HDB - 1Q2020 updates – Growth still driven by NII

HDB achieved a moderate earnings growth in 1Q (+13.5% YoY), mainly driven by the impressive expansion of net interest income, while other income streams were somehow limited under unfavorable economic conditions. We note that in 1Q the bank has escalated some reserves for trading & investment securities, operating expense and provision expense in case of worsen virus situation. For 2020, we expect net interest income momentum to remain strong, but service income would be more quite at least until the exclusive bancassurance agreement is finalized. We also expect that the bank’s relatively prudent provisioning in 1Q would be able to moderate the virus impact on bottom line in the subsequent quarters. We forecast 2020E earnings growth at 16.4% YoY, giving an EPS 2020f of VND 4,293.

Our target price on the lastest Result Update report for HDB is VND 29,000, equivalent to a potential upside of 6% versus current market price. We note that 2Q business results is likely to reflect the negative impact of Covid-19 more clearly, representing a window for investors to ACCUMULATE the stock.

DRC – Update on 1Q2020

DRC's results in 1Q were quite positive thanks to the better performance of the radial segment compared to the same period last year. That partly eliminated the decline of the bias segment. However, we think that Covid-19 will negatively affect DRC’s exports to the US and Brazil. Therefore, both revenue and profit of DRC will go down in 2Q2020. As a result, we do not think 2Q2020 is a good time to invest on DRC.

We have a target price of VND 21,400/share combined with cash dividend, that will be 13% higher than the closing price on 05/06/2020. We recommend an ACCUMULATE for this stock.

PC1 AGM Update – Energy to be the core business

At its 2020 annual general meeting, PC1 has announced its 2020 guidance and its long-term strategy. We think the most important point is that the company is transforming itself into a power company, as electricity business will be the main contributor to PC1’s profit. In the next five years, PC1’s pipeline includes 144 MW in wind power capacity, 100 MW in solar power capacity and approximately 60 MW in hydropower capacity. Accordingly, PC1’s power capacity will total 325 MW. Then, while construction’s profit margin is significantly lower than that of electricity and real estate cannot provide consistent annual income, PC1’s power plant portfolio will dominate PC1’s financials.

DXG update: Awaiting for Gem Sky World’s launch

Dat Xanh (HSX: DXG) sets total revenue and profit targets in 2020 of VND4.9tn (-16% YoY) and VND1.0tn (-15% YoY), respectively. Management has a prudent view due to the impact of the Covid-19 being highly unpredictable. Generally, this profit guidance is in line with our forecast, with revenue and NPAT-MI of VND5.5tn and VND1.0tn.

FRT - Annual General Meeting Update

After a rough 2019, FRT is expected to have a tougher 2020 before recovering from 2021 on. The covid-19 pandemic is impacting consumer spending and retailing footfall. The saturated smartphone market will further hurt FPT Shop sales. Meanwhile, bad-debt of F-Friend and F-Subsidy is still a concern and FRT will need to write of VND 15bn more in 2020. On the other hand, Long Chau Pharmacy is still in an expansion phase but as yet to contribute to profits

IMP – 2020’s bidding result YTD and a quick review on other competitors in tier 1 & 2 drug bid

For IMP, business prospects come mainly from the ETC channel (hospitals), considering that the OTC channel (pharmacies) is stacked with competition and is not a huge market either (only 25% of total drug sales in Vietnam). On the other hand, ETC channel offers a lot of potential for EU-GMP standard manufacturers to replace foreign medicines in the Tier 1 and 2 bid. Policy wise, Circular 15/2019 was really a big catalyst for the like of IMP

BFC – Profit to improve in 2Q2020

In 2Q2020, BFC targets to consume 191 thousand tons of NPK, down 6% YoY. Revenue and EBT respectively are set at VND1,796bn and VND52bn. We believe that the actual number in 2Q should be higher than the plan

NKG - 1Q2020 updates

NKG’s operating performance improved strongly as net income increased from VND -101.6 billion in 1Q2019 to VND 41.5 billion in 1Q2020. Its gross margin rose noticeably from 0.0% in 1Q2019 to 8.6% in 1Q2020. NKG’s net income and gross margin were supported by a strong rise in HRC prices, which increased significantly to USD 520/ton in 1Q2020 after hitting a bottom at USD 420/ton in 4Q2019. However, its net income was hit by a foreign exchange loss of VND 35 billion, caused by a surge of roughly 1.7% in the USD/VND exchange rate.

US - Strange times

More and more predictions coming from so-called ‘experts’ that the world is heading for a debt deflation of the type last seen in the Great Depression of 1929-30. This writer is not naturally unsympathetic to such views. We believe that the extraordinary policy responses to Covid-19 marks the beginning of the end of the disinflationary era in existence since the early 1980s.

TCB 1Q2020 updates - NII to maintain strong momentum

TCB achieved a good 1Q business performance as the impact of Covid-19 has yet to be reflected fully. Results in the next quarters are expected to be hit harder. Set aside the concentration risk of lending to real estate-related sectors, we appreciate the bank’s solid balance sheet, with a focus on lower risk segments, such as high-income group, working capital and collateralization. A significant portion of 1Q earnings was also spent to accumulate more room for NPL and LLR, in precaution for probable bad debt formation upon the outbreak. Considering the current stable condition of the real estate market, we think TCB would show a strong resilience to this crisis and would be able to recover strongly whence the pandemic impact is over.

We forecast TCB’s earnings growth to reach 14.4% YoY in 2020E, before recovering to c.25% YoY in 2021E. We keep our target price at VND 24,000, equivalent to a potential upside of 14% versus the current market price. We thereby recommend to ACCUMULATE the stock.

VHC – Update on 2020 AGM

The performance of the main segment, pangasius, appeared to be better than our expectations for 2Q2020. Although the collagen-gelatin (C-G) expansion plan will be completed later than previously planned, the management believes that the company’s adjustments in operation and the positive market demand for collagen could guarantee the revenue and PAT target of this segment. The new project of fish oil for human consumption will also contribute in improving profit margin. However, although the selling price of pangasius has continuously been adjusted downward from the historical peak in 4Q2018 until now, it may decline further to approach the demand-supply equilibrium, per the management. Considering all these factors, we revise up our 1-year target price by 25% for VHC to VND 38,100/share. With an expected cash dividend of VND 1,500/share, the total return is 16%, compared to the closing price as of May 21^st, 2020. We recommend to ACCUMULATE  this stock.