Company Report

Despite a -36% YoY slump in generation volume, 3Q 2021 NPAT aggregated VND 603 bn compared to VND 124 bn in 3Q 2020. This significant YoY increase was primarily attributed to lower O&M expenses at Ca Mau.  ​​​​​​​At present, we do not rate the shares of POW, given current unpredictability of sales and expenses at the Ca Mau plant.

We are initiating coverage on the shares of DPR with a BUY rating, and are establishing a 1 YR target price of VND 91,000 – representing an ROI of 20% (including the 4% dividend yield). We see significant potential in DPR’s large land bank, which can be converted into industrial parks – a major opportunity for the company to unlock value and revenue going forward. The increase in demand for industrial parks is particularly pronounced in Binh Phuoc province, more so once the highway connecting Ho Chi Minh City – Binh Duong province (Thu Dau Mot) – Binh Phuoc province (Chon Thanh) is completed in 2025. By way of example, lease rates for industrial parks in Binh Duong province have increased 50% since 2019 (from $80/sqm in 2019 to $120/sqm in 2021). The highway completion should cause lease rates to accelerate.  Further, Binh Phuoc’s 54%-59% lease rate discount to Binh Duong’s ($55-65 USD/sqm in Binh Phuoc vs $120-160 USD/sqm in Binh Duong) makes industrial parks in Binh Phuoc substantially more attractive to SMEs. That being said, we believe that DPR’s traditional natural rubber business will still continue to benefit from higher market prices in the short-term. Also, income from rubber tree disposal will likely post a double-digit growth in 2021-2022 thanks to the recovery in demand from furniture exporters. For 2021, we estimate earnings to rise by 28% YoY, thanks to a favorable natural rubber price and higher income from rubber tree disposal. For 2022, we believe that DPR will recognize land compensation income of VND 317 bn – pushing earnings 100% higher YoY. 

With a FY21-25 CAGR of 12.3% YoY, we believe that the shares of REE remain attractive given the current growth momentum in hydropower, wind projects, and other long-term projects (E-Town 6 office building) and public investment which will drive M&E (Long Thanh airport-terminal). As a result, we raise our 1Y TP for the shares of REE to VND86,400 (from VND64,000), which represents 14% upside. We call our OUTPERFORM rating on the shares. 

GAS reported 3Q NPAT of VND 2.4 tn, up 19.1% YoY on a consolidated basis. Meanwhile, NPAT of the parent company reached VND 2.5 bn (+16% YoY). The results exceeded the company’s preliminary results and our estimates, despite the significant drop in gas consumption during 3Q due to strict lockdowns in the Southern provinces. Cumulatively through 9M2021, GAS posted NPAT of VND 6.8 tn (+9.2% YoY), completing 97% of its full year earnings target. Upbeat 3Q earnings prompt us to increase our 2021 NPAT forecast by 10.2%. For 2022, we raise our base case assumption for Brent oil prices from USD 68/bbl to USD 75/bbl (+7% YoY). Accordingly, we increase our 2022F NPAT to VND 11.8 tn (from VND 10.9 tn previously) translating into a 22% YoY growth. After factoring in our earnings revisions, we derive a new TP of VND 130,000/share (from VND 118,500/share) based on an equal blend of a target PER of 20x (from 19x) and EV/EBITDA of 11.5x (from 11x), and using 2022E earnings. As the share price appreciated by 40% in the past 2 months, and in our base-case ROI is just at 8%, we downgrade our recommendation on GAS from Outperform to Market perform. Nevertheless, GAS remains our preferred stock in the oil & gas sector and we recommend investors to accumulate the shares at an attractive entry point.  

Reflecting our revised estimates, we derive a new 12-month target price of VND 190,000 (previously VND 183,000), which is predicated on an equally weighted target P/E of 28x (from 25x) and our DCF. As SAB gained back market share temporarily during the lockdown period, which is a special circumstance, it is early to conclude that it can sustain its market leader position. However, we think it still deserves a re-rating due to the following: (i) we believe that there will be a strong demand recovery from November post-Covid-19 lockdown; and (ii) SAB can rely on the strength of its on-trade channels and distribution network in order to capture sales volume growth more quickly, as folks begin dining out again. At the current price of VND 159,900/share, SAB is trading at 2021 and 2022 P/E of 26.7x and 23.2x respectively, which is rather attractive compared to its historical average P/E of 34x. With 19% potential upside from the current levels, we upgrade SAB to BUY (from Market Perform). Key downside risks to our call are softer-than-expected sales volume due to the stiffer-than-expected competition, and further lockdowns.

