DRC – The growth path is less bumpy over past year
04-04-2024
: DRC
: Automobiles
: Hung Nguyen
Tags:
- Radial TBR tire maintains the riding role for DRC’s performance in 2024F of 25% YoY, owing to (1) the improvement of global goods rotation, (2) the elevated capacity in its phase-3 radial factory from 0.75 to 1.0 mn units/year from Q2-2024; and (3) the increased sales of the US market as we believe DRC’s products is able to be substitute for Thailand’s TBR tires in H2-2024.
- In 2024, we anticipate DRC’s operating margin will improve by +6 bps YoY due to the historic lows of 2023 coupled with our assumption that DRC will increase the natural rubber inventory reservation or level up its selling price to partly offset the upward shifts from this material. In summary, for 2024, we project DRC’s net revenue and NPAT to gain VND 5,349 bn (or USD 221 mn, +19.0% YoY) and VND 235 bn (or USD 12.2 mn, +19.9% YoY), resulting in an EPS of VND 2,331.
- We determine a one-year target price for DRC at VND 30,300/share, based on two methods: FCFF and P/E, with respective weights of 50% and 50%, which is -11% lower than the closing price on April 4th 2024. However, DRC maintains a stable dividend policy, with an average payout ratio in 2024 of ~60%. Hence, we suggest that investors following the arbitrage strategy can consider accumulating DRC stock when the market undergoes a significant correction at a reasonable price. Investors who prefer stable dividends can flexibly disburse when the cash dividend yield is attractive more than the bank deposits.
SCS – Raise TP to VND 95,600. Reiterate BUY recommendation
03-04-2024
: SCS
: Aviation
: Tung Do
Tags: Q1/2024 results
- We have adjusted the target price for SCS to 95,600 VND, up 6% from the latest TP, implying an expected total return (including a cash dividend of 5,000 VND/share) of 36% as of April 3rd, 2024. We reiterate a BUY recommendation for SCS.
- The volume of international cargo has shown robust growth following collaboration with Qatar Airways. International volume in Q1/24 is estimated to reach nearly 43 thousand tons (+40% YoY), while domestic volume reaches 15.8 thousand tons (+23% YoY).
- For the year 2024, projected revenue and net profit after tax (NPAT) are VND 974 billion (+38% YoY) and VND 659 billion (+32% YoY), respectively. The forecasted EPS for 2024F is 6,300 VND.
HPG – Dung Quat 02 Complex to be the long-term growth driver
02-04-2024
: HPG
: Materials
: Thach Lam Do, CFA
Tags: HPG
- The Dung Quat 02 Steel Complex (DQ02) has a designed capacity of 5.6 mn tons of HRC/year, divided into 2 phases. In which, phase 01 has the capacity of 2.8 mn tons/year, and it is expected to start trial production in the 4Q24, and begin operation from the 1Q25. As of March 2024, the project has completed 50% of phase 1’s total progress, in which HPG has completed 90% of the construction of main items (roller mills, steel smelting, iron smelting, coke smelting, and raw material processing plants) and completed more than 50% of the total steel structure.
- With the current construction progress of the Dung Quat 02 complex, we believe the factory will be able to be put into operation from the 1Q25 as planned, with relatively high efficiency (utilization rate of 80% for phase 01, corresponding to 2025 HRC output of 2.24 million tons). Thereby, HPG's revenue in 2025 can reach VND 197 tn (USD 8.1bn, +35%YoY), with 2025 gross profit can reach VND 30.6tn (USD 1.3bn, +59%YoY), and net profit to reach VND 21tn (USD 864mn, +85%YoY). The corresponding EPS in 2025 will be VND 3,380.
- We use two methods (FCFF and PB) to evaluate the stock; our fair value comes at VND 36,600 per share, implying a total return of +20% as of the closing price on April 02nd, 2024, equivalent to a BUY recommendation for long-term investment purpose for Hoa Phat Group Jsc
Anticipated PCE inflation signal for the Fed’s first rate cut
01-04-2024
: VDS
: Macroeconomics
: Luan Pham
Tags:
- Fed’s key inflation indicator holds steady, as anticipated.
- A normalization of super core PCE and services inflation.
- PCE inflation trends point towards a rate cut in June.
Fisheries Industry - Prospects of Major Markets
29-03-2024
: VHC, FMC, ANV
: Fishery
: Hien Le
Tags:
- The export value in the first two months of the year has increased by 28% YoY, with the export value of Pangasius rising by 8% YoY and shrimp increasing by 28% YoY. The increase in export value is primarily due to an 18% YoY increase in Pangasius volume and a 32% YoY increase in shrimp volume, while prices continue to decrease by 9% YoY and 3% YoY, respectively.
