Company Report

We lower our rating on the shares from Outperform to Market Perform, despite increasing our 1-year target price to VND 40,000 /share (from VND 35,800/share) on the back of our net income revision by 10%. We expect PLX’s 2023 PBT to achieve strong growth of 76%YoY, reaching VND 4 tn.  While we expect total domestic volume can increase 4%, the margin can be supported by the full-year impact of the adjustment in petroleum retail price formula. PLX’s 4Q22 PBT reached VND 1.65 tn, the highest level since 3Q21 and accelerating 426% QoQ due to both an adjustment in retail petrol pricing and favorable exchange rate movements. The development value-added services at petroleum stations, in our view, is supportive of long-term growth, as we anticipate that PLX will provide truck stop-related services such as food, motel, car-washing, laundry service, at its large petrol stations (around 10% of PLX’s retail stations over the long-term). PLX expects to pilot the new model in between 10-20 large stations prior to mass roll-out, with the first set being launched in 2023.  While we also believe that the full 40% divestment from its stake in PGB on Apr 7^th could serve as a short-term catalyst for the shares (potential VND 700 bn gain), our valuation and earnings do not take this factor into account.

Net sales during 2022 were flat at VND 1.6 tn (USD 66 mn), but some products outperformed. Strong growth came from core products, such as antibiotics (+46% YoY), cancer drugs (+63% YoY), and dialysis solutions (+27% YoY). On the other hand, trading products (medical supplies and drugs) decreased sharply to VND 116 bn (-74% YoY). Gross profit reached VND 767 bn (+23% YoY, USD 33 mn), while PBT reached VND 299 bn (+29% YoY, USD 13 mn) due to the company’s focus on higher margin business. Growth during 2023 is expected to decelerate, according to management. DBD expects revenue to achieve VND 1.8 tn (+9% YoY, USD 75 mn) and PBT of VND 255 bn (-17% YoY, USD 11 mn). This equates to a drop in the PBT margin from 19% during 2022 to 15%. For core products, the company expects slow to no growth except for cancer drugs and dialysis solution of 15% and 20%, respectively.

After a 341% YoY surge in net income in 9M22, DGC earnings growth started to normalize from such a dramatic ascent, and posted a comparatively shallow pullback in 4Q22 (-20% YoY), which did not come as a surprise to us. However, we believe that DGC earnings will continue to decline in the coming quarters, along with the expected correction in the yellow phosphorus price, and a possible increase in electricity (expected in 2Q23). Meanwhile, the company’s currently high net cash position can help deliver an increase in interest income, helping to cushion the earnings drop to some extent. We forecast DGC net income to decline to VND 3.8 tn (-37% YoY) in 2023, though it is still much higher than earnings before COVID-19.

For 4Q22, the number of total visits rose. Revenue reached VND 125 bn (USD 5.3 mn, +21% YoY), while net income reached VND 43 bn (USD 1.7 mn, +33% YoY). Despite the price increase from August, gross profit margin remained at 47% partly due to a drop in number of inpatient visits. Expansion plan is clear with a more sensible timeline. Last year, TNH planned to commence three hospitals concurrently. However, they have since adjusted their plan to focus on two hospitals: TNH Viet Yen and TNH Lang Son with possible opening time of 2024 and 2025, which we view as both more appropriate and certain. The TNH Viet Yen Hospital with capacity of 300 beds has commenced construction, with an expected completion date of 2Q24.

BMP’s 2022 net revenue and NPAT were VND5.8tn (+28% YoY) and VND696bn (+225% YoY), respectively, achieving 101% and 106% of our 2022 forecast. NPAT during 4Q22 hit a three-year high due to lower PVC input prices (PVC prices accounted for 80% of COGS). However, BMP sales volume has weakened, owing to the slowdown in construction activities. Sales volume reached 24k tonnes (-8% YoY, -5% QoQ) during 4Q22, equivalent to 89% of the 4Q22 target. During 4Q22, BMP reported net sales and NPAT of VND1.4tn (-1% YoY, -6% QoQ) and VND248bn (+117% YoY, +41% QoQ), respectively. Gross margin increased significantly from 19.9% during 4Q21 to 33.7% during 4Q22, as ASP remained high while input costs remained low. Since the 2Q22 peak, PVC resin prices have dropped dramatically from USD1,430/metric tonne during 2Q22 to USD 950/tonne during 4Q22. Due to the increase in the gross margin, net profit/metric ton reached a record high of VND10.4m/metric tonne during 4Q22, a significant increase from VND4.4m/metric tonne during 4Q21.

