Company Report

Due to the worse-than-expected macroeconomic indicators in 1Q23 and the sluggish sales of ICT & CE in Jan-Feb 2023, we revise down our 2023 net income forecast by -11% to VND 4 tn (-3% YoY), with earnings expected to come bouncing back in 4Q23. We introduce our 2024 net income estimate of VND 5 trillion (+26% YoY). We now use our average 2023F-2024F financials (from 2023F) for valuation and unchanged price multiples, and derive a new target price at VND 44,400 (from VND 44,600). With 9% upside from the current share price, we maintain our MARKET PERFORM rating. MWG currently trades at 2023-2024F P/Es of 15x and 12x respectively, which is lower than 3-year historical P/E of 16.3x. However, the stock price may not have yet priced in the uncertainty on the earnings trough in 1H23F and the economic recovery pace.

DHC’s NPATMI declined YoY in 2022, the first time since 2018. Net sales reached VND 3.9 tn (-5.3% YoY) due to a decrease in paper consumption demand. Such a decrease in demand was witnessed by export company customers and packaging companies. DHC has also doubled raw material inventory during 4Q22, compared to the same period last year, as the company accumulated raw materials when the OCC paper price dropped -40% YoY. We estimate that the current inventory should help to improve the gross profit margin during 1Q23.

Earnings continued to normalize from the brief upcycle with NPATMI declining -21% QoQ and -16% YoY, leading to our lowering of 2023 earnings forecast by 24%. Lingering high inflation and overstocked inventories issue needs some time to correct and shipping volumes are expected to remain weak within 1H 2023, before improvement can be expected from 2H 2023.We change our rating for the stock to OUTPERFORM (from BUY) with a revised 1Y P/E target of 6x and a revised 1Y TP of VND 40,500/share (~16.9% upside). We believe even though earnings outlook might be negative in short-term, the industry dynamics have passed its worst time, as evidence in the recent recovery of charter rate. We expect 2H 2023 industry dynamics to improve, which can lay a good foundation for market re-rating for the sector.

DGW recently slashed its 2023 net income guidance by -49% to VND 400 bn due to lower-than-expected Jan-Feb 2023 results, wherein revenue of laptops and mobile phones tumbled by 40-45% YoY. Given the poor performance in Jan-Feb 2023 results and the recent credit constraints of consumer finance companies, we  slash our 2023-2024 net income estimates by -40% and -32% to VND 456 bn (-33% YoY) and VND 585 bn (+28% YoY), with net income growth back in expansion territory come 4Q23. Key indicators to watch could be inflation, unemployment, as well as loan disbursement at consumer finance companies. Despite macro headwinds, DGW is still able to add new brands to its product portfolio.  With an unchanged target P/E of 9x on average 2023F-2024F financials (from 2023F), we derive a new target price at VND 28,700 (from VND 41,600). We call for a MARKET PERFORM rating.

We downgrade our rating on STB shares to Outperform from Buy with a 1Y TP of VND 29,000 share (+11.5% upside). During 2023, we expect that strong growth momentum will continue, with PBT growth of 65.4% YoY or to approx. VND 10.5 tn. Such stellar growth is expected to be supported by a significant 4.4% improvement in NIM (+96 bps YoY), and the clearance of legacy assets. As the bank has a different growth cycle than other banks due to M&A back in 2016, we expect that 2023 will be the last chapter of its restructuring plan, with full VAMC bond provisioning - a milestone that is likely to unbridle the bank from its previous burden, and free it towards more promising earnings growth ahead.

Our current rating on the shares of HPG is Market Perform with a 1-year TP of VND 20,000/share, predicated on a 2023 net profit forecast of VND 9.7 tn (+14.6% YoY). We expect that the company’s earnings will improve during the second quarter thanks to higher steel prices. However, the company can still post substantial negative earnings growth during 1H23 compared to 1H22.  YoY growth could resume from 2H23 compared to last year’s low base.

