GDA – Prospect of recovery with attractive valuation
11-06-2024
: VDS
: Materials
: Thach Lam Do, CFA
Tags: GDA
- In 1Q2024, GDA recorded revenue of VND 4,099bn (USD 165mn, +4%YoY, -11%QoQ), with galvanized steel‘s volume has recovered, compared to same period last year, and reached 203 thousand tons (+12%YoY, -7%QoQ). The recover was owing to the volume in foreign markets (especially from North America and EU, with restocking activites after holiday period, accounting for 70% of total output). Gross profit reached VND 347bn (USD 14mn, +18% YoY, +12%QoQ) and 1Q24 net profit after tax (NPAT) of VND 95bn (USD3.8mn, +16% YoY, +375%QoQ)
- The company plans to pay 2023 cash dividends at a rate of 10% (VND 1,000/share) and stock dividends at a rate of 20% (100 shares receive 20 new shares). It maintains the plan to establish a new galvanized steel factory (capacity of 1.2 million tons/year), and also issuing shares to existing shareholders, in order to supplement capital for the capital expenditure
- For the whole year 2024, we expect the average export output to be maintained at 40,000 tons/month (14% higher than in 2023, with recovery of export markets), while the domestic output can record significant growth, owing to real estate projects to promote construction activities (average domestic output to reach 35,000 tons/month, 21% higher than in 2023). Therefore, GDA can achieve sales output of 900 thousand tons (+16%YoY). Revenue and NPAT in 2024 can reach VND 21tn (+20%Yoy) and VND 360bn (+27%YoY), respectively. EPS 2024 can reach VND 3,075.
- The PE/PB forward of GDA are 9.4x/0.8x, respectively, showing that the company's recovery prospects in 2024 are not fully reflected in the stock price. With highlights from: 1/ The company has the second largest market share in the field of galvanized steel production and also has plans to establish a new factory, 2/ Market consumption has recovered; we think this stock is currently trading at an attractive valuation compared to other listed steel companies.
VIB – Provisioning and Operating Expenses Continue to Pressure Q2-2024 Profit Growth
10-06-2024
: VIB
: Banking
: Tung Do
Tags: VIB
- For Q2-2024, we estimate a 14% YoY decline in pre-tax profit to VND 2.5 trillion due to increased pressure from provisioning expenses and operating costs, while total operating income remains flat compared to the same period last year
- We have revised down our 2024F NPAT forecast by 8% from previous projections to VND 9.4 trillion (+10% YoY), reflecting a 30-bps reduction in NIM from the previous projection to 4.2%
- We have adjusted our target price for VIB down by 4% to VND 25,100 per share. Combined with the assumption of a cash dividend payout ratio to par value of 12.5% over the next 12 months (equivalent to a payout ratio of 40%), the total expected return is 17%. We downgrade our recommendation on VIB from BUY to ACCUMULATE
Vietnam's textile industry is gradually losing its competitive edge in the US and domestic markets
07-06-2024
: TNG, MSH, STK
: Textile & Garment
: Hien Le
Tags:
- The global textile and garment industry is estimated to have an CAGR of 4% from 2022 to 2030, with high growth rates in the Chinese and Canadian markets, while other markets maintain a growth rate of 3%. The CAGR in 2021-2023 for the export of apparel and bedding items is projected to be 4%, higher than that of yarn, fabric, and other items.
- For the period 2024-2030, we expect Vietnam's textile and garment industry to grow at a higher rate than the global CAGR of 4% as capturing market share from China in the US market. Companies with a high proportion of export revenue to the US, such as TNG and MSH, will benefit. However, in the long term, Vietnam will find it challenging to gain market share in the US as declining competitive advantages.
- The domestic market, according to data from the Ministry of Industry and Trade, Vietnam's retail revenue of textiles and garments in 2023 reached 246 trillion VND (or USD 9,84 bn), equivalent to a CAGR of 6% for the period 2018-2023. According to Euromonitor data, the CAGR of retail revenue in textiles and garments and the expansion of fashion stores in Vietnam for the period 2022-2027 is 3.8%/2.1%.
- The OBM (Original Brand Manufacturing) segment in Vietnam faces fierce competition from foreign rivals as consumers tend to purchase foreign brands and the demand for online shopping is increasing. The domestic market is highly fragmented, with each fashion brand holding a market share of less than 3%. However, companies can still enter the OBM segment if they can build a strong brand image and boost online sales with a diverse range of products that suit consumer preferences.
