Company Report

Tuning our 2023F core PBT assumptions 5% to VND 1.45 tn (+24% YoY). Including the one-off gain of VND 94 bn, our new 2023F PBT estimate is VND 1.55 tn, +6% YoY (up from VND 1.48 tn). This means that for 2H 2023, we envision a stronger core PBT of VND 772 bn (+29% YoY). PBT is expected to decline -4.3% YoY during 2024F, as we assume lower one-off income in 2024F and a flattish core PBT if we exclude the one-off gains for both years. Downgrade to MARKET PERFORM (from OUTPERFORM), with 2024 TP of VND 24,000/share (from VND 23,200/share). PVT is trading at 2023F and 2024F P/E forward ratio of 8.27x and 9.0x, respectively, which is at the high end of its historical P/E band. The stock remains our favorite play in the tanker industry (currently in an upcycle) with outstanding management, but we’d recommend to accumulate at a lower share price.

IDC is one of the largest industrial park developers in Vietnam, with 727 ha of available lettable land in Long An, Ba Ria Vung Tau, and Thai Binh provinces. Low compensation and clearance costs should enable IDC to maintain its gross profit margin of IP segment at above 50% between 2023 to 2026.  IDC trades at a 2023 P/E of 10.2x and P/B of 2.5x, and 2024 P/E and PB of 8.9x and 2.4x - lower than industry average of 14.8x and 3x, respectively. We have OUTPERFORM rating for the shares of IDC, wherein our 1-year target price is adjusted to VND 53,200/share (from VND 51,400/share), representing an upside of 8.8% from current market price. With 101.76 ha new signings and a payment schedule to be accelerated from one year to six months, as we observed amongst large clients, IDC’s cash flow should continue to improve.  We believe that IDC can maintain its cash dividend at 40% of par value during 2023 and 2024, with the dividend yield of 8.3%.

In 2Q 2023, GMD recorded better results than our expectation, surpassing even in such a low-key picture in terms of external demand, handily exceeding previous estimates. Net sales only declined by -6.7% YoY, while core PBT declined by a mere -10% YoY (while recovering by 8% QoQ). Revenue for 1H23 only declined by -2.4% YoY to reach VND 1.8 trillion, while PBT reached VND 2.5 trillion, including a VND 1.8 trillion one-off profit from Nam Hai Dinh Vu Port divestment recorded in 2Q 2023 (in line with our estimate of VND 1.8 trillion). Excluding the one-off gain, 1H2023 core PBT otherwise would have registered at VND 642 bn (-11% YoY). This also beat our in-house estimate thanks largely to a higher gross margin.

Reflecting positive performance on YoY basis and stable growth outlook of VRE’s core business of mall leasing, we reiterate our BUY rating on the shares of VRE with 1Y target price of VND 38,700/share (28.8% upside), a slight decline of 4% compared with our previous TP due to the rescheduling of new mall openings. Valuation (2023E EV/EBITDA of 8.8x, both below historical and regional peer average of 15x) is also attractive, in our view. Key downside risks to the shares of VRE include: (i) delay in development of Vinhomes mega projects which could impact the company’s expansion; and (ii) weaker-than-expected consumption which may lead to a slowdown of tenant expansion plans.

We maintain our Market Perform rating on the shares of TCB, with a 1Y TP of VND 38,700/share as we roll our valuation basis to 2024. We undoubtedly believe in the long-term prospects of the property and the corporate bond markets in Vietnam, and that a key market player, like TCB would eventually reap the rewards. Over the short-term, however, we continue to foresee challenges which is not likely to be resolved in its entirety over the short-term, but instead could take at least 2-3 years to resolve. During this time, the absorption rate in the property market may not be desirable and may adversely affect the cash flow of developers/landowners. Accordingly, TCB’s earnings growth may not match the impressive years (2014-2021) near-term. We project that the bank’s pretax profit for 2023 and 2024 will reach VND 23.3 tn (-8.5% YoY) and VND 27.2 tn (+16.1% YoY), respectively. Hence, ROE is projected to remain around 15% vs. the industry average of 16.2%.

KBC Q2 reported revenue and NPAT was VND 2 tn (+421% YoY) and VND 747 bn (vs. losses of -VND 323 bn in 2Q22), respectively. The strong growth during Q2 was primarily attributed to revenue from industrial land lease increasing 625% YoY, accounting for 95% of total revenue. Cumulatively, during the first six months of 2023, total revenue reached VND 4.27 tn (+294% YoY) and net income achieved VND 1.8 tn (+800.3% YoY), fulfilling 47% and 45% of full year revenue and net profit target, respectively.  By end of Q2, KBC had 185 ha committed to lease to several clients, of which KBC handed over 128 ha during the first six months. During 2H 2023, KBC management expects to deliver up to 100 ha in Quang Chau, Tan Phu Trung and NSHL IP. Meanwhile, the company also expects to hand over residential land in Phuc Ninh UA once the LUF payment to the State is complete. Should this be the case, KBC may achieve its challenging target of VND 9 tn (+840% YoY) in revenue and VND 4 tn (+151% YoY) in NPAT this year.

We attended the SAB analyst meeting on August 3, 2023 to receive an update on 2Q23 results and the sales outlook for 2H23, and get a better sense of the current competitive landscape. For 2Q23, SAB posted net sales and net profit of VND 8.3 tn (-7.7% YoY and +33.8% QoQ) and VND 1.2 tn (-32.5% YoY and +20.6% QoQ), respectively, which were in line with expectations. Q2 results were a byproduct of weak consumer demand, along with the stricter enforcement of Decree 100. Management indicated that it would be a challenge for the company to meet its annual targets, given that the domestic demand recovery remains slower than expected. On a positive note, market share gains have resumed since the Tet holiday, reducing the market share gap between SAB and its major competitor. 

