Steel industry update - Flat steel segment outperformed

• Steel consumption has increased positively in 5M2021 YoY in all major segments.
• In construction steel, sales volume grew at a high pace in 5M2021, but the domestic demand can become weaker in the June-September period due to seasonality, high selling price, and COVID-19’s negative impact.
• In the coated steel segment, sales volume has increased strongly in 5M2021 due to strong demand overseas. Exports can remain strong in 2H2021 owing to favorable demand, prices, and trade policies.
• We raise our target price on HPG from VND 50,100/share to VND 55,200/share to account for the better prospect in the hot-rolled coil segment.

Update on credit growth in 1H2021

• Softening credit momentum due to the latest Covid-19 outbreak.
• Credit access by SMEs remained weak in 1H2021.
• More customers received loans with preferential interest rates from banks.
• The SBV remains focused on targeting credit expansion.

Industrial Parks – Vietnam has lots of opportunities to attract more FDI, helping industrial park companies grow

Vietnam has some strong points which presents it as a good option for investors. Therefore, we expect that there will be an increase in FDI flowing into Vietnam in the coming years and IP companies will benefit from this. In the next couple of years, companies owning big land bank in Hai Phong and Vung Tau may have chances to lease out their land quicker than expected with better leasing price. Meanwhile, in the long term, expanding land bank is a sustainable way to develop instead of waiting for leasing price to increase over time.

TCM – 5M2021 Update: Surging Costs Eat Into Profit

• 5M2021 revenue and PAT came at USD 67.5 mn (+19% YoY) and USD 1 mn (+37% YoY). Net margin has kept the downward  trend  from the beginning of the year,  from 7% in Jan to 5.2% in May. Surging garment material costs and transportation costs are the causes.
• The completion rate of 2021 plan is currently 38% in revenue and 33% in PAT. Thereby, it is higly possible that TCM will not achieve its 2021 guidance.
• We forecast 2021 revenue and PAT at VND 4,185 bn (~USD 182 mn, +20.6% YoY) and VND 192 bn (~USD 8.3 mn, -30.3% YoY). The stock is trading at PER 21.5x, far higher than its average PER 7.7x of the 2016-2019 period. Given PER forward of 2021 and 2022 are 35.9x and 20.7x and CAGR of revenue and PAT of 2020-2025 are 8.3% and 11.2%, the stock is overvalued. Thereby, we recommend to OBSERVE.

FPT 5M-2021 Results: Key Businesses Are Picking Up, Extending Profit’s Double-Digit Growth

• 5M-2021 revenue and PBT respectively posted VND13.3tn (+18.6% YoY) and VND2.4tn (+21.8% YoY), slightly behind our expectations by completing 36%/40% of the corresponding forecasts due to lower-than-expected global IT services performance.
• While we maintain a strong positive stance on FPT’s outlook as we believed it is well-positioned (cost advantage and improving technology capabilities) to capture the digital cloud computing, and AI adoption megatrends over the long-term, the current valuation may not support short-term stock price appreciation (current trailing P/E of 20.8x is 3sd higher than its average since 2017). Our previous forecasts (2021F revenue/NPAT-MI are projected at VND36.9tn/VND4,265bn), which are currently under review, suggesting a 2021F/22F forward P/E of 17.9x/15.8x. The current TP of VND90,000 is under revision as well.

DGC – Higher selling price and gross margin improvement bring growth in 2021

• DGC is known as a leader in the chemical industry in Vietnam with its main product - yellow phosphorus (P4) - widely used in the production of semiconductors and DAP fertilizers.
• DGC has been producing higher added value products, derived from P4, to improve its profit margin.
• Khai Truong 25 mine has come into operation since the end of 1Q2021, ensuring 30% of apatite ore demand for phosphorus production. Self-supply will help gross margin improve from 3Q2021 onwards.
• Nghi Son project as well as real estate project will be the growth engine from 2023.
• Recent rising price of yellow phosphorus is likely to support the 2Q2021 earnings of DGC. Revenue and net profit in 2Q2021 are estimated at VND2,181bn and VND320bn to VND330bn respectively.

