Company Report

We downgrade our rating to Market Perform (from Outperform) on the shares of QNS, with a target price of VND 53,500/share (from VND 65,000/share), as we lower 2024 earnings 5% and lower P/E target for the sugar segment. We consider that sugar prices may be approaching the top of the cycle and that valuations may be challenged to sustain through FY 2024/25. Our new price target represents a potential upside of 14% (total ROI 22%). We remain positive growth on business results, encouraged by elevated domestic sugar prices and sustainable refined sugar (RS) volume growth. The company also paid a stable cash dividend, with a 2024 dividend yield of 7.5%.

We are downgrading our rating on the shares of KBC to MARKET PERFORM (from OUTPERFORM), as we lower target price to VND 33,200/share. Our downgrade reflects both the delay of industrial park (IP) land transferred to tenants and our belief that KBC’s major project development could be further delayed. Both factors have already negatively impacted QoQ revenues and NPAT.  For 3Q23, KBC posted revenue of VND 247.1 bn (+21.6% YoY & -89.4% QoQ) and NPAT of VND 19 bn (-99% YoY & -98.2% QoQ) due to the delay of industrial park (IP) land transferred to tenants and the absence of one-off revaluation gain as of 3Q22 with value of VND 2.18 tn. Between Q1-Q3, net revenue reached VND 4.79 tn (+272% YoY), and total net income reached VND 2.09 tn (-2.3% YoY), fulfilling 53% and 52% of the company’s full year revenue and net profit target, respectively.  The company has achieved 63% and 72% of our previous forecast for FY2023 revenue and net profit, respectively.

We maintain our Market Perform rating on the shares of TCB, although we opt to reduce our 1Y TP to VND 34,500/share (from VND 38,700) as we apply a 10% discount for the concentration risk of the bank, and increasing our NPL assumption 40 bps. The increase of the corporate bond balance +21% QoQ (or VND 8.5 tn) and loans to the real estate sector +6.7% QoQ (or VND 14 tn) during 3Q23 was not really a welcome move. We would have preferred to see a more reduced balance in corporate bonds held. Although apparently poised to diversify its loan book, TCB has dove further and doubled down on the property sector. Loans to ReCom (real estate, construction, and construction materials) amounted to 43% of the bank’s total credit on issue at 3Q23 (vs. 32% at 2020).

GEX total revenue and profit-before-tax (PBT) during 9M23 dropped -11.5% and -21.4% YoY respectively to VND 21.9 tn and 1.39 tn, due to the decline in electrical equipment and construction material segments following the stagnancy of the residential property market. However, the revenue and gross profit from the property segment, which is mainly contributed by industrial park segment under VGC, increased 20% and 64.6% YoY respectively to VND 3.7 tn and 1.7 tn (in spite of the relatively high base of 9M22), and was catalyzed by the rise in lease prices of between 15%-20% YoY in some industrial parks and the strong growth by 26.6% in leasing area, which reached 157 ha during 9M23.

IDC is one of the largest industrial park developers in Vietnam, with 631 ha of leasable land which are available for sales in Long An, Ba Ria Vung Tau, and Thai Binh province. Low compensation and clearance costs should enable IDC to maintain industrial park segment gross profit margin of the at above 42% through 2026.  We reiterate our OUTPERFORM rating on the shares of IDC with 1-year target price of VND 53,200/share, which represents 9% upside. At the end of third quarter 2023, IDC has signed for leasing of 122 ha in form of MOUs or leasing contracts. With payment schedules to be accelerated from a year to 6 months, IDC’s cash inflow will continue to increase.  As such, we believe that IDC will maintain its cash dividend at 40% on par value through 2024, which represents a dividend yield of 8.9%.

We reiterate our OUTPERFORM rating on the shares of FPT, with a higher 12-month SOTP-based TP of VND 100,100 (equivalent to 8% upside potential). FPT trades at an attractive 2024E P/E of 14.1x relative to peers’ average of 14.9x. While the slowing growth of signed revenue, narrowing PBT margins of domestic IT and online advertising need to be monitored, FPT is expected to win more contracts due to its low-cost advantage and long-term benefits from its increased presence in international markets. Further, FPT Education too is expected to remain on a solid growth trajectory for 2024, driven by the gap between education supply and demand in Vietnam and the expectation that FPT University will receive its first batch of students in semiconductors and microelectronics. We also believe there to be limited FX risks associated with FPT’s foreign debt given its robust hedging strategy; FPT also maintains healthy interest coverage and net cash.

In 3Q 2023, GMD posted net sales of VND 998 bn, +1% YoY and +9.4% QoQ, and PBT of VND 397 bn +18% YoY, beating our estimate of VND 360 bn by a comfortable margin, thanks to strong improvement in gross margin of both the Port segment and Logistics segment. Excluding Gemalink, all GMD feeder ports throughput during the quarter reached 281K TEU, +3% YoY and +1% QoQ. Gemalink improved in the quarter, with estimated volume of 260K TEU (excluding barging), +2% QoQ showing quarter-on-quarter improvement of the external demand from US/EU markets, according to VPA data.