We reiterate our BUY rating on the shares of VRE reflecting our belief of a stronger recovery in mall leasing this year and upgrade our 1Y TP to VND 40,400/share (previously VND 35,200/share) - representing 37.9% upside. We believe that VRE, as the largest mall operator nationwide, should continue to benefit from the rising middle-class incomes and the continuous expansion of both international and domestic retail brands in Vietnam. Further, we do not exclude the possibility of potential asset sales that could act as a catalyst for the shares. Key downside risks to VRE may include: (i) delay in development of Vinhomes mega projects could impact the Company’s expansion; and (ii) weaker-than-expected consumption could decelerate tenants’ expansion plans.

GAS’s revenue and net profit in 4Q22 arrived at VND 22.1 tn and 3.34 tn, respectively, increasing 9.3% YoY and 64.4%, respectively. Cumulatively, GAS’s revenue and net profit for 2022 reached VND 100.7 tn (+27.5% YoY) and VND 15 tn (+70.2% YoY), respectively, exceeding guidance by 26% and 114%. Such performance was supported by the surge in oil prices that boosted both the dry gas and LPG segments, while volumes of dry gas and LPG achieved modest growth of 8% and 0.4% YoY, respectively. However, given an expected drop of around 17% YoY in Brent oil prices under our 2023 base case, we are cutting our 2023 revenue and net profit forecasts by 23% and 14% and expect GAS’s revenue and net profit to drop by 11.5% and 27.4% YoY, respectively.

We maintain our positive outlook on TDM’s operations, given the stable growth in consumption demand and TDM’s most efficient clean water enterprise due to its low water loss rate and stable source of raw materials from both the Dong Nai River and Phuoc Hoa Lake. Additionally, the Bau Bang factory is expected to surpass 10% of the average demand for Binh Duong province between 2022-2025 to cater to future demand in the Bau Bang Industrial & Residential Area, as well as additional industrial customers setting up shop at VSIP 3. We recommend an Outperform rating for the shares of TDM, with a target price of VND 39,600 (6.5% upside) based on our DCF valuation. Dividend payout ratio will reach 45% in 2023, translating to an yield of 3.6%. In the long term, we expect that the M&A of Gia Tan - Dong Nai water plants and Can Tho Water Supply JSC to be the main drivers for TDM's profit growth  when demand growth in Binh Duong slows down.

We upgrade our rating on the shares of ANV from Market Perform to Outperform given our improved outlook on the company. We expect that ANV will outperform other fishery companies in terms of profit growth with expected 5% YoY NPAT growth. We revise up 2023 NPAT by 33% compared to our previous forecast, mostly due to (1) higher ASP to China market and (2) higher new order from the US market. Our target price for the shares of ANV is now at VND 33,300/share (+11% upside), up from VND 25,100/share.

We reiterate our OUTPERFROM rating on the shares of PVT despite lowering our 1Y TP to VND 23,200/share (~17% upside) from VND 24,000/share. 4Q 2022 revenue and gross profit increased 17% and 33% YoY, respectively, due to 25% YoY growth in transportation segment revenue associated with higher charter rates, as the FSO segment stabilized. We see a strong tanker charter market supported by sanctioning measures on Russia oil&oil products increasing ton-mile demand for oil transport. Full year 2022 PBT thus reached VND 1.5 tn (+40% YoY), which is 8% higher than SSI Research estimates due to a surprising asset disposal gain during 4Q. Excluding all asset disposal gains, 2022 PBT would have been VND 1.2 tn (+17% YoY), slightly higher than its PBT CAGR of 15.6% over the past ten years.

We expect BSR’s 2023 revenue and net income to drop -21.5% and -57.7% YoY, respectively, to VND 131.2 tn and 6.2 tn driven by sales volume of 6.0 mn m3/tons (-15% YoY) under our base case assumption where plant maintenance will occur. We also assume that Brent oil price will average USD 83/barrel (-17% YoY), and average crack spread would drop by 30% YoY in 2023. Our rating on the shares of BSR is Market Perform, with a 1-year target of VND 16,600/share based on a target P/E of 8x, which is regional peer average. However, the recent plunge in global oil prices could weigh on the company’s inventory provisions, as well as the share price over the short-term.

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.