DPM – Deductible input VAT helps boost profits in 2025
06-06-2024
: DPM
: Fertilizer
: Ngan Le
Tags: DPM VAT 2Q2024
- In 1Q24, the revenue of the Urea/NPK segment grew by 17% YoY and 23% YoY, respectively, compensating for the decline in the import segment, resulting in a net revenue of VND 3,307 bn (+1% YoY). Thanks to the cooling of input material costs, the NPK and import businesses achieved a gross profit margin (2% to 5%), leading to an increase in the overall gross profit margin to 18% compared to 16% in 2023. However, NPAT-MI in 2024 remained equivalent to last year, reaching VND 264 bn, due to an increase in SG&A expenses.
- For Q2/2024, we estimate revenue and net profit after tax (NPAT) to be VND 2,841 billion (USD 113 million; -23% YoY) and VND 276 billion (USD 11 million; +162% YoY), respectively. For the full year 2024, we estimate revenue to reach VND 13,809 billion (USD 548 million; +2% YoY), assuming stable selling prices and Urea output compared to 2023. The NPAT attributable to shareholders is expected to increase by 55% YoY to VND 826 billion (USD 33 million), driven by profitable operations in the NPK and Kali segments following underperformance in 2023. The corresponding EPS is VND 2,094.
- DPM's stock price has surged over 24% from its low in April, largely reflecting positive investor expectations regarding the potential approval of the amended VAT law in the October session of the National Assembly, which is anticipated to benefit businesses. According to our estimates, if the VAT law is passed as expected, the NPAT for 2025 will increase by more than 50% compared to the scenario where it is not passed (assuming stable prices and sales volume). Under this scenario, the fair value based on the discounted cash flow (DCF) method is VND 47,500 per share, compared to a fair value of VND 38,500 (based on DCF) in the scenario where the law is not passed.
- DPM's stock price is highly sensitive to news about the amended VAT law, though this is not the only factor impacting the company's business results. Therefore, we believe that investors might consider waiting for more concrete information regarding the VAT law amendments being discussed by the National Assembly in the May session before making investment decisions on this stock.
Vietnam Dairy Market – Sales growth will slow down in the long-term
05-06-2024
: VNM
: Food, Beverage & Tobacco
: Hung Nguyen
Tags: VNM
- Vietnam dairy consumption continues to be weak in Q1-2024 with a decline of 2.8% YoY attributed to the bleak consumer sentiment from the end-2022 until now.
- In period of 2024-28, dairy market sales growth will slow down due to the higher-and-higher milk consumption per capita compared to Asian peers’ and the birth rate decreased in Vietnam.
- Dairy companies' 2024 profits will benefit from the downward trend in prices of raw milk powder, but will be offset by decelerating revenue growth and increased SG&A expenses/revenue due to fierce competition
1H2024 steel industry outlook – Output sales to recover
04-06-2024
: HPG, HSG, NKG
: Materials
: Thach Lam Do, CFA
Tags: GDA
- In 1Q24, construction steel consumption was flat compared to the same period last year, when the residential real estate projects (main consumption sector) have not promoted sales/construction phase in the 1Q. For hot-rolled coil (HRC) and downstream products (coated steel sheets, steel pipes), sales volume maintained positive growth compared with 2023, owing to demand from foreign markets (ASEAN, EU, US). Notably, the EU market has surpassed ASEAN to become Vietnam's key export market.
In April, we noticed that the domestic market showed clear signs of recovery compared to the 1Q24, especially in the northern market. - We believe that the recovery comes from: 1/ Residential real estate projects and public investment projects are pushing construction activities and 2/ Inventory accumulation activities before the rainy season. Thereby, we expect that domestic sales output of steel companies can remain at a high level in the 2Q 2024, which is a supprtive factor for the business results, in the context of expectations for the stable profit margin (expected output price is relatively stable in 2Q).
- For 2024, HPG (Buy, target price: VND 33,900) is our top pick due to its leading industry position and investment plans to take advantage of the sector's recovery cycle. In addition, GDA (Non-rated) is a stock that investors can pay attention to, with: 1/Expectation of domestic output to recover in the 2Q; 2/ The stock is trading at a PBR of 0.8x, relatively low compared to peers (galvanized steel sheet companies are traded at a PBR of 1.2x). Coated steel stocks, including HSG (Accumulate, target price: VND 24,300) and NKG (Neutral, target price: VND 24,600), with the anticipated recovery in 2Q has started to be reflected in stock prices, which are more suitable for short-term trading strategies when the market price adjusts relatively to our TP.
