Company Report

Given expectations that the provisioning of VAMC bonds will be completed during 2023, we believe that earnings growth during 2024 and 2025 will be promising, and the bank will have a better chance of accomplishing its restructuring plan of the required timeline. Although STB maintains a reasonable level of exposure to the real estate sector and has no interest in corporate bonds, we are concerned about the quality of its loan portfolio, including the Bamboo Airways exposure. Accordingly, we finetune our rating to Outperform from Buy, with a 2024 target price of VND 37,500/share.  Our target price represents an upside of 14.7%.

PTB operates at a higher growth rate than the wood industry due to its large customers (Masterband, and Melissa & Doug). In addition, the company’s stable earnings reflect optimized labor productivity – allowing the wood gross profit margin to range between 3% - 4% higher than industry average.  By our estimate, a 1% increase in interest rates leads to a 2% decrease in PTB’s pre-tax profit. We see PTB's profit bottoming out in 2Q23, however the recovery is not strong in 2024. PTB trades at a 2023 and 2024 forward P/E of 10.2x and 9.05x, respectively, which are lower than peer (11x). Using a blended average P/E for the wood industry of 11x and the stone industry of 10x, we derive a 1Y target price for the shares of PTB of VND 61,600/share (upside 6.6%). We maintain our MARKET PERFORM rating.

We maintain our 2023F revenue estimates of VND 17.5 tn (+6.5% YoY) and finetune our PBT estimates to VND 1.176 tn (+23% YoY, up 13% from our previous forecast to reflect higher financial income). We also increase our backlog assumption between 2024F-2027F by USD 300 mn (total USD 2.2 bn backlog value in this period) to reflect the potential opportunity for PVS to be awarded an offshore conventional oil&gas project near-term. Reiterate OUTPERFORM rating, with new TP VND 39,900/share. Over the short-term, news regarding results of project bidding and the development of Block B projects are main catalysts for the shares.

Despite the general decline in the first half, PAN maintains its revenue and NPAT guidance of VND 15.2 tn (+11% YoY) and VND 840 bn (+6% YoY), respectively, with expectation of market dynamics weathering the storm (a better Winter-Spring crop, recovery and lower cost of operating business of fisheries sector). For 1H23, PAN posted revenue and NPATMI of VND 5.3 tn (-14% YoY) and VND 105 bn (-40% YoY), respectively. Excluding non-recurring asset sales in 1Q23 from subsidiary Bibica Corp (BBC), the NPATMI decrease would be 21% YoY.  By segment, aquaculture saw the largest drop due to the economic downturn, coupled with a high 1H22 base. For agribusiness, a higher COGS and weak demand for the seed business was observed, while packaged rice, pesticide and fumigation saw an increase.

We had initially anticipated a double digit decline in revenue and earnings for both 2Q23 and 3Q23. However, 2Q23 results surprised, with revenue declining by -17% YoY and net income by -8% YoY. In July, the decrease in revenue eased to -4% YoY, while net income increased by 10% YoY. This is explained by: (1) more rapid new store opening pace and (2) better-than-expected gross profit margins on product mix changes. Taking recent developments into account, we increase our 2023 and 2024 net income forecasts to VND 1.84 tn (+2% YoY, from VND 1.74 tn) and VND 2.04 tn (+11% YoY, from VND 1.96 tn), respectively. As such, 2H23 earnings may post YoY growth (+4% YoY).  Our higher EPS forecasts prompt us to increase our target price for the shares of PNJ to VND 90,200 per share (previously VND 86,000/share), representing 13.5% upside. We reiterate our OUTPERFORM rating on the shares. 

During 2Q 2023, benefiting from a tight global drilling market, PVD exhibited a very strong comeback from both the low base last year and on a QoQ perspective – matching expectations. Revenue declined -6.7% YoY (due to no hired rigs this year compared to one hired Hakuryu-11 rig last year) and was up +15% QoQ. NPAT grew in both QoQ (surging +196% QoQ) and YoY terms. Excluding the one-off gain of VND 70 bn from a contract termination agreement, core NPAT would be VND 94 bn, +113% QoQ. 

We reiterate our Outperform rating on the shares FMC. Our updated one-year price target for FMC is VND 56,200/share (from VND 50,600/share), as we roll forward our price target to 2024F EPS - representing +21% upside. FMC exports reached USD 87 mn (-26% YoY) and outperformed the Vietnamese shrimp export market (-32% YoY) during 1H23 due to FMC’s key market in Japan which remain stable YoY.  During 2Q23, FMC reported net sales and NPATMI of VND 1 tn (-27% YoY, +2% QoQ) and VND 71 bn (-59% YoY, +53% QoQ), respectively as 2Q22 was the earnings peak of FMC. 

