Company Report

We upgrade our recommendation on the shares of BVH from Market Perform to Outperform, along with increasing our 1Y TP to VND 73,300 (from VND 71,000) reflecting our NPAT-MI estimate increase in 2022 of 8% to VND 2.2 tn (+14% YoY). The revision reflects the distinct improvement in the business margin within the life insurance arm, and a more normalized claims ratio at the non-life insurer. Over the past several years, BVH managed through unfavorable periods where life insurance was hampered by a lower interest rate environment and an unprecedented high claims ratio as it aggressively expanded the non-life business in 2017-2018. As interest rates appear to have bottomed and claims expenses gradually normalized, we believe that a more favorable business environment now exists for BVH. From 2018, we have also observed a greater correlation between BVH’s performance and government bond yields.

We reiterate our BUY rating on the shares of FPT and raise our 1Y TP to VND136,900 (vs. previous TP of VND112,500) – implying 28% upside along with a 2% dividend. Our higher target price reflects the strong growth in the technology segment. The 2022 PBT growth for technology is estimated at +30% YoY supported by both global (+29.9%) and domestic IT segments (+32.1%). Further, management believes that a 30% growth for domestic IT can also be achieved over the next three years, which is the same for the education segment. FPT could also likely be shielded from commodity volatility and deliver 20% plus YoY growth for 2022.

Since our upgrade to BUY on March 7, 2022, the shares of DGC surged 29% - surpassing our target price. As such, we downgrade the shares of DGC to OUTPERFORM, with just 11% remaining to our new target price of VND 252,000 (based on unchanged target PE of 11x, vs previous target price of VND 214,000) per share. On March 29, 2022, DGC held an AGM whereby the company provided conservative net income guidance of VND 3.5 tn (+39% YoY) given the reduced sales volume for wet phosphoric acid and thermal phosphoric acid. As phosphate rock reserves in Vietnam becoming increasingly scarce, management set a conservative sales volume target. Nevertheless, we believe that DGC could increase the extraction of phosphate rock from its own mine to compensate for the reduction in externally purchased phosphate rock. Given a greater-than-expected 1Q22 ASP for yellow phosphorus, we raise our 2022 net income estimate 24% to VND 4.6 tn (+83% YoY).

As the oil & gas and drilling industry has evolved to reflect a new market reality, we expect that PVD will be one of the primary beneficiaries of this this evolution once oil&gas projects restart and new projects get kicked off. Thus we revise up our assumptions for day rate and utilization of PVD rigs in 2022F-2024F and our estimates. Specifically, we expect PVD’s revenue to grow 60% and 28% YoY, respectively, from both higher workloads and day rates. We also expect gross margins to return to 2019 levels for 2022F, as the day rate begins to break away from breakeven rates (around USD 53,000/day). NPAT is expected to grow  637% YoY off of the 2021 low base in 2022F and 152% YoY in 2023F. Given our upgraded estimates, we increase our 1Y TP for PVD to VND 37,000/share (equivalent to P/B 2022F of 1.1x). Maintain MARKET PERFORM rating.

FY21’s strong backlog and attractive new order book in 2022 are very supportive to the shares of HTN. In 2021, HTN’s ending backlog reached approx. VND 29.8 tn (+36% YoY). The strong backlog should solidify revenue, NPAT, and also post-money EPS growth for 2022. Our FY22E & FY23E EPS has factored in the dilution from the 25 mn new share private placement since 2H2022. We call our Outperform rating on the shares of HTN, along with our 1Y TP of VND 69,300 (25% upside) on back of a strong backlog in 2021 that will secure 2022 revenue (+60%yoy), NPAT (+44.3%yoy) and also post-money EPS growth (+26.6%yoy).

In Jan-Feb 2022, MWG achieved VND 25.383 tn (+17% YoY) in net sales and VND 1.077 tn (+8% YoY) in net income, having accomplished 18% and 17% of the full year target respectively. Please note that 2022 Lunar New Year came early this year, so the year end high season sales were predominantly recorded in 4Q21 rather than 1Q22. We think Jan-Feb 2022 net income growth was weak due to sluggish monthly revenue of BHX and aggressive online promotion. As the greater emphasis on the online channel is within our realm of expectations, we maintain our 2022 net income estimate of VND 6.875 tn (+40% YoY), and reiterate a BUY recommendation with a target price of VND 174,000 per share.

We initiate a BUY recommendation for the share of DBD (Binh Dinh Pharmaceutical & Medical Equipment) with the target price of VND 73,000/share, which is equal to a total return of 35% from the current price as of March 23th, 2022. We saw DBD as an attractive investment as the company: (1) capable of manufacturing highly complex products - cancer treatment and dialysis fluid, (2) active in products R&D with significant unused capacity, (3) about to hold one competitive GMP-EU factory, (4) is a potential target for large M&A deal. We expect DBD sales and net profit in 2022 to reach VND 1.78 tn (+9% YoY) and VND 223 tn (+21% YoY) respectively. We also expect DBD sales and net profit CAGR at 9% and 13% respectively during 2023 – 2028, backed with expansion in drug store sales channel, increase in capacity and impact of GMP EU certification to drug bidding activities in hospital. 

We reiterate our Outperform rating on the shares of VNM, although we lower our 12-month target price to VND90,000/share (from VND106,000/share), based on a blended DCF valuation and a lower target P/E (19x from 21x). Our adjustment takes into consideration a slower-than-expected 4Q21 revenue recovery at a time when the gross margin continues to be under pressure in the near term. We have not seen any sign that prices for inputs (ie, milk powder, cattle feed, and oil prices) will correct soon in 1H22.  Accordingly, we are trimming our 2022E NPAT by 4.4%. Catalysts: higher-than-expected sales growth/lower-than-expected raw material prices. Downside risks: lower-than-expected sales and higher-than-expected raw-material prices.

