Company Report

Since our upgrade of the shares to OUTPERFORM on April 2nd 2021, the shares of DGC have surged 62% reflecting the current uptrend in yellow phosphorus price. Given the ability to maintain strong earnings growth supported by upbeat demand for yellow phosphorus, real estate project and Nghi Son project, earnings growth metrics would appear to be on a more stable upward trajectory. For that, we believe that the shares of DGC deserve a higher P/E multiple and are raising our P/E target from 10x to 12x. In addition, we roll forward 2021 forecasts to 2022. This pushes us to increase our 1Y price target VND 109,000 per share (from VND 70,000 per share (after stock dividend)). With an upside potential of 12% (including a 1.5% dividend yield), we reiterate our OUTPERFORM rating on the shares of DGC. 

We are raising our target price on the shares of QNS to VND 52,000/share (from VND 47,300/share), given both the improvement seen in the sugar segment and a roll forward of our forecasts to mid-2022. This upgrade, implies an ROI on the shares of 27%, and results in a reiteration of our Outperform rating. Despite the fourth Covid-19 outbreak from the May-June period, QNS still managed to post encouraging Q2 results, with top line and bottom line growth performance of 11.5% and 12.8%, respectively. We remain very encouraged that QNS’ financial results will stage a 2021 turnaround on the back of strength of the sugar business.

HSG and NKG earnings reached records of VND 1.7 tn and 848 bn in the recent quarter, respectively, jumping 5x and 49x relative to the same quarter last year due to considerable export volume growth and a surge in steel prices. Over time, the export channel can help both companies maintain a full capacity utilization rate despite the lingering negative impact of Covid-19 on domestic demand. Both HSG and NKG have obtained pre-export orders for a full capacity utilization through November. We expect HSG revenue and net profit performance to reach VND 54.1 tn (+96.5% YoY) and VND 4.26 tn (+272% YoY) in FY2021, respectively, driven by sales volume growth of 51% YoY and ASP growth of 27.8% YoY. On the other hand, NKG 2021 revenue and net profit should reach VND 26.4 tn (+129%YoY) and VND 2.03 tn (+587% YoY), respectively, with sale volume growth of 48% YoY and with an ASP growth of 54% YoY. HSG is trading at FY 2021 and FY 2022 forward P/E of 4.3x and 6.0x, respectively, while NKG is trading at 3.2x and 4.5x. Valuation remains attractive, in our view, even when taking into account the potential earnings correction next year. Our rating for NKG is BUY, with a 1-year target price of VND 42,500/share,  predicated on a target P/E of 5.5x. We rate HSG as Outperform, with a 1-year target price of VND 43,100/share, predicated on a target P/E of 7x. For both stocks, we expect that the stock rise will be more likely to happen in 2021 before cooling down in 2022 together with earnings normalization.

HAH posted impressive NPATMI growth of 127% YoY in 1H 2021, due to two new vessels added in Q2. As global supply chain disruptions are expected to go unresolved through 2023, market conditions will continue to be favorable for container shipping companies. HAH is poised to be one of the primary beneficiaries of this dynamic. Though the current Covid-19 outbreak could affect shipping volume in Q3, we believe that HAH will continue to post strong earnings growth through 2022. We increase our NPATMI forecast for 2021 and 2022 to VND 279 bn (+102% YoY) and VND 339 bn (+21% YoY), respectively, based on higher charter rates and higher freight rates. We reiterate our BUY recommendation for HAH, with a revised 1Y TP of VND 55,900/share (from last TP of VND 43,800/share) implying a 18.5% upside. 

We reiterate our Outperform rating on the shares of PLC, given its ROI of 21% (including 7% dividend yield). Our new target price is lifted to VND 35,000 per share (previously VND 30,300 per share) as we apply an unchanged target P/E of 11x and roll our estimate to mid-2022. Stronger than expected H1 results have triggered an increase in our earnings forecast for 2021, with profit growth projection of 56.3% YoY. Over the long-term, we hold the view that PLC earnings will be boosted between 2021-2025 driven by the asphalt segment from a new public investment cycle in Vietnam. 

2Q21 results broke previous records: HPG’s revenue and net profit hit new record highs in 2Q21 at VND 35.1 tn and VND 9.745 tn, surging by 72% YoY and 254% YoY respectively. The surge was driven by both strong volume growth, and a rising price from the steel segment. Cumulatively, the company’s revenue and net profit in 1H21 posted VND 66.26 tn (+67% YoY) and VND 16.71 tn (+230% YoY), accomplishing 55% and 93% of its annual target.  We forecast HPG’s revenue and net profit to reach VND143 tn (+59% YoY) and VND 29.5 tn (+118% YoY) respectively in 2021. Although the resurgence of Covid-19 may put pressure on volumes and ASP in the short term, we expect that net profit in 2H21 may still attain strong growth of 51% YoY thanks to resilient HRC demand, as flat-steel exports are expected to maintain strong growth in the upcoming 2 quarters. HPG is trading at 2021E and 2022E P/E of 7.5x and 7.9x respectively, which we still consider to be attractive. We maintain our Outperform rating for HPG, with a 1-year target price of VND54,000/share based on a consistent target P/E and EV/EBITDA of 9x and 6.5x respectively. In this note, we adjust the EPS and target price following the company’s 35% stock dividend and 5% cash dividend paid in May 2021.

