External demand weakened sharply in Oct 2022

• Export growth weakened significantly while imports improved slightly from the previous month.
• 2022’s export turnover is estimated at $375-380 billion, up 12-13% over the same period.
• 2022’s import turnover is estimated at $363-366 billion, up 9-10% over the same period.

FPT - Resilient 9m-2022 Business Results Amid Headwinds From Global Macro Economy

In Q3-2022, FPT achieved net revenue and NPAT-MI of VND 11,149 billion (+28% YoY) and VND 1,454 billion (+29% YoY), respectively. Accumulative 9M-2022, FPT recorded net revenue and NPAT-MI of VND 30,975 billion (+24% YoY) and VND 3,943 billion (+30% YoY), respectively. These results are slightly lower than our expectations.

Global IT services maintained revenue and EBT growth at double-digit rates of 30% YoY and 28% YoY respectively.

• Notably, revenue growth from the Japanese market in Q3-2022 started to accelerate to 19% YoY despite the JPY depreciating about 18.5% YoY, implying a jump of 40% YoY of products delivery in Q3-2022 compared to a growth of over 20% YoY in the first half of the year. In addition, revenue growth from other markets remained high: US +33% YoY, EU +22% YoY and APAC +58% YoY. Excluding exchange rate factor, 9M-2022 accumulated revenue of Japan market up 27% YoY, EU up 10% YoY.
• However, revenue from digital transformation (DX) services decreased by 1% YoY in Q3-2022. This is due to (1) the decline in demand from NFT game customers, leading to negative growth in services revenue using Blockchain technology and (2) the high comparative base of the same period last year. On the other hand, Cloud services recorded rapid cumulative growth of 54% YoY. FPT maintains DX services’ full- year growth target of 35-40% (9M-2022 +34% YoY).
• Newly signed revenue has started to decelerate slightly, growing by 15% YoY in Q3-2022, compared to 40% YoY in 1H-2022. In particular, customers in the US have recently shown signs of delaying the progress of IT spending due to the macro headwinds. In contrast, signed revenue in Japanese market has picked up with an increase of 50% YoY over the last two months.

REE – Favorable conditions boosted earnings in 3Q2022

• The company posted revenue and NPATMI of VND 2,234 bn (or USD 91 mn) and VND 680 bn (or USD 28 mn).The gross profit margin expanded to 41% in 3Q2022 from 32% in 3Q2021, driven mainly by the power sector. Power plant earnings have tripled compared to that in 2021, contributing 55% of  total NPAT. Office leasing/ M&E services and the trading sector have  doubled/tenfold compared to last year, contributing 26% and 6% to total NPAT. The water segment sustainably rose by 10%, accounting for 13% NPAT.
• In 2022, we forecast revenue and NPATMI to be VND 8,486 bn (or USD 346 mn) and VND 2,678 bn (or USD 109 mn), +46% YoY and +44% YoY, respectively. REE has outperformed during 2022 thanks to (1) Favorable conditions boosting hydropower results; (2) New contribution of the three wind power plants; (3) The recovery of remaining segment compared to 2021. We forecast revenue and NPAT in 2023 to be VND 8,237 bn (or USD 336 mn) and VND 2,581 (or USD 105 mn), -4% YoY and -3% YoY, respectively.
• We revise down our target price to VND 79,000 to reflect (1) higher WACC  and (2) higher interest rates in the context of a risk-free rate surge. Comprising of VND 1,000 dividends in the next 12 months, offering an upside of 16% compared to the closing price as of Aug 11th, 2022. Hence, we recommend to ACCUMULATE this stock.

DPR – Tree liquidation lift up 3Q2022 earnings, land use conversion will be the main focus in the long term

• In Q3/2022, revenue was VND 340 billion or USD 14.2 million (+13% YoY), and NPAT-MI was VND 85 billion or USD 3.5 million (+25% YoY). Accumulated 9 months, revenue reached VND 841 billion or USD 35 million (+15.68%), and NPAT-MI reached VND 139 billion USD 5.8 million (+34.53% YoY).
• We believe that DPR can complete the revenue plan in 2022 as the main business segment does not have much fluctuation, however, the year's profit target is difficult to achieve as the land handover plan was not as expected. Accordingly, revenue and NPAT-MI in 2022 are estimated at VND 1,347 billion or USD 56.1 million (+11%YoY) and VND 472 billion or USD 19.7 million (+10%YoY), respectively.
• PDR plans to convert 4,000 hectares of rubber land to industrial or residential use. This plan is consistent with Binh Phuoc province's master plan for the period 2021-2025 and is feasible because (1) the DPR rubber land area is in a prime location adjacent to Binh Duong province's industrial capital, and (2) there is a convenient regional linkage. This is consistent with the provincial planning philosophy. (2) Clearing land for project implementation will be much easier than negotiating with numerous individual households.
• We continue to maintain a positive long-term outlook for DPR. When compared to the previous valuation, the target price has been reduced by 8.7% to 66,300 VND/share compared to the last valuation in the 2H2022 strategy report  due to (1) the upward adjustment of the discount rate is more in line with the recent rapidly increasing interest rate trend, (2) delaying the handover of land to Binh Phuoc province, and (3) delaying the progress of Bac Dong Phu Expansion Industrial Park project to 2025. When combined with the expected cash dividend of 3,000 VND/share in the next 12 months, the total expected return is +35.5% (based on the closing price on 11/10/2022).