PNJ achieved net sales and net income of VND 8.3 tn (+18% YoY) and VND 466 bn (+3% YoY), respectively, during 4Q22. Although 4Q22 earnings growth decelerated (vs 133% YoY during the 9M 2022) due to weaker consumer spend, this was in line with our expectation. We expect that the weak macroeconomic environment will continue to inhibit PNJ earnings growth during 1H23 before rebounding during 2H23. However, PNJ delivered a net income growth of 12% YoY during January 2023, due to the surge in gold bar sales on God of Wealth Day which fell in January 2023 (vs February 2022). We expect financial performance through June to more accurately reflect existing macro headwinds.We forecast PNJ net income to grow 13% YoY between 2023-2024, driven by: (i) continuous network expansion and store upgrades; and (ii) gaining market share from mom & pop shop on the back of PNJ’s large scale, ability to operate a large number of stores across the country with wide range of product assortments and new product offerings. 

The 2023 business plan was approved, but with two scenarios: HSG’s net profit in 2023F is targeted at VND 100 bn (-40%YoY) under a conservative-leaning plan, where sales volume is assumed to drop -16% YoY to 1.5 mn tons. Under the more bullish scenario, net income is targeted to increase 20% YoY to VND 300 bn if sales volume falls -10% YoY to 1.6 mn tons. In both cases, ASP is assumed at over VND 22 mn/ton, a decline of around -18.5% YoY. The company expects to issue stock dividends for the previous fiscal year, with a maximum rate of 3%.

We reiterate our Outperform rating on the shares of VCB, with a new 12-month TP of VND103,750 (from VND89,600), based on a 2023E P/B of 2.6x (from 2.3x), as we increase our 2023E PBT by 15% to VND44.6tn (+19.4% YoY). With a historical prudence in lending, VCB is much less prone than peers to be impacted by the elevated risk in the real estate and corporate bond market.

With a critical position in the Vietnamese banking system, a solid and recognizable brand name, and stronger-than-peer earnings growth, we see VCB’s business being protected by a moat. Hence, VCB’s valuation gap relative to the private banks should further widen, assuming continued strong execution.

4Q 2022 revenue increased 16% YoY, while NPAT increased 86% YoY during the last quarter of the year, thanks to strong improvement in EPC/EPCI segment and JV contribution. EPC segment recorded strong results thanks to Dai Nguyet project completion, as well as continuation of large projects such as Gallaf – Batch 3, Shwe Jacket…2022 revenue thus reached VND 16 tn (+ 15.5% YoY), while NPATMI reached VND 772 bn (+28.5% YoY). This is 20% higher than our estimate, with the key upside surprise coming from higher EPC/EPCI profit and profit margin. 2022 EPS was VND 1,212/share, +33% YoY, and translating into a trailing-12 month P/E ratio of 22x.

NPATMI growth is estimated at +47% YoY, driven by the company’s nickel project, as well as a new revenue stream from electricity sales to the Nomura-Haiphong Industrial Zone (NHIZ). The nickel project will generate 23% of the company’s gross profit; whereas 6% is expected to be generated via electricity sales to the IZ since 2023 which could provide another stable cashflow along with PC1’s current hydropower & wind power segment. Additional stable cashflow from power sales to IZ should be useful amid uncertainty risk of borrowing rate. Further, PC1 current interest coverage ratio is 3x which could be still safe per our view. We call for Outperform rating for PC1, with a 1Y TP of VND33,930 offering a 25% upside.