- The Pangasius industry in 2024 is expected to see growth in export volume in the US and China markets, while the EU market will remain stable compared to the previous year. Price increases in major markets are expected to be challenging compared to the period year due to high price competition and abundant supply of Tilapia and Pollock.
- The shrimp industry in 2024 is expected to see growth in both export volume and price recovery in the Japanese market as its low base and increasing wages in Japan. For the US, China, and EU 28 markets, competition with raw shrimp from Ecuador and India remains high, so we expect export volume to increase due to economic recovery while prices may not rise due to abundant shrimp supply.
Seaport industry – Awaiting the wave of recovery in 2024
28-03-2024
: GMD, VSC, HAH
: Seaports
: Quan Cao
Tags:
- Accumulated 2M2024, the estimated value of container via sea ex-im of goods were USD 32 billion (+17% YoY) and USD 20 billion (+13% YoY), respectively.
- Accumulated 2M2024, the container throughput in Hai Phong and Vung Tau regions were 1,005 thousand TEUs (+30% YoY) and 900 thousand TEUs (+55% YoY), respectively.
- For 2024, the import-export demand could recover strongly as early indicators are sending positive signals.
DCM - 2024 Fully depreciated urea plant drives earnings growth
27-03-2024
: DCM
: Fertilizer
: Ngan Le
Tags:
- We project the revenue and MPAT-MI in 2024 to reach VND 14,470 billion (USD 603 million) and VND 1,622 billion (USD 68 million) respectively, marking a 15% YoY increase in revenue and a significant 46% YoY surge in NPAT. The NPK segment is expected to be a revenue growth driver after the merger with the NPK Han-Viet plant, while the fully depreciated urea plant will stimulate profit growth in 2024.
- At a projected 2024 EPS of VND 3,064, DCM shares trade at a forward PE of 11.6x, higher than the 5-year average of 10.1x, showing that the current share price reflects the prospects of increasing business profits in 2024.
- In 2024, it is expected that the amended VAT law (imposing a 5% VAT on fertilizer products) will be implemented at the conference for review and comment at the 7th meeting (May-2024), and approved at the 8th meeting (Oct-2024). If the Law is passed with fertilizer products moving from non-taxable to 5% VAT, we expect domestic fertilizer producers will be able to compete with imported products thanks to lower costs.
- However, the intention of including fertilizer products into VAT’s item list has been considered at many National Assembly session but has not yet approved. Therefore, we do not yet include this factor in our assumptions for forcasting the business’s results. We will re-evaluate when we have more information after the 7th session of the National Assembly.
Update on monetary market in March 2024
26-03-2024
: VDS
: Macroeconomics
: Ha My
Tags: Monetary market
- The SBV's liquidity withdrawals may be near its peak.
- Credit improved slowly despite reduced lending interest rates.
- The dong may depreciate by 3% in the first half of 2024.
PNJ – Retail segment will drive the growth in 2024
25-03-2024
: PNJ
: Retailing
: An Nguyen
Tags: PNJ Jewelry
- In the picture of economic recovery, we believe that retail segment will be growth driver for PNJ’s performance in 2024, in the pillars of, (1) the increase in jewelry demand; (2) the leading position of PNJ in reaching customers thanks to the largest store network throughout Vietnam; and (3) PNJ‘s various advertising and promotional campaigns.
- In the assumption that the gold prices will be traded at high level in 1H2024, we forecast 2024 net sales and NPAT–MI to reach VND35,375 bn (or USD1,461 mn; +6.8% YoY) and VND2,245 bn (or USD93 mn; +13.9% YoY), respectively. The equivalent EPS is VND6,345 (+13.9% YoY).
- Based on the P/E (50%) and FCFF (50%) valuation methods, we raise PNJ's target price to VND97,500 from VND86,200 in our previous report, based on: (1) Increase 2024 NPAT-MI; and (2) Decrease WACC. PNJ’s stock price has increased by +15% YTD on the expectation of both recovery in the retail segment in 2024 and surge in the gold bar price. Therefore, we suppose that the positive expectation of PNJ’s performance has been reflected in the stock price movement.
- However, PNJ still has both upside and downside risks. We recommend investors to follow new signals from PNJ’s operations over the next 12-month that are not included in our current forecast, or wait for a correction in PNJ stock prices to make a suitable investment decision
DPR – Passing through the bottleneck
22-03-2024
: DPR
: Industrial Land RE
: Hung Le
Tags:
- Decision No. 227/QD-TTg of 2024 removes the bottleneck of industrial land quota in Binh Phuoc until 2025, thereby paving the way for the expansion of the North Dong Phu IP and the South Dong Phu IP to expedite progress.