We maintain our Market Perform rating on the shares for BSR, but raise our target price to VND 21,600/share given the low interest rate environment. Our target price is based on a 2024 P/E and EV/EBITDA target of 10x and 5x, respectively. Over the short-term, we believe that the share price can outperform the market due to robust earnings growth next quarter. However, due to the volatile nature of the company’s earnings due to fluctuations in both oil prices and crack spreads, the shares are likely more suitable to short-term investors with a high-risk tolerance. In addition, any news regarding the listing on HOSE would be supportive to the share price.

HPG trades at a 2024F P/E and EV/EBITDA ratio of 12.5x and 7.2x, respectively. We maintain our MARKET PERFORM rating, but raise our 12-month target price to VND28,500/share (from VND19,800), as we roll over our valuation basis to 2024F (from 2023F) and increase our target PE and EV/EBITDA to 13x and 7.5x, respectively, given the recent significant decline in the market interest rate. We expect a more significant recovery to take place from late 2023 or early 2024.  As the current price has already reflected part of the earnings recovery in the coming year, we believe investors should wait for a price correction to accumulate the stock over a longer-term investment horizon. Upside risk: stronger-than-expected demand for steel products in the domestic market; downside risk: lower-than-expected steel prices.

We increase our 2023 NPAT estimate by 32% over our previous forecast, encouraged by lower-than-expected PVC input prices. Our new one-year price target for the shares of BMP is VND 99,200/share (from VND 84,300/share) as we roll forward our price target to 2024F - representing +13% upside. We reiterate our MARKET PERFORM rating for the shares of BMP. 2Q23 earnings surpassed the prior quarter records due to resilient ASP and lower-than-expected PVC input prices despite lower sales volume. Net sales and NPAT were VND 1.3 tn (-14% YoY, -7% QoQ) and VND 295 bn (+103% YoY, +5% QoQ), respectively.

VHC posted 2Q23 results, wherein net profit reached VND 412 bn, declining -48% YoY but improving +88% QoQ due to gross margin expansion and lower selling expenses. While sales were in line with our expectation, 2Q23 NPAT was better than expected. For 2023, we expect net sales and net profit to reach VND 11 tn (-16.9% YoY) and VND 1.46 tn (-26% YoY). This is 11.4% higher than our previous net profit forecast. For 2024, we expect net sales and net profit to reach VND 12.4 tn (+12.6% YoY) and VND 1.7 tn (+17.8% YoY), respectively.  Our 1Y target price for VHC is VND 80,500/share (from 71,500/share), representing an upside of 3.9%. We maintain our MARKET PERFORM rating on the shares of VHC.

2Q23 earnings of DCM came out better than our expectation with net income of VND 290 bn (-72% YoY, but 26% QoQ). We have previously anticipated that 2Q23 earnings may be worse than that of 1Q23 as urea price continued to drop in 2Q23. In fact, the urea sales price dropped by -11% QoQ, which roughly halved the gross profit margin from 20.8% in 1Q23 to 11.3% (close to 12% in 2H19, when the domestic demand was weak due to adverse weather condition) in 2Q23. Additionally, expenses for science and technology development declined more than we expected in 2Q23. This, together with the increase in financial income, brought DCM to its 2Q23 earnings results, though we think at this point the company has reached a bottoming out point in terms of earnings going forward.

In 2Q 2023, SCS recorded revenue of VND 172 bn (-17.4% YoY) and PBT of VND 147 bn (-10% YoY), continuing the declining trend since 4Q 2022 and in line with our estimates. However, looking to the QoQ comparison, things look brighter with clear recovery in all financial attributes from previous quarters:  revenue growth of 6.4% QoQ and PBT growth of 14% QoQ.

With these results, 1H 2023 revenue reached VND 334 bn (-26.5% YoY) and PBT reached VND 277 bn (-24% YoY). However, such results do not register as a surprise to us, and overall performance during 1H 2023 has closely matched with our current estimates for 2023 and passed the halfway point for the year, which we find to be an encouraging sign.

2Q23 revenue reached VND 288 bn (+10% YoY), while Q2 NPAT recorded the best performance in two years. This result is in line with our forecast when the SZC MOU contract was announced at the end of 2022. Revenue from leased industrial park land was VND 263 bn (+3.9% YoY), having rented 15 ha to the Sonadezi Corporation (owns 46.8% of SZC) at USD 72/m2 (+17% YoY). The gross profit margin jumped from 36.4% in 2Q22 to 53.9% due primarily to increase in average lease prices, which cushioned SZC’s earlier actions of booking additional land costs for the remaining land in the fully-owned Chau Duc Industrial Park since 1Q22. In addition, shophouse sales in the Sonadezi Huu Phuoc Residential Area reached VND 11.7 bn, while there was no revenue in 2Q22. Interest expense increased 21% YoY due to the recognition of loan from the golf course which came on line. General and administrative expenses decreased -30% YoY due primarily to the reduction cost of salaries. Net income reached VND 95.9 bn (+56% YoY).

Our last rating on DRC was MARKET PERFORM, as we believe that 2023 earnings will likely decline due to weak demand, which forced DRC to reduce prices charged to its customers in order to protect sales volume, hence effectively squeezing the profit margin. Q2 earnings (-39% YoY) came out even worse than company guidance (pretax profit of VND 63 bn vs company guidance of VND 80 bn). Earnings may start to recover in 2H23 (+57% HoH, -28% YoY) thanks to (i) the second half of the year traditionally being the high season and (ii) a gradual recovery in demand in both the domestic and export market.