FED notes from the June meeting

• Economic growth estimate rises to 7% from 6.5%.
• Fed funds forecast sees possibility of one hike in 2022, two in 2023.
• Markets take the Fed revisions to heart, Treasury yields and dollar strengthen.

Fed’s policy makers have finally awakened to reality. Inflation is probably not temporary as data in the US, Europe, China, Japan and other regions show.

MPC: AGM update – Brighter business outlook in 2H-FY21 but container shortage to continue

• In 2021, MPC plans to reach VND 15,755 Bn (or USD 685 Mn, +10% YoY) in revenue and VND 1,092 Bn (or USD 47 Mn, +63% YoY). MPC estimates 1H-FY21 pre-tax profit at VND 300 Bn (+11% YoY), completing 27% target. MPC proposes FY21 cash dividend of 5,000-7,000 VND/share (dividend yield 14.1-19.8%), the payout ratio 92-129% based on 2021 guidance. However, we are still suspicious about the ability to fulfill earnings and cash dividend guidance amid soaring freight costs and upcoming large CAPEX.
• 2H-FY21 revenue could bounce back strongly thanks to both export volume and ASP recovery, driven by strong demand rebound and Indian shrimp supply shortage. We expect gross margin will improve in the subsequent quarters because ASP could rise faster than raw materials prices. However, high freight costs could be a bottleneck for MPC to achieve its profit guidance.
• MPC's share price has rallied by 15% since the beginning of June 2021. We believe this short-term positive reaction is supported by the information that MPC would set high business guidance and very attractive dividend guidance. At the closing price on June 21, 2021, MPC is trading at a trailing P/E of 12.6x, higher than the 5-year average P/E of 9.6x. We note that the stock price may increase in line with the tailwinds of the shrimp export and positive business results in 2H-FY21.

TDM – Fulfills 68% its 2021 target profit in 2Q2021

• In 2021, the company plans to reach VND 453 Bn (or USD 19.5 Mn) and VND 274 Bn (or USD 11.8 Mn) in revenue and NPAT, +17% YoY and +53% YoY, respectively. It gained VND 119 Bn (or USD 5.1 Mn) in net profit for the first quarter thanks to the BWE’s dividend. The company estimates NPAT in 2Q2021 to be VND 53 billion, +12% YoY. Thus, 1H2021’s NPAT is going to be at 68% of its 2021 target.
• To reach untapped potential areas. in Dong Nai province. Purchased 20% of Gia Tan, alongside BWE owns 48% of Gia Tan, this group is going to unlock this business’s value.
• TDM has sustainable growth based on potential from an industrial park in Binh Duong and the new joint venture in Dong Nai. For its core business, the selling price is going to increase by 5% as schedule and growth in Binh Duong will raise its volume.

Trade data remained supportive in May

• Stronger external demand for most Vietnamese products.
• All export markets recorded strong rebound.
• Imports were buoyant due to rising domestic demand and high commodity prices.
• Vietnam recorded the largest trade deficit since 2009.

CTG – Short-term tailwinds and potential earnings surprise

• In 1Q2021, CTG achieved superior growth as the bank recorded a sharp fall in CIR, credit and interest costs. PBT growth was +171% YoY mainly due to provision expenses dropped -69% YoY.
• Despite the moderate expected credit growth, CTG is projected to achieve VND 6,265 bn PBT (USD 272 mn, +40% YoY) in the second quarter. This is attributed to a continuously widened NIM on a low comparison base and the movement of bad debt to upper loan groups lowering pressure on credit costs.
• We raise the projected 2021 PBT to VND 24,802 bn (USD 1.1 bn, +45% YoY). As the average multiple valuation rose dramatically and the bank is likely to barely reach the previously expected range of provision expenses in 2021, we raise our target price to VND 51,700/share and our recommendation to NEUTRAL. This translates to an upside of +2% from the closing price of June 16 2021.