After a strong earnings expansion of 84% YoY in the first 3 quarters of 2022, GMD earnings growth significantly slowed down to +9% YoY in 4Q22, as negatively impacted by weak exports sectors. We expect that economic headwinds will continue to exert pressure on the company’s core earnings in 2023. However, we expect the sale of Nam Hai Dinh Vu port (NHDV) will be a positive factor that support earnings growth, as well as using proceeds to reduce financial burden and invest in new projects. GMD might restructure its business in the highly competitive Haiphong port cluster area, by concentrating volume to the newly built Nam Dinh Vu port (NDV).

HT1’s 2022 net revenue and NPAT was VND 8.9 tn (+26% YoY) and VND 262 bn (-29% YoY), respectively, achieving 102% and 100% of our 2022 in-house forecast. During 4Q22, HT1 reported net sales and NPAT of VND 2.3 tn (+14% YoY, +2% QoQ) and VND 58 bn (+8% YoY, +58% QoQ), respectively. Cement sales volume during 4Q22 totaled 1.7 mn tons (+5% YoY, + 5% QoQ) with ASP remaining flat QoQ at VND 1.3 mn/ton. Cement sales volume during 4Q21 were low due to COVID-19. During 4Q22, cement sales volume decreased 7% compared to 4Q20. This reflects lower construction activity due to the downturn in the real estate market. Profit has bottomed as input coal prices corrected -10% QoQ. As a result, GPM increased to 9.1% during 4Q22 -up from 8.4% during 3Q22.

We expect VIB’s profit before tax to achieve VND 12 tn (+13.5% YoY) with NIM squeeze of 4.62% (-31 bps YoY) due to higher funding cost and asset quality deceleration. Given a high exposure to real estate sector, the ability to service loan could be hurt due to the high interest rate environment. Hence, we think that NPL ratio will pick up to 2.6% in 2023. As a result, we maintain our Market Perform rating for VIB, with a 1Y TP of VND 22,000.

MWG’s financial performance was worse-than-expected during 4Q22, with net income declining by 60% YoY due to: (i) lackluster demand in the context of macroeconomic headwinds; (ii) the 4Q21 high base when the company experienced pent-up consumer demand; (iii) slow delivery of the iPhone 14; and (iv) a sharp increase in interest expense. On the bright side, we estimate 4Q22 PBT margin at BHX to have improved by 0.9pp vs. that in 3Q22 and 2pp vs. that in 1H22. The improved profitability of the grocery segment and the absence of one-off expenses relating to grocery store closures should be the main earnings growth driver for 2023, while the ICT & CE segment should be impacted by rising inflation and unemployment. We forecast 2023E net income at VND4.4tn (+9% YoY, from VND4.7tn), as we factor in larger-than-expected losses from the pharmacy segment. With our revised 2023 financials, we derive a new SOTP-based 12-month target price of VND44,600 (from VND43,500) for the shares of MWG, and maintain our MARKET PERFORM rating.

We update NLG to Market Perform, with our 1Y target price of VND 29,200 (+15.6% potential upside). As such, we revised down our 1Y target price by -30% since our last report by revising the discount rate from 12% to 14% as well as extending the presale progress of NLG key projects such as Waterfront, Waterpoint, NLG Can Tho, among others. With a large percentage of real estate second tier city projects in the company land bank, homebuyer demand for these projects will continue to be affected due to high interest rate mortgages, as well as low transactional liquidity in the market. In 2023, sales and handover of multiple projects (including Akari and Mizuki Park, Izumi, and Southgate) will still be the key momentum for NLG business results. As such, we forecast 2023F net revenue of VND 5.5 tn ($234 mil USD, +26% YoY) and NPATMI of VND 930 bn ($39 mil, +7.6% YoY). With a strong backlog of nearly VND 17 tn ($723 million USD) at the end of 2022 (mostly coming from mid-end housing projects), NLG earnings should be gradually allocated over the next upcoming years (2023-2025).