BID reported a 2021 profit before tax of VND13.6tn, and we raise our 12-month target price on BID to VND42,300 from VND41,100 (adjusted for dividends), based on an unchanged target PBR of 2.2x applied to our 2022E BVPS and assuming 5% in additional share issuance. With better-than expected safety indicators and with NPLs and LLCs at all-time highs of 0.98% and 219%, respectively, the CAR improved to nearly 9%. We believe that high provisioning in 2021 will reduce bad debt and help relax credit growth for 2022. We project pre-tax profit for 2022E at VND19.4tn (+42.4% YoY), primarily fueled by credit and deposit growth of 10% and 10.4% YoY, respectively, a NIM reduction of 12bps YoY, and a lower credit cost of 1.76%.  The capital raise plan set in 2020 is likely to be more favorable this year, when the impact of the COVID-19 pandemic has taken on a milder form. We maintain our MARKET PERFORM rating on the stock.

If excluding the one-off, non-cash gain from the revaluation of Tan Phat JSC in 2Q 2021, PC1 could offer an approx. NPATMI of 29% YoY in FY22 (VND 552 bn) - led by three wind power projects (Lien Lap, Phong Nguyen, and Phong Huy) and the Dinh Cong properties project. PC1 should also enjoy attractive long-term growth in 2023 NPATMI (+55% YoY), driven by Dinh Cong, Vinh Hung & Bac Tu Liem projects and Tan Phat’s new nickel project. We reiterate our Outperform rating on the shares of PC1, along with our 1Y TP of VND 48,800 (+15% upside). 

We are increasing our 1Y TP on the shares of MBB to VND 40,000/share (from VND 35,200), and reiterating our Outperform rating. The price target upgrade reflects our improved outlook for earnings growth in 2022, given the overall improvement in MBB’s now substantial credit risk buffer at the end of 2021. We forecast that MBB will achieve a pretax profit of VND 22.3 tn (+35% YoY) in 2022, fueled by strong credit growth (+25.6%) and reduced provisioning pressure (-22% YoY). If we are correct in our assumptions, MBB’s 2022 ROE will be 26.3% - the second highest in the industry and the highest amongst similar-scale peer. There is also market speculation that MBB will support Oceanbank or a so-called “zero-dong” bank. Although nothing has been confirmed, we think it might not a bad deal for MBB provided the proper SBV support is given and that there is a long runway to get back into Oceanbank into regulatory compliance. We have not accounted for such a deal in our forecast.

We reiterate our BUY rating on the shares of DGC, however, we are significantly raising our price target to VND 214,000 per share (from VND 190,000) - representing an ROI of 30%.  Our target price is based on PE of 11x. While yellow phosphorus prices likely will decline from their recent peak, we do estimate that the 2022 yellow phosphorous ASP average remain 20% higher than that of the 2021 average given the strong chipmaker demand. We hence raise our 2022 earnings estimate by 33%, to VND 3.71 tn (+47.6% YoY). As such, 2022 bottom-line is likely to reach another peak. 

We have a BUY rating on the shares of QNS with 1-year target price of VND 61,000/share. We slash our 2022 earnings estimate by 3.6% as we (1) take into account of a continued high soybean price trend that impacts the soymilk margin and (2) lowered sugar volume forecast (mostly Refined Extra type sugar). However, we raise target P/E from 12x to 13x for the shares.  Fundamentally, we keep the view that QNS financial results had turned around since 2021 on the back of strength of the sugar business, while the soymilk segment has posted resilient sales growth despite the Covid-19 pandemic. Soymilk volume growth of 20% in the first 2 months of 2022 encourages us to stay with our view. Down side risk: Lower than expected demand for QNS products, due to a variety of factors such as the complicated pandemic situation/higher than expected soybean price/lower than expected refined extra (RE) sugar volume.

In our view, the supply chain disruption could carry through into 2023 longer than we initially expected, due to a trifecta of factors: (i) the surge in Omicron cases and the potential for new variants; (ii) China’s zero-Covid policy; and (iii) rising tensions between Russia – Ukraine, which will exert more pressure on global trade. Additionally, new vessel deliveries in 2022 are limited to only 3.1% of the current fleet. Thus, we expect both international and domestic container shipping to perform well with favorable conditions through 2023.With six new vessels to be added to the fleet between 2022 – 2024, HAH is ambitiously expanding into the Intra-Asia market to take advantage of the favorable market environment. We believe that the company’s new services will be profitable, given advantages of their low-cost fleet (8 out of 14 vessels having been invested into at low cost). We estimate that HAH will maintain high earnings growth during 2022 and 2023, and revise our NPATMI forecast to VND 744 bn (+67% YoY, +12.7% from our previous forecast) and VND 902 bn (+21% YoY) respectively, translating to an EPS of VND 14,641 in 2022 and VND 17,742 in 2023. We reiterate our BUY rating for HAH, with a revised 1Y TP of VND 106,000/share (unchanged target P/E of 7x), implying a 28% upside.

We are upgrading our rating on the shares of STK from OUTPERFORM to BUY, and our 1Y target price of VND 70,300/share (+26% upside). Our upgrade reflects the improved recycled yarn to total revenue ratio to 54% in 2022, as sales volume has now begun to recover to pre-pandemic levels in 1Q22. In 2022, we expect the company to post net sales and net profit of VND 2.62 tn (+28% YoY) and VND 318 bn (+14.1% YoY) respectively. With respect to 2021, STK recorded a decline in net sales and gross profit margins during 4Q21 due to less recycled yarn in the total sales mix (37% in Q4 vs 57% in 1H21) given the continued labor shortage. Nevertheless, STK still hit its target of 50% of its sales comprised of recycled yarn for 2021.