July preliminary results: total revenue VND 9.8 tn (-11% YoY, +4% QoQ), in which ICT &CE and grocery revenue were VND 6.7 tn (-21% YoY, flat MoM) and VND 2.8 tn (+17% YoY, +11% MoM), respectively. With worse-than-expected 2Q23 results, we revise down our 2023 net income estimate to VND 1.27 tn (-69% YoY, from VND 3 tn). 2024 net income is estimated at VND 4.99 tn (+294% YoY, from VND 4.6 tn). We believe that MWG’s earnings passed the trough in 2Q23 and is on a recovery trajectory. Hence we raise our target multiples and derive a new SOTP-based target price of VND 61,500 per share (from VND 59,400). Since our last BUY call on July 12^th, the MWG share price has increased by 10%. As our new target price offers 14.1% upside, we rate the stock as OUTPERFORM (from BUY).

At the current price, HSG is trading at 2024FY P/E, P/B and EV/EBITDA forwards of 23.6x, 1.2x and 7.6x respectively, while NKG trades at 2024 P/E, P/B and EV/EBITDA forward of 20.4x, 0.9x and and 8.1x respectively. Our rating for both stocks is Market Perform, with a 1-year target price of VND 19,300/share for NKG, and VND 19,900/share for HSG based on target PB and EV/EBITDA of 0.9x and 7.5x respectively for NKG, and 1.2x and 7.5x for HSG respectively.

Given the degree of support from Cir. 02, we believe that NPL formation rates have peaked during 1H23, and that the NPL ratio will be vacillate around 3% for the remainder of 2023. VIB has exhibited less interest in corporate bonds and real estate developers in general. However, asset quality still deteriorated, as lending rate hikes have affected customer prepayment. Although we believe that early government intervention in the real estate sector will help shorten the industry's recovery time compared to the previous cycle, the recovery path remains hazy at least another year, in our view. Thus, we maintain our Market Perform rating on the shares of VIB with a 1-year target price of VND 22,700 per share.

We are maintaining our OUTPERFORM rating on the shares of VCB with a 2024 target price of VND 105,900/share (from VND 92,633/share after adjusting for the stock dividend) - representing an upside of 18.7%, as we roll forward our valuation basis, assuming that the company’s private placements will be successful, and increase our target PB to 2.7x (from 2.4x) due to the lower interest rate environment. VCB posted VND 9.3 tn pretax profit (+25% YoY) vs. our estimate of VND 10 tn (+35% YoY), as the bank booked more provisions than we had anticipated. Nevertheless, we continue to view the 2Q23 results as strong and the 1H23 provisions as pre-emptive and will likely enable future provisions to be reduced from 2H23. During the period, VCB also bucked the trend in both NIM (+2 bps QoQ) and asset quality (flat NPL ratio of 0.8%, and further fortified its provision coverage at 386%). The only drawback for the quarter, in our view, was that CASA nudged -43 bps lower to 30%, as the peer average CASA improved 45 bps. We however do not consider this as significant, as VCB continues to possess the lowest funding cost in the sector due in large part to its stable depositor base. CASA should further improve over the near term as deposit rates remain at a low level.

DGC delivered net income of VND 882 bn (-54% YoY) for 2Q23, which exceeded company guidance of VND 630 bn. Compared to the latest quarter, net income increased 7% QoQ, due primarily to higher usage of in-house phosphate rock, as ASP continued its downtrend. We expect that earnings for 2H23 will rise 11% vs. 1H23 as the price of yellow phosphorus and related products recover - along with the rebound in demand from fertilizer and semiconductor producers. The price of DAP-type fertilizer has increased between 12%-15% from the trough of July due to higher agro-commodity prices. Meanwhile, we expect that demand for yellow phosphorus from semiconductors to recover during late 2023, helping DGC to post double digit net income growth for 2024. We estimate 2023 and 2024 net income of VND 3.59 tn (-41% YoY, from VND 3.8 tn) and VND 4.34 tn (+21% YoY), respectively. We derive a target price for the shares of DGC of VND 84,000 per share – representing upside of 14.4%. We call for OUTPERFORM rating on the shares.

For 2023, we expect that the company will post net sales and net profit of VND 63.4 tn (+5.7% YoY) and VND 9.1 tn (+5.9% YoY), respectively. This is -1.3% lower than our previous net profit forecast. Such an outlook translates into 2H23 net sales and net income growth of +10% and +18% YoY, respectively. For 2024, we expect net sales and net profit to reach VND 67.4 tn (+6.3% YoY) and VND 10.7 tn (+17.2% YoY), respectively. Our 2024 net profit forecast is 4.4% higher than our previous estimate. We raise our GPM assumption for 2024 from 42.1% to 43% to reflect the declining trend of imported milk powder. Our updated 1Y target price for the shares of VNM is raised to VND 86,600/share (from VND 82,000/share), based on our 2024E EPS and DCF methodology. With upside of 19%, we reiterate our OUTPERFORM rating on the shares of VNM.