ACB – Stand Still in the Coming Storm

• ACB posted an earnings growth of 71% YoY in Q3/22 driven by high growth in net interest income, service income, slower growth in operating expenses and provision expenses fell sharply.
  
• Asset quality was slightly deteriorated due to the expiration of Cirular 14 but restructured customers continued to recover and provision buffer remained high. Profit performance was not impacted as the bank has fully provisioned the entired structured loans last year. Besides, ACB is one of the a few banks in our coverage that are least affected by the ongoing adjustments in the real estate sector and harsh macroeconomic conditions, owing to low exposure to the sector.
  
• Q4/22 performance will continue to be healthy as in Q3 and will make a high growth on the low comparison base of Q4/21. For 2023, we see more constraints to the growth momentum of the bank including low credit growth, quickly rising interest rate, high mobilizing pressure and higher credit costs (compared to the low base of 2022).
• The forecast of PBT for 2022-2023 are VND 18,113 billion (+51%) and VND 19,958 billion (+12%), respectively. Corresponding book value per share are estimated at VND 18,586 and VND 21,316. As we reduce the ROE of 2022-2023 and raise valuation factors of discount rate and lower P/B target to factor in the high capital cost environment and the market worsened sentiment to the banking system, the target price is revised to VND 29,200/share, down 32% from the previous valuation. This translates to an upside of 7% from the closing price of November 9, 2022, and an ACCUMULATE recommendation

TNG – 3Q22 sales ahead of expectation, but financial expenses continue to hurt earnings

• 3Q22 sales ahead of expectation. Net sales reached VND 2,021 bn/ USD 81.3 mn (+2% QoQ, +29% YoY), showing a strong resilience to sector headwinds. NPAT-MI was VND 106 bn/ USD 4.3 mn (+22% QoQ, 25% YoY), while financial expenses surged 48 % YoY to VND 68 bn.
• The company has received full orders in Q4 despite sector woes. We forecast net revenue and NPAT-MI of VND 1,493 bn/ USD 60 mn (+2%QoQ, 133% YoY) and VND 70 bn/ USD 2.8 mn (+14% QoQ, 154% YoY), respectively, because of positive order momentum. For FY22, we expect TNG’s net revenue and NPAT-MI to be VND 6,756 bn/ USD 272 mn (+24% YoY) and VND 301bn/USD 12.1 mn (+29% YoY), respectively. The correspondent EPS is VND 3,042.
• We maintain BUY while lowering one-year target price to VND 20,700/share (from VND 27,600/share). The lower TP is primarily driven by downward FY23 earning revisions due to rising inflation risks affecting spending on discretionary in exporting countries. We also lower our target P/E to 6.7x, below TNG’s 10-year range owing to potantial risks from the rising discount rate. With an expected cash dividend of VND 800/share in the next 12 months, implying a total return of 46%, based on the closing price of Nov 8th, 2022.

QNS – Gross margin to gradually improve

• Accumulated 9M-2022, revenue and NPAT-MI were VND 6,311 Bn (or USD 263 Mn) and VND 858 Bn (or USD 36 Mn), rising by 9.3% YoY and declining by 1.4% YoY, respectively. Overall, the results are in line with our expectation.
  
• We currently forecast that revenue and NPAT-MI will reach VND 8,064 Bn (or USD 336 Mn, +10% YoY) and VND 1,267 Bn (or USD 53 Mn, +1% YoY), respectively in FY2022. FY2023 revenue and net profit are expected to reach VND 8,730 Bn (or USD 363 Mn, +10% YoY) and VND 1,443 Bn (or USD 60 Mn, +14% YoY), respectively.
• We revise our target price down by 5% to VND47,700 per share mainly due to increasing discount rate. We have a BUY recommendation on QNS with expected return of 23%, including a 7% cash dividend yield.

