Company Report

We rate a rate a strong BUY for TRA shares with the target price of VND 101,000/share – representing 29% upside from the current price on August 20th. Key investment catalysts for TRA are: 1) recent progress in the development of new herbal medicines & health supplements, while benefits from stricter quality control in Vietnam’s health supplement market, (2) lower SG&A expenses on sales with improvements in revenue of new R&D products and more efficient sales strategy, (3) higher utilization on synthetic drug factory with product transfer from Daewoong Pharma in H2 2021. Also, the company’s sales from trading & cosigned goods are expected to grow significantly with new signed distribution agreements with JW, CKD & other supplement brands. We expect TRA total sales to reach VND 2.19 tn (+15% YoY) in 2021 and VND 2.54 (+16% YoY) in 2022. Net income is expected to reach VND 275 bn (+26%) in 2021 & VND 353 bn (+29%) in 2022. As earnings growth has now begun to return from 2021 after going flat during 2015 - 2020, with lesser competition and higher diversification in products, we believe that 29% upside in the shares of TRA is achievable – especially given where industry peers are trading.

At the current price of 108,100 VND, VHM is trading at 2021 P/E and P/B forward metrics of 12.4x and 3.7x respectively. We maintain our 1-year Target price at VND 130,000 (upside 20%). For this year, with the solid backlog from sold projects such as Vinhomes Grand Park, Ocean Park, Smart City…, we expect the revenue and NPAT to achieve VND 94 tn (+31 YoY) and VND 33.4 tn (+20 YoY) respectively.  As the fundamental operations of VHM has no significant change, the share price fluctuation might be temporary in nature.

We reiterate our OUTPERFORM rating on the shares of VPB with 1Y target price of VND 70,700/share. Even though FeCredit is going through a hard time with aggressive writing off and low profitability in 2021, gradual recover should be expected in 2022. Besides, we do see better than expected income generating capacity at  the parent bank in 2022, fueled by the upcoming capital infusion. Net profit from the FeCredit divestiture and proceeds of the planned private placement support the bank’s ambitious long-term expansion. On a consolidated basis, PBT for 2021 and 2022 are projected at VND 16.8 tn (+29% YoY) and VND 21.4 tn (+27% YoY). 

We call for MARKET PERFORM rating on the shares of BVH in 2H 2021 even though we keep our 1Y TP unchanged at VND 71,000/share. We consider the company as a gateway to the under-penetrated life insurance market in Vietnam. BVH trades at a discount to its historical average due to the current low interest rate environment, which we consider an opportunity for long-term investors. According to our estimates, 2H 2021 earnings growth might be negative at -33% YoY before bouncing back by +27% YoY in 2022. Hence, we believe investors could consider accumulating BVH in 2H 2021 at price weakness. Downside risk: Larger-than-expected decline in interest rates and VN government bond yields, and a qualified audit opinion for FY 2020 and 1H 2021. Upside surprise: A stronger-than-expected uptick in VN government bond yields.

Despite the positive revenue growth of 16% in 2Q21, BMP’s net profit fell by 73% YoY to VND42bn due to a sharp contraction in the gross margin, stemming from surging input costs. We believe the company’s business results will hit their lowest level ever in 3Q21, with the capacity utilization rate falling to between 20-50% during the July to September period, due to the social-distancing measures in place in Southern Vietnam. We lower our 2021E sales volume for BMP from 115k tons to 99 k tons (-10% YoY), and our gross margin from 18.2% to 14.0%, which leads to a 52% cut to our net income. Accordingly, we expect 2021E revenue and net profit at VND4.8tn (+3% YoY) and VND202bn (-61% YoY), respectively. Following our earnings cut, we downgrade our rating on the stock from MARKET PERFORM to UNDERPERFORM with a lower 12-month target price of VND51,700/share (previously VND55,000), based on an unchanged target PER of 11x now applied to our 2022E EPS (previously 2021E). We look for the share price to drop in the short-term, and then stabilize as we anticipate a recovery in business results from 4Q21. For 2022E, we expect the company’s results to recover with net profit rebounding to VND391bn (+ 94% YoY), on the back of 13% YoY growth in sales volume and a 5% correction in the plastic resin price. Upside risk: lower-than-expected input costs. 

We maintain a positive outlook on the shares of Gemadept. On the demand side, we expect strong growth for GMD volume in 2021 and 2022. On the supply side, however, Vietnamese production could face some challenges in 2H2021 given the resurgence of Covid-19 in the southern provinces. We believe that the company’s prospects are brighter in 2022, as the pandemic should be better controlled globally. We believe that Gemadept is a good proxy for the Vietnamese logistics industry due to its fully integrated nationwide network. We reiterate our 1Y TP of VND 56,200/share (which implies a 14.7% upside), and our OUTPERFORM rating on the shares of GMD. Our rating does not reflect the possible impact of a new potential floor price for port tariffs, nor the impact of the divestment of real estate/ rubber/ port projects which are positive catalysts for the shares of GMD.

We believe that SZC's gross profit margin can remain above 60% as a result of low compensation and clearance costs in Chau Duc IP. In addition, demand for leased land will increase due to the shift of production from China to Vietnam and the development of infrastructure in Ba Ria - Vung Tau, where leased land demand is expected to rise by 5- 8% YoY from 2021 to 2025. However, in the short term, Covid’s impact has reduced the number of new investors in 3Q2021. We lower our recommendation from BUY to MARKET PERFORM after the stock price has increased by 35.3% since July 2021, for which target price is 42,700 VND per share.