- The provincial master plan of Binh Phuoc has been approved, and the draft master plan of Binh Duong province shows clearer prospects for land conversion and opens up many opportunities to materialize projects in the future. The estimated total area of convertible land reserves for site clearance and resettlement until 2030 is up to 1,743 ha.
- Under the base scenario, we forecast DPR's revenue and net profit for 2024 to reach VND 1,126 million (UDS 45 mn;+11% YoY) and VND 260 bn (USD 10 mn +26% YoY) respectively. Based on the assumption that DPR may receive compensation from the Tien Hung 2 project and the average rubber selling price throughout the year reaches VND 41 million/ton. Corresponding EPS reaches VND 2,988.
- Based on the sum-of-the-parts (SOTP) method, the target price is adjusted upwards by VND 51,100/share as legal bottlenecks regarding land targets have been removed, and the provincial master plan confirms the feasibility of the land conversion story. Therefore, we reassess the benefits of the two expanded industrial park projects, along with additional income from site clearance and resettlement compensation, reflecting this benefit in this update. Coupled with a cash dividend of VND 1,500/share over the next 12 months, the expected total return is 30.0% (based on the closing price on March 21, 2024), equivalent to a BUY recommendation for long-term investment purposes
STK – First take on 1Q24 results – tough time
21-03-2024
: STK
: Textile & Garment
: Hoai Trinh
Tags: STK
- In the first quarter of 2024, earnings results are expected to reflect a sluggish recovery in the first half of the year. We forecast that the net revenue and NPAT-MI of STK will approximately reach VND 300 bn (-14.8% QoQ, +4.2% YoY; USD 12 mn) and VND 4 bn (-87.3% QoQ, +145.6% YoY; USD 0.16 mn) in Q1, under the assumptions that (1) the overall yarn production will be around 5.7 thousand tons (+7.5% YoY), of which recycled yarn will account for about 58% of revenue (+1% YoY), and (2) there will be a slight decrease in the average selling price (ASP).
- For the year 2024, we maintain our viewpoint that STK's recovery pace will decelerate, with the primary recovery occurring in the latter half. We project that the net revenue and NPAT-MI of STK will reach VND 1,979 bn (+38.8% YoY; USD 81 mn) and VND 154 bn (+76% YoY; USD 6 mn), respectively, based on assumptions that (1) the total yarn production will return to growth, increasing by 36% YoY (assuming that the two existing factories will operate at an ultilization rate of 60% and Unitex, starting its operations in Q4, will run at about 10% capacity); (2) the share of recycled yarn will account for approximately 51% of total revenue; and (3) interest expenses are expected to increase by VND 39 bn and depreciation expenses by VND 30 bn as the Unitex factory commences operations in Q4/2023. The corresponding EPS is VND 1,640 per share.
- We have adjusted the target price to VND 29,000 per share (up from VND 26,200 per share) as we reassess the earnings outlook for the 2025–2028 period. Currently, we believe that expectations for a rapid and strong recovery in order volume have already been reflected in the stock price. Therefore, we have downgraded our recommendation from NEUTRAL to REDUCE for STK
FRT – Long Chau persists its riding role for FRT’s performance in 2024
20-03-2024
: FRT
: Retailing
: Hung Nguyen
Tags: FRT Retailing
- In Q4-2023, FRT's net revenue and NPAT-MI recorded VND 8,690 bn (or USD 364 mn, +5.5% QoQ, +2.7% YoY), and VND -101 bn (net loss of Q3-2023: VND -13 bn), respectively, resulting in 2023 EPS of VND -2,375. It is due to (1) one-off costs regarding FPT Shop closure and inventory expiration processing, and (2) higher-year ago bonuses related to strong performance of Long Chau.
- In 2024, we project that the company's net revenue will reach VND 41,619 bn (or USD 1,741 mn, +38.0% YoY) and VND 304 bn (or USD 12.7 mn), respectively, resulting in an EPS of VND 2,229. It is driven by (1) the rehabilitation of ICT demand from the 2023 low-base for both revenue and profit margin and (2) the increasing coverage of Long Chau into tier-2,3 provinces with higher performance in each store.
- Based on the Sum of the Parts (SoTP) valuation method, we have revised our target price for FRT to VND 139,500 per share, up from VND 112,800 per share, on the pillars of (1) raised number of store count to over 3,050 stores by the end of FY27; and (2) revise up Long Chau’s target FY24 P/S from 0.60x to 0.85x on the new expansion plan of Long Chau (enter new market – tier 2,3 provinces).
- FRT’ stock price has increased by +46% from Dec-2023. Therefore, we suppose that the growth expectations of FRT has partly reflected on its stock price movement. We have NEUTRAL recommendation for FRT stock, downgrading from ACCUMULATE level in our previous report
04-04-2024
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