In our estimates, excluding the one-off, non-cash gain from the revaluation of Tan Phat JSC in 2Q 2021, PC1 could still offer an approx. NPATMI of 16% YoY in FY22 (VND 559 bn) - led by three wind power projects (Lien Lap, Phong Nguyen, and Phong Huy). PC1 should also enjoy attractive long-term growth in 2023 NPATMI (+40% YoY), driven by Vinh Hung & Bac Tu Liem projects and Tan Phat’s new nickel project. We call for Outperform rating and 1Y TP of VND 46,800 (+18% upside) on the shares of PC1. An additional 81MW hydropower plants could come on line since 2024 - 2026, lifting total hydropower capacity to 283MW by 2026  - up from 168MW in 2021.  

VHC reported strong growth for 3Q21, with net sales of VND 2.2 tn (+24% YoY) and NPATMI of VND 255 bn (+46% YoY), respectively. Cumulatively, the company accomplished 74% and 93% of annual targets for net sales and PAT. VHC was the most profitable fishery exporter out of Q3 lockdown, benefited from strong demand from the US market coupled with a higher ASP. The company has been running at between 85%-90% capacity while implementing “three-on-the-spot” work-live on-site production and keeping administrative expense stable. As VHC has proven its position as a market leader from time to time, we believe that the shares deserve their re-rating over the past two years. We raise our target P/E for the key segments of VHC – 13x for wellness segment and SGC, and 10x for pangasius segment (previously 10x and 7.5x, respectively) and use mid-2022 TTM EPS as our base. Our new price target is VND 70.2k/share (up from VND 47k/share), implying an upside of 13.4% and a total ROI of 16.6%. We upgrade our rating for the shares from Market Perform to Outperform.

HPG released its 3Q21 results, with revenue and net profit reaching record highs of VND 38.9 tn and VND10.35 tn (up by 56% and 170% YoY), respectively primarily attributable to the HRC segment. Cumulatively, HPG’s revenue and net profit in 9M21 increased 63% and 206% YoY, respectively, to VND105 tn and VND27 tn, respectively. We attribute the strong growth during the quarter to resilient sales volumes and especially to the surge in HRC prices on the back of pre-signed two month contracts. As 3Q21 results are higher than our estimates mainly due to a better-than-expected profit margin, we raise our 2021 net profit forecast by 24% to VND 36.6 tn – translating into 171% YoY growth. Sales volumes across all steel product lines is expected to recover during the final quarter of the year, but the HRC margins could experience a correction compared to the record highs in 3Q21. In 2022, we expect the construction steel sales and HRC volumes to maintain growth of 17% and 28% YoY, respectively. The gross margin should normalize to 24.5% from 28.7% in 2021F due to a 5-6% YoY correction in steel prices. Accordingly, we forecast 2022 revenue and net profit at VND 165 tn (+6% YoY) and VND 32.7 tn (-10.5% YoY), respectively. We reiterate our Outperform rating on the shares, but raise our 1-year target price by 16.7% to VND 63,000/share due to the upward revision in our 2022 earnings forecast.

Viconship announced impressive prelim 3Q 2021 PBT results of VND 149.3 bn (+73.4% YoY), supported by superior volume growth relative to peers and enhanced profit margins post-management reshuffle. We observe marked improvement in company profit margins in 2Q21 and 3Q21. As a result, we increase our PBT forecasts to VND 474 bn (+41% YoY) and VND 604 bn (+27% YoY) in 2021 and 2022, respectively. We reiterate BUY rating on the shares of VSC on the back of higher earnings outlook and the potential strategy change into a growth company after several years of stable earnings, leading to our re-rating to 2022F target P/E ratio of 12x. Pre-money 1-year target price is VND 80,800/share (+26% upside), while post-money target price is VND 46,500/share (after 1:1 rights issuance in the coming time). VSC offers 1:1 rights issuance to all shareholders (ex-rights date on Oct 25), and short-term selling pressure could increase with some large shareholders registering to sell 1.5 mn shares over the near-term. Over the longer term, increased risks come from the new project pipeline which will require large capex with profit uncertanties. However, this also presents Viconship an opportunity to become more of a growth company.

With coal prices rising at a more accelerated pace than that of oil/gas, gas-based urea producers in Vietnam like DPM are key beneficiaries of this trend as they do not bear high coal prices while taking advantage high urea sales prices. NPK sales volume also have improved significantly over 2Q21. Combined with one-off items of VND 329 bn (recognized in 2Q21 and 3Q21), we increase our 2021 pretax profit to VND 2.099 tn (+148% YoY), while 2H21 pretax profit growth is estimated to increase 200% YoY. We believe that 2022 core earnings could increase another 9% YoY, but without the one-off income as prior, total pretax profit is estimated at VND 1.929 tn (-8% YoY). As the company benefits from the recent urea price uptrend, we increase target multiples and derive a new target price at VND 42,200 (from VND 32,000). With an ROI of 5% (dividend yield of 6%), we call for an MARKET PERFORM rating for DPM.  In the short term, DPM share price momentum may still be strong on the back of solid 2H21 earnings.