DBD – Profit growth by core business

• In Q3/2022, DBD recorded net revenue and NPAT of VND 394 billion (-29% YoY) and VND 54 billion (+31% YoY), respectively. Accumulated 9M2022, net revenue and PBT reached VND 1,090 billion (-6% YoY) and VND 207 billion (+23% YoY), completing 67% and 90% of the annual plan. Net revenue and PBT accumulated 9M2022 completed 74% and 78% our forecast, respectively.
• Revenue dropped sharply in Q3/2022 as sales of medical equipment and supplies decreased by -99% YoY, to only VND2 billion, from the high base of Q3/2021. In Q3/2022, the revenue of pharmaceuticals reached VND 400 billion (+19% YoY), accounting for 96% of total revenue. The ETC and OTC channels’ revenue were VND 567 billion (+26% YoY) and VND 428 billion (+5% YoY), respectively.
• Forecasted net revenue/NPAT are VND 1.469 billion (-5,7% YoY)/ VND 215 billion (+16,8% YoY) for 2022F and VND 1.679 billion (+15,5% YoY)/ VND 264 billion (+23% YoY), respectively. We maintain a BUY recommendation with a target price of VND 52.200 per share.

VNM – Regain market share on the success of new trade terms

• In Q3 2022, Vinamilk posted net sales and net profit of VND16,079 bn (or USD684 mn; +7.7% QoQ; -0.7% YoY) and VND2,298 bn (or USD98 mn; +10.3% QoQ; -21.4% YoY), respectively. The positive signal taken from the performance is that domestic earnings has recovered. VNM regained market share in all key products (except formula powdered milk).
• We forecast Q4/2022 net revenue and NPAT-MI to reach VND 17,625 Bn (or USD 750 Mn, +9.6% QoQ, +11.4% YoY) and VND 3,054 Bn (or USD 130 Mn, +32.9% QoQ, +39.1% YoY), respectively. Better profit margin will come from lower raw milk costs as the company closed raw material contracts at below year-ago levels.  
• We maintain the target price of VND85,100. Adding a cash dividend of VND4,000, the 12-months expected return is 13.8% compared to the closing price on Nov 02nd 2022. Despite the rosy outlook that VNM ‘s organic sales will grow since Q4 2022, VNM ‘stock price rose by +14.6% from the beginning of Oct-2022, thus we downdrage from BUY to ACCUMULATE this stock.

HDG – Energy segment slowing down from Q4

• In 3Q2022, revenue (+32% YoY) and NPAT (+310% YoY) recorded positive growth. The main growth driver came from the energy segment, which maintained a high growth rate (+177% YoY in revenue) thanks to the stable operation of factories and favorable hydrological condition.
• In 4Q2022, Rong Viet estimates that HDG’s revenue and NPAT will reach VND 1,023 bn (+22% QoQ and -22% YoY) and VND 367 billion (+8% QoQ and -40% YoY) respectively. For the whole year 2022, we estimate revenue and NPAT at VND 3,515 bn, -7% yoy and VND 1,416 bn, +5% yoy, completing 95% and 105% of the year plan, respectively. EPS is estimated at 4,870 VND per share.
• We maintain our BUY recommendation for HDG stock within a holding target of more than 12 months, target price adjusted to VND 35,900 per share, upside of +21%, compared to closing price on November 1, 2022 (lower price by VND 11,900 dong in the August 2022 strategic report due to the correction of the discount rate in line with the increasing trend of market interest rates.

Fertilizer sector – 3Q22 mixed earnings picture and better sales volume expectation in 4Q22

• Urea prices started to regain from August after recording a decrease in previous months while other prices were flat.
• Mixed earnings picture in 3Q2022 with growth from DPM, DCM while BFC to fall. Earnings may reach peak in 1H2022.
• Sales volume of domestic fertilizer is expected to improve in Winter-Spring crop. Overall consumption volume will still depend heavily on export activities, especially urea producers.

ACV – Q3-2022 Business Results Update: Maintaining the Robust Recovery Momentum

• Total passenger volume recorded the all-time high at 30 million in Q3-2022 (international: 4 million, domestic: 26 million) and up 8% compared to Q2-2022.
• Core net revenue (excluding landing/take-off revenue) reached VND3,605 billion, up 24% QoQ and 21% lower than the same period in 2019 (pre-covid level). Meanwhile, core EBIT (excluding landing/take-off profit) recorded VND 1,697 billion, up 74% QoQ and also about 20% lower than Q3-2019.
• Accumulated 9M-2022, ACV posted revenue of VND 8,209 billion (+154% YoY) and NPAT-MI of VND 5,164 billion (31x YoY), after excluding landing/take-off revenue and profit.