ACV - 2024 AGM Update: International passenger volume to surpass pre-pandemic levels
03-06-2024
: ACV
: Aviation
: Quan Cao
Tags: Aviation ACV
- The AGM has set a plan for total passenger volume to reach 113 million pax (+1% YoY) this year. Within this, ACV expects international passenger volume to increase by 23% from 2023 levels, approximately 41 million pax. The plan for domestic passenger volume is to reach only 72 million pax (-10% YoY).
- Regarding financial plans, total revenue is expected to be 20,325 billion VND (+2% YoY), and pre-tax profit is projected to be 9,378 billion VND (-11% YoY). Excluding profit from airfield management of 1,464 billion VND, ACV's PBT is projected to be 7,900 billion VND (+11% YoY).
- Distribution plan: The Ministry of Finance has issued a document proposing amendments to Decree No. 140/2020/ND-CP, which is expected to be approved in July 2024. This will allow ACV to distribute retained earnings from 2019 by stock dividends.
QNS – Continue to benefit from high sugar prices in the first half of 2024
31-05-2024
: QNS
: Sugar
: An Nguyen
Tags:
- In 4M2024, the local sugar trading prices have been maintained at a high level compared to the same period last year, which is the main growth driver for both sales and profits of QNS.
- For 2024, the forecast revenue and net profit to reach VND 11,194 billion (+12% YoY) and VND 2,194 billion (+0% YoY), respectively in 2024. The equivalent EPS is VND 7,134.
- Using SoTP method, we raise QNS's target price to VND 55,800 from VND 54,000, based on the adjustment to increase net profit to VND 2,194 billion (+0% YoY) from VND 2,062 billion (-7% YoY). New/old EPS equivalent is 7,132/6,506 VND. The main reason is that we adjusted the forecast for soymilk segment revenue in 2024 to VND 4,217 billion (+5% YoY) from VND 4,068 billion (-5% YoY) of the previous forecast.
- Compared to the stock market price on May 30th 2024, the expected stock price return is calculated at +13%. Based on the expectation that (1) the sugar prices might increase in Jun 2024 before slowing down in 2H2024; (2) 2024 outlook of QNS; and (3) attractive dividend policy (VND4,000/share), we recommend that the investors who follow the arbitrage strategy can execute short-term trading on QNS shares collerating with sugar price movements, while investors who prefer stable dividend can ACCUMULATE QNS shares.
A View On Latest US's new tariffs
30-05-2024
: VDS
: Macroeconomics
: Luân Phạm
Tags: US-China
- Have US-China economic relations reached a point with no return?
- Short-Term Limited Impact of US Tariffs, Long-Term Risks Looming.
NTC – Pivot point is near to come
29-05-2024
: NTC
: Industrial Land RE
: Hung Le
Tags:
- Decree No. 12/2024/ND-CP and Document 06/2024/QD-UBND issued by Binh Duong Province signal positive developments regarding the calculation of land use fees for the NTU3 project. The estimated additional land fee is VND 5.2 billion per hectare (marking a 62% decrease compared to the previous update on February 5, 2024.
- In our base scenario for 2024, we project total revenue to reach VND 757 billion (USD 30 million, +222%YoY). Net profit is forecasted to hit VND 535 billion (USD 21 million, +79%YoY). Correspondingly, the EPS is expected to be VND 22,310.
- We maintain our BUY recommendation with an adjusted target price of VND 346,000 per share. This adjustment reflects the reduced additional land use fees needed to be paid. Combined with an expected cash dividend of VND 6,000 per share over the next 12 months, the total anticipated return is 65% relative to the closing price on May 28, 2024.
A view from the domestic gold market
28-05-2024
: VDS
: Macroeconomics
: My Tran
Tags:
- Despite limited supply, Vietnam ranks third in Asia regarding gold bar consumption demand.
- Amending Decree 24 is necessary, but it took time to agree on a solution and implementation steps.
- The SBV halted the gold auction to deploy another strategy.
Power sector – Electricity consumption maintained a two digit growth in early months of 2024
27-05-2024
: PC1, TV2
: Power
: Lam Nguyen
Tags: PC1 TV2
- Electricity consumption in 2024 is projected to grow positively from the low base in 2023. We expect coal-fired and hydroelectric power plants to play an important role in the electricity generation.
- The development of power infrastructure and transmission networks will also carry on in 2024 to ensure that there is no risk of capacity shortages at the peak times. Accordingly, companies involved in consulting, design, construction, and material supply for these infrastructure projects are expected to see additional backlog in 2024
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