radial production line kicks in. Our new 2024 earnings estimates are 12% higher than the previous as we take into account the recent increase in sales order from the US market (from 22K units/month to 25K units/month, accounting for 33% of the total radial tire sales volume), while the sales order from the Brazil market is to be remained unchanged (35K units/month, accounting for 47% of the total radial tire sales volume). With an unchanged target P/E of 12x on 2024F revised financials, we derive a new target price for DRC at VND 28,400 per share (from VND 25,300). We maintain MARKET PERFORM rating on DRC.

Given the weaker-than-expected 9M23 results, we slash our NPATMI estimate to VND608bn (-83% YoY; from VND2.05tn) for 2023, due primarily to the underperformance of the retail, meat, and mining business lines. For 2024, we expect a broad-based recovery across all segments.  We believe that revenue growth from WCM (consumer retail chain) could come from a rapid pace of new store openings during 2022-23 that should start yielding fruit, along with the recovery in consumer spending. For the mining business, we admit that uncertainty in ore grade poses too much of a challenge to estimate MSR’s margin - prompting us to take a more conservative view. Associate TCB is estimated to post 15% PBT growth for 2024, with encouraging credit growth and a higher NIM. Meanwhile, interest expenses have already established a high base for 2023 and will likely not increase during 2024 (as we expect MSN will partly reduce its outstanding debt). Our 2024F net sales and NPATMI estimates are set at VND90.1tn (+9.3% YoY) and VND1.58tn (+160% YoY), respectively.

We reiterate our MARKET PERFORM rating for the shares of BMP. Our new target price for the shares of BMP is VND 103,400/share (from VND 99,200/share), as we apply a target P/E 2024F of 10x (unchanged) - representing 2.6% downside. BMP posted net sales and NPAT of VND 926 bn (-38% YoY, -31% QoQ) and VND 209 bn (+19% YoY, -29% QoQ), respectively, off from its 2Q23 historical high due to a significant decline in sales volume. We estimate that 3Q23 sales volume decreased -38% YoY while ASP remained flat YoY due to a slowdown in construction activities and rising competition. Gross profit margin increased to 43% during 3Q23, compared to 42.8% for 2Q23 and 28.3% for 3Q22, owing to a drop in PVC input prices. During 3Q23, the expense-to-sales ratio remained stable at 12.8% compared to 13% for 2Q23, but staged an increase from the 8.8% at 3Q22.

Highly leveraged position has been the main concern for FRT, especially in the rising interest rate environment (4Q22 and 1Q23). The funding pressure of FRT has eased with borrowing costs in 3Q23 declined by 200 bps from the peak and improved profitability from the pharmacy chain. With lower borrowing costs, FRT can speed up new openings for Long Chau chain to gain market share in the context that competitor An Khang and Pharmacity are still struggling with their business model. Larger scale should eventually help to enlarge the profit margin for Long Chau over the long term. As such, the reduction in borrowing costs is meaningful for a highly levered company like FRT, we hence raise P/S target multiple for the pharmacy chain from 0.8x to 1x. We hence lift our 1-year target price to VND 117,000/share (from VND 105,000). As FRT share price has increased by 35% since our last BUY call, we now call for OUTPERFORM rating on FRT shares with 13.5% upside.