We maintain our MARKET PERFORM rating on the shares of MSN, despite raising our SOTP-based 12-month target price to VND153,000/share (from VND116,500/share). Our higher TP is based on (1) rolling forward our valuation basis from average 2021-22E to 2022E; (2) a re-rating for TCB’s valuation with our target P/E rising from 1.8x to 2x; and (3) our higher estimates for MML and VCM given their better-than-expected operating performance in 1H21. We also remove the 10% conglomerate discount from our SOTP valuation as we see initial synergies being achieved amongst members in the group, especially the consumer, retail and 3F businesses. Fundamentally, we believe that positive financial performance for MSN in 2021E and 2022E has largely been factored in the valuation. In 2022, we forecast MSN to continue the strong growth momentum in its NPAT of 67% YoY, as we expect continuous profit improvement at both VCM and MML, as well as a strong performance at Techcombank. This prompts us to raise our 2021-22E NPATMI by 11-27%. Over time, positive catalysts should include: (1) corporate actions, such as a stake sales (TCX, MHT, and MML [feed business]), a private placement at the group level, or the listing of TCX; and (2) improved performance within the retail and/or mining businesses. 

Given the recent resurgence of COVID-19, VCB has announced a preferential lending package to impacted customers starting from 15 July 2021. This should cause net interest income to decline to VND1.8tn for 2H21E. As a result, we reduce our 2021E PBT by 8% to VND26.4tn (+14.7% YoY). We also look for 2022E PBT to reach VND33.7tn (+27% YoY), assuming credit and deposit growth of 14% YoY and 10.9% YoY, respectively, along with a NIM of 3.05%. We assume that VCB will issue a 6.5% pre-money stake during 2022. As a result, we trim our 12-month target price for the shares of VCB to VND113,500 (from VND114,200), which implies potential upside of 14%. We reiterate our Outperform rating on the shares of VCB.  

VHC held an analyst meeting on Aug 9th to discuss Q2’21 financial results and production status during the 4th Covid-resurgence in Vietnam. In 2Q’21, VHC recorded impressive Q2’21 results, wherein net sales and net profit grew by 41.3% YoY and 16.3% YoY respectively, bouncing off a low base in Q2’20. This was mostly thanks to the reopening of the US economy (60% of total VHC pangasius exports). With the current disruption experienced during this instance of viral resurgence, management is not very positive about 2H21. While the problem lies neither on the demand nor the supply side (production applying the “3 at the spot” work/live on-site practices in place), disruption in the transportation of goods due to container shortages is causing difficulty when it comes to managing costs, as many orders are stuck at seaports. We updated our estimates to reflect uncertainties in 2H21 (cutting NPAT estimates by 4% and 6% in 2021 and 2022 respectively). However, we still expect a good recovery from VHC in 2022, assuming that global shipping costs will wind down (-15% YoY and 2.9% of sales). We also rolled forward our 2022E EPS to derive an updated target price of VND 47,000/share (+12% upside). As such, our rating for the stock is MARKET PERFORM.

FY21 NPAT growth is forecast at 23% YoY. According to management, CTR expects higher growth of 30% YoY under base case. Our forecast is a bit more conservative, given the potential impact from Covid-19. Key CTR growth drivers are from ‘defensive’ segments such as telecom infrastructure operations, telecom infrastructure leasing segment, and telecom construction which likely will be less sensitive to Covid-19, and are a good defensive play. CTR also offers more attractive EPS growth in FY21/FY22/FY23 of 22%/15%/25%, respectively, comparing favorably to Asian peers of 20%/10%/8% over the same timeframe. With 1Y target price of VND 88,900 - representing 6% upside, we call for Market Perform rating on the shares of CTR. 

Despite our downward earnings revision for 2021, we still believe that oil prices for 2021 and 2022 will remain above USD 60/bbl), oil&gas projects in Vietnam and in the region will gradually restart, and that there will be better pricing for PVD services. PVD is trading at a 2021F and 2022F P/E ratio of 221x and 39x, respectively, which is quite pricey. Forward P/B for the 2021-2022 period, however, is a much more reasonable 0.57x. We reiterate our Market Perform rating on the shares of PVD, with a revised 1Y TP of VND 21,000/share (~13% upside) from our previous TP of VND 23,000/share. Additional upside surprises could come from news on contract bids won for 2022, or higher oil prices. Downside could occur from a delay in the deployment of the TAD rig (commencing operation in Oct 2021), as well as a lower oil prices.

We maintain our MARKET PERFORM rating on the shares of VNM, however, we modestly cut our 1-year target price to VND 103,000/share (from VND 107,000/share) based on an unchanged target PER of 21x applied to our 2021-2E EPS as we lower our forecasts for 2021/2022 period given the impact of the fourth resurgence of Covid-19. In addition to reduced consumption by low-income consumers-who have been hit the hardest during the pandemic, the strict social distancing measures applied in many cities/provinces throughout Vietnam since May have also placed some difficulties in product distribution via the general trade (GT) channel (which accounts for about 85% of VNM’s domestic sales). As such, we are of the view that the initial plan for 2.5% growth in revenue and flat YoY earnings for 2021 becomes a bit more challenging for VNM  - unless the pandemic can be contained by the Aug-Sept period.