Top-line trailed our forecast, but net profit slightly exceeds due to gross-margin expansion. For 3Q23, VNM reported net sales and net profit of VND15.6tn (-2.8% YoY) and VND2.5tn (+9.1% YoY), respectively. Accordingly, gross margin for the quarter was 41.9% (+240bps YoY; +140bps QoQ) on the back of a correction in raw material prices. For 9M23, net sales and net profit reached VND44.8tn (-0.3% YoY) and VND6.7tn (-0.6% YoY), respectively, completing a respective 71% and 77% of management’s full-year target. Management hints that for 2023, while sales would be on track (flat YoY), net income might grow 3% YoY on continued margin improvement in 4Q23. New packaging launch likely to continue across product portfolio through mid-2024. SG&A reached 24.4% of net sales in 3Q23 (+162 bps YoY, +50bps QoQ), as the larger gross profit was reinvested into marketing and promotional activities.

We believe that NIM will recover in 4Q23 and improve modestly in 2024 because deposit rate decline will be factored in coming quarters and the bank concentration in medium and long-term loans has stabilized lending rates. However, the cash flow needed to settle debts, particularly for mortgage, consumer, and developer loans, has been negatively impacted by the economic downturn, that will still pressure on the asset quality of the bank in our view. As a result, we maintain our MARKET PERFORM rating for the shares of HDB, with a 1Y TP of VND 20,100/share.

Despite the slowdown of the economy and a rattled consumer, VRE continues to take advantage of stable growth and operational efficiencies in its core business of mall leasing. Given the weak growth expectations for 2024 due to management’s postponement of new mall openings and the decline in property sales YoY, reflecting the overall strategy of VRE to focus on Vincom Megamall type development which do not have shophouses for sales component as Vincom Plaza/Vincom Plus projects have, we are lowering our 1Y target price to VND 31,300/share (from VND 38,700/share). Our reduced TP reflects the use of a more conservative capitalization rate of higher 0.25%-1.0% than the previous valuation. Nevertheless, despite the level of stress that the counter is experiencing, we feel much of the bad news is already priced in and are maintaining our BUY rating on the shares given the implied 30.7% upside.

For 4Q 2023 and 2024, HHV continues to be benefited from the upcycle of infrastructure investment that resulting in construction as the growth driven factor for sales and earnings during this period. Meanwhile, we assume BOT segment sales growth in 2024 to converge to a natural rate, at 3-5% variable amongst projects. Overall, net earnings for 4Q 2023 and 2024 are respectively forecasted at VND 117 bn (+55% YoY) and VND 477 bn (+12.2% YoY). The lower earnings growth in 2024 net income is due to the high-based performance in 2023. Based on the forecasts for 2024 (which has yet to consider the impact of share placements to 2024F EPS), the P/E forward ratio is around 11.x and the TTM P/E ratio stands at 14.x, which are relatively lower than the three-year average P/E ratio of 16.x. 

We upgrade the shares of HSG from Market Perform to Outperform, and increase our 1-year target price to VND 22,600/share (from VND 19,900/share). In addition to HSG’s significant profit beat for the quarter, the recovery in steel prices and increase in export demand from North America should be catalysts for the shares over the near-term.

Maintain MARKET PERFORM. We up our 1Y TP for PVT to VND 27,000/share (from VND 24,000) based on P/E target of 9x, equivalent to 11% upside.

Short-term catalyst: we think price catalyst can be higher tanker spot rates in winter season and solid 4Q 2023 earnings growth estimated at 15% YoY.

Long-term catalyst: we would be careful on the reversal of the tanker industry should a demand destruction event were to happen, but we believe PVT earnings trend would be more stable because of its high provision practice to serve as a buffer for hard times.

Investment view: We reiterate our Outperform rating for the shares of FMC. Our one-year price target is VND 55,500/share (+15% upside). We remain bullish on the shares, as the Japanese market has a higher ASP, limited competition, and a higher barrier to entry with the preference for the value-added productscoming from Vietnam.

MWG delivered disappointed results in 3Q23 with net sales and net income of VND30.3tn (-5% YoY, +2.8% QoQ) and VND38.8bn (-96% YoY, vs VND17.4bn in 2Q23). The gross profit margin inched up marginally, from 18.5% in 2Q23 to 18.7% in 3Q23, aiding the QoQ recovery in earnings. Excluding the financial income, we estimate the PBT margin of the ICT & CE segment improved from 0.8% in 2Q23 to 1.6% in 3Q23. Net sales and net income tracked for 9M23 totaled VND86.9tn (-16% YoY) and VND77.5bn (-98% YoY), respectively, having accomplished only 64% and a mere 2% of management’s 2023 guidance. As such, we believe earnings have bottomed out in 2Q23 and are on the recovery path, though the pace is lower than our expectations.