Company Report

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.  

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.