BID – Expecting robust growth in 2021, but issues remain

• BID sets a target for 2021 PBT at VND 13,000 billion, credit and mobilization growth at 10-12% and 12-15% respectively.
• We estimate that BID could reach VND 13,300 billion in PBT or even higher.
• The capital raising is pivotal, but we think the enhancement in asset and growth quality is more crucial for a sustainable expansion.

PVB – Staying idle until large projects kickstart

• 2021 results will depend mostly on minor projects outside of the Oil & Gas industry.
• Long-term prospects rely on major domestic projects, which are expected to remain idle until 2022.
• Some quarters might experience weak bottom line.

Worth monitoring inflation expectations

Two measures of inflation expectations, the US 10-year breakeven inflation rate and the US 5-year 5-year forward inflation expectations are now at their highest level since August 2014 (Figure 1). It is perhaps sending a message that long-term bond yields are heading higher.

NLG –Stake divestment at Waterfront boosted 2020 profit

• A 34.9% stake divestment at Waterfront has primarily driven 2020 results amid the scarcity of product handover.
• Financial income continue to be the profit driver in 2021 as NLG expects to transfer a 50% stake in Dai Phuoc and revaluate current shares at Dong Nai Waterfront following an additional 30% stake acquisition recently.
• Key deliveries in 2021 include Akari, Southgate and Can Tho projects.

DCM – 1Q2021 to Surge due to High Fertilizer Selling Price

The input gas price for urea production is recovering rapidly but due to its weight of 60% in the production cost of Ca Mau Fertilizer (DCM), the adverse impact will be partially limited. For the output, the selling prices of urea have risen sharply following world prices because of the supply shortage from China while the demand for global agricultural production is returning quickly. We believe that DCM's results could grow dramatically in 1Q2021 with revenue and profit after tax increasing by 32% YoY and 99% YoY, respectively. However, fertilizers selling prices in the following quarters will likely decrease gradually while oil prices will remain high or continue to increase, gradually reducing the positive effect on profits.

According to the high-profit scenario of 1Q2021, the most recent 12-month EPS at the end of 1Q2021 will reach VND 1,435/share and DCM's stock is trading at a trailing PER of 12x, approximately the five-year average. As investor sentiment is being supported by the information of high fertilizer prices, we expect the trailing PER to reach a similarly high level as in 2020, 13.5x, corresponding to a target price of VND 19,300/share in the short term. Valuation could decrease gradually when fertilizer prices cool down.

Semiconductor stocks. Where are we?

• In the current context of semiconductor having performed so well in the past 15 months and being way above their 200-EMA, we think a correction/ retracement is necessary.
• The semiconductor industry was one of the most insulated from the Covid-19 crisis in 2020.
• There will be a better time to buy some of these stocks in the next few months. Our favorites remain Xilinx, TSMC and ASML.

NKG – Favorable steel price and strong export to Europe and North America will boost NPAT in 1H

We think increasing HRC price and a high export volume to European and American markets, which have high profitability, will boost NKG’s performance in the 1H. Because factories will run at full capacity until June, NKG’s selling volume can reach 400.000 tons in 1H, growing by 35% YoY. The quarterly HRC average price is expected to increase by roughly 17% QoQ in 1Q, which will support NKG’s gross margin at roughly 9%  this quarter, which will be similar to that in 4Q2020. Therefore, we expect  NPAT will not be lower compared to 4Q2020. For 2H, NKG’s performance can be highly uncertain as the HRC price is at a high level and highly volatile. Regarding its financial health, we think NKG is becoming safer as its long-term debt decreased by 31%, and the interest burden also decreased as interest expenses fell by 17% YoY in 2020.

Thermal power plants: Cash dividend payout season

Power plants usually pay regular annual cash dividends. Since power plants more or less benefit from a closely regulated market, electricity stocks draw high attention before shareholders meeting season. Especially after the two peak years of 2019-2020, profit distribution in 2021 is an important catalyst, because many businesses will give very attractive dividend yield of 6-10%.

More importantly, cash dividends are increasingly important due to the pressure to build new thermal power plants to address power shortages in Vietnam. Power generation corporations have a large need for capital, and dividends from power plants will contribute a large part to this financial resource, especially when the time for disbursement is approaching.

Rong Viet's favorite stock list has some representatives of this group, including PPC, HND and NT2.

Key points

• A few thermal power plants, having strong 2019-2020 earnings, are going to produce considerable dividend yields. As cash dividend payout season is coming, we recommend investors to look at PPC, HND and NT2, who have certain stability in future earnings and high annual dividends.
• PPC is expected to payout VND 2,500 per share in the next twelve months, equivalent to an 8.9% dividend yield.
• HND is expected to payout VND 2,000 per share in the next twelve months, equivalent to a 9.6% dividend yield.
• &l

BSR – Likely to surpass the annual profit guidance because of the oil price rally

We believe the oil price’s multiple-month rally since last October has surprised industry participants themselves in terms of 1Q earnings even though only two thirds of the quarter have gone by. We noticed that Vietnamese oil and gas companies prepared their 2021 guidance based on an assumption of oil price at 45 USD per barrel (WTI). As a result, there were pessimistic expectations in terms of profit. Now that oil price was around 50 USD at the beginning of the year and is currently hovering around 65 USD, we think there might be several companies who already achieved their annual target in the first months of the year and BSR is one of them.

HPG - Strong HRC sales will boost the net income

We believe that HPG's prospect is positive in 1Q owing to the strong demand for HRC and increasing steel price. We forecast its net profit of roughly VND 6,200 billion, up 172% YoY. The main reason for the high growth comes from the abundant steel billet output from two new blast furnaces in Dung Quat, as well as new HRC production volume. We expect HRC sales to reach about 730,000 tons, while construction steel output of all types will grow by 12.5% ​​YoY to reach 1.16 million tons. Due to the high demand from coated steel manufacturers to meet export orders, HPG will not meet difficulties to sell its HRC production volume. Besides, hot rolled steel price tends to increase strongly because of a supply shortage. This allows HPG to enjoy a gross margin of 26% -28%. We estimate that hot rolled steel segment can contribute about 30% to the company's total gross profit in 1Q 2021. Although HPG's share price has reached its target price, we recommend investors to HOLD. We will publish a Result Update report soon to take into account the better-than-expected steel price outlook.