Despite robust earnings recorded in 2021 through May, June results recorded a net profit decline of -39% YoY due to the 4th Covid resurgence. The lockdown in Hanoi, HCMC, and some southern provinces will continue to have a detrimental impact on Q3 earnings. Our base case assumes that if the 4th resurgence can be contained by the end of August and that if the population is fully vaccinated in Q2’22, we revised our PNJ earnings growth forecast for 2021 and 2022.  As difficult as this situation is, the Covid resurgence likely will result in PNJ consolidating the market and gaining a greater share of the pie primarily from the closure of weaker mom-and-pop shops. At VND 95,800/share, PNJ trades at a 2021 and 2022 P/E of 17.9x and 15.2x, respectively. Our 1Y target price for the shares of PNJ is VND 116,500/share (+21.6% upside), and we reiterate our BUY recommendation.

For 2Q 2021, TOI and PBT of MBB achieved VND 8.9 tn (+36% YoY) and VND 3.4 tn (+16.5% YoY), respectively. Earnings growth was lower than peer, as the bank made provisions for restructured loans, resulting in a 100% YoY surge in provisioning. Aggregate provisions for credit losses rose to VND 6 tn, which is enough to cover both current NPLs of VND 2.5 tn (0.76%) and restructured loans of VND 2.7 tn. Liquidity ratios returned to a healthier level, as deposit growth was strong (+9.3% YTD vs. credit growth of +10.7% YTD). For full year 2021, we lower our PBT estimate -3% to VND 15.4 tn to reflect the newly announced program of lending rate cuts for clients impacted by Covid-19. Meanwhile, our earnings forecast for 2022 remains unchanged at VND 18.5 tn. As ROE for 2021 and 2022 are expected to reach 23% and 22%, respectively, we believe that a target P/B ratio of 2x remains valid and we maintain our BUY rating on the shares of MBB along with our TP of VND 35,300/share. Downside risk: Higher-than-expected NPL formation rate; high exposure to solar farm projects (8% of total outstanding loans). 

We are upgrading our rating on the shares of TCB to OUTPERFORM from Market Perform, but maintaining our 1Y target price of VND 58,200/share, which implies a 17.6% upside. The Bank’s bond issuance and distribution segment should continue to benefit from the prolonged low interest rate environment amid the complicated recent developments with Covid-19. However, TCB does have a high degree of exposure to real estate developers who also invested in the riskier hospitality real estate segments, which could potentially impact credit quality. TCB posted stellar 2Q21 earnings results, with TOI and PBT delivering VND 9.2 tn (+58.3% YoY) and VND 6 tn (+66.4% YoY), respectively. This was attributable to high credit growth (+12.6% YTD, +35% YoY), a sharp increase in NIM to 5.90% (+157 bps YoY), strong fee revenue growth (+24% YoY), and robust trading/investment returns (foreign currencies and securities, +241% YoY), as well as improved CIR & lower cost of credit. Cumulatively, 1H 2021 PBT reached VND 11.5 tn (+71.2% YoY), fulfilling 58.3% of 2021F full-year guidance (VND 19.8 tn). The parent bank’s PBT aggregated VND 9.6 tn (+69.2% YoY), whereas subsidiaries’ PBT amounted to VND 2 tn (+82% YoY). ROA and ROE in 1H21 remained elevated at 3.9% and 23.6% respectively.

DGW recently held an online analyst meeting to discuss its robust Q2 earnings growth, which was driven by the continuous market share gains of Xiaomi mobile phones as anticipated in our previous report, a new revenue stream from Apple products, and profitable sales prices of laptop due to scarcity during the pandemic. The Company also shared more about new contracts signed for office equipment (Samsung, Choetech) and consumer goods (Vstent) segments. In addition, DGW is dealing with a vendor to distribute home appliances, starting in 2022. As a result, we increase our forecast for both 2021 and 2022 by 6% and 4%, respectively. The earnings outlook for 2022 is especially encouraging, as Xiaomi is likely to gain further share with mobile phone demand set to recover post-pandemic. Since our upgrade to OUTPERFORM in April, the shares of DGW advanced 17% - surpassing our target price. By rolling over our average 2021-2022 to 2022 financials solely while maintaining our target P/E of 14x, we derive a new target price at VND 162,000 before the stock split  (up from our previous target of VND 139,000). With a 17% potential upside potential (including the 0.8% dividend yield), we reiterate our OUTPERFORM call.