Power industry – Growth on the back of the economic recovery

• Electricity volume in the first two months in 2022 grew 6.1% compared to that in 2021 on the back of the economic recovery.
• The thermal group benefits from high contracted volume and high selling price on CGM. Among those stocks in our coverage list, HND and QTP are coal thermal plants that will experience a high growth in contracted volume compared to 2021, and we also have positive view to those stock.
• Hydropower plants continue to benefit from hydrology conditions.
• Renewable energy group to wait for the new scheme to expand capacity. Beneficiaries are REE, GEG, PC1.

MWG – Entering Promising Indonesia Consumer Electronics Retail Industry

• The partnership should be a good match for both as ERAA hasn’t been selling white goods and the JV could leverage MWG’s experience and cutting-edge retail execution in the consumer electronics field.

ACB – 2022/2023 outlook: capture the advantage in retail with digitalization

• 2021 results were slightly under our expectations. NII was up to our projections, but TOI and PBT missed our estimates. We appreciate the quality improvement in CASA base and the conservative provisioning policy for restructured debts.
• The 2022-2023 PBT forecasts are almost unchanged despite the under-than-expected 2021 results, landing at VND 15.4 trillion (USD 669 mn, 28% YoY) and VND 18.7 trillion (USD 813 mn, 22% YoY), respectively for 2022 and 2023. 2023 revenue is revised upward by 3%. We anticipate pressure on CIR as ACB allocates more funds to technology investments and incurs operating costs to maintain a high CASA base. We maintain our projections on the 2022-2025 credit cost margin curve.
• The revised forward 2022 book value per share is VND 20,478, translating to a forward P/B of 1.6x. We maintain a target price of VND 42,000/share and a BUY recommendation. This translates to an upside of 28% from the closing price of March 18, 2022.

FMC – New factories likely to drive profits stronger than expected

• We revise our TP by 14% from the latest valuation to VND 69,500, implying an expected return (including cash dividend yield) of 15%. Our increased target price is driven by: (1) a 21% upward revision in 2022F-2026F NPAT-MI as we increase our projected shrimp export volume and gross margin; (2) raising 2022 target PER from 10.5x to 12.0x due to improving long-term NPAT growth outlook and the current growth cycle of the seafood industry. We have an ACCUMULATE rating for this stock.  
• In 2M-2022, FMC’s export revenue grew strongly by 70% YoY, mainly driven by high shrimp demand and the contribution of Tam An factory.
• In 2022, we forecast FMC’s revenue and NPAT-MI to be VND 6,551 Bn (or USD 285 Mn, +26% YoY) and VND 360 Bn (or USD 16 Mn, +35% YoY). We believe that a double-digit NPAT growth will be seen in 2022 due to the contribution of two new factories. Our upside risk is better-than-expected new factory capacity while downside risk comes from cooling-down global shrimp demand, higher logistics costs and increasing raw material prices. Our projected EPS in 2022 will be VND 5,536. 

Rising commodity prices have clouded trade outlook

• Export growth improved in Feb 2022.
• Rising raw material prices could affect the prospect of trade balance.
• Exports of non-tech products continued to improve in Feb 2022.
• Import of raw materials for production is on the rise.

Export growth improved in Feb 2022

Trade activities continued to their positive growth during last month. Specifically, export growth continued to improve to 15.5% yoy in Feb 2022, higher than the 8.1% increase in Jan 2022. On a month-on-month basis, export turnover decreased by 24.1%, mainly due to the impact of the Lunar New Year holiday. On the other hand, import turnover recorded a stronger rise, increasing by 22.3% over the same period (compared with an increase of 11.3% in Jan 2022). In the first two months of the year, Vietnam's exports and imports grew by 11.2% and 16.1% respectively over the same period.

Equity markets face an era of discomfort

• As this author mentioned before: the era of easy money is over.
• Equity markets are correcting. Ukraine is / was the trigger point.
• Sounds like 2008-09

DPM – Bottom line to hike on the back of increasing Urea price

• Revenue and profit grew 64.7% and 350.8% respectively in 2021 thanks to the strong increase of fertilizers price and chemicals as well as extraordinary profits.
• 1Q2022 business results are expected to remain high thanks to positive fertilizer prices in the context of the Russia-Ukraine conflict, which may lead to a global shortage of urea.
• We believe that 2022 business results will post growth instead of decline as previous forecast, and raise the 2022 earnings forecast from VND1,676 bn (USD 73.5 mn) to VND5,004 bn (USD 219.4 mn), up 60% YoY due to the change in fertilizer price forecast. 2022 EPS is VND12,674.
• In addition, DPM's business results is expected to be positive in 1Q2022 and can last till 2Q2022 thanks to the short-term shortage of Urea supply due to the tension between Russia and Ukraine, leading to high Urea prices. Therefore, we believe that DPM's stock price can benefit from this and recommend BUY with a target price of VND73,100/share in the short term.
• Investors should be cautious with fertilizer price movements related to geopolitical fluctuations surrounding the Russia-Ukraine war. In the event of a positive change from Russia's export activities, the fertilizer price may reverse sharply.
• Downside risk from restricting fertilizer export.

Steel industry – Positive signs for coated steel exports to Europe. Surging coking coal price puts pressure on basic oxygen furnaces’ gross margin.

• Europe’s steel prices have been rising fast with pressures from increasing energy prices and the potential disruption of steel supply from Russia and Ukraine. HRC prices in this area have increased by 35% from USD 1,054/ton to USD 1,419/ton in the last month. Hence, exporting to Europe can bring a higher gross margin in 1H2022 for Vietnamese producers, such as HSG, NKG, HPG.
• Due to the demand recovery after the winter and the increasing HRC price gap between Europe and Vietnam, the orders from Europe have improved strongly since January/2022 after decreasing during 4Q/2021. Currently, NKG has received sufficient exporting orders for production until end-May/2022.
• HPG and Formosa can face short-term difficulties from surging coking coal prices, which can harm their gross margin. Rising risks of the disruption in supply from Russia encouraged coal importers to find alternative sources from Australia or Indonesia. Australia coking coal prices have increased sharply by 43% from the beginning of February 2022 to USD 570/ton last month.

PPC – Dividends from associates saved the business in 2021

• In 4Q2021, revenue/NPAT posted VND 539 bn (or USD 23 mn)/ VND 64 bn (or USD 2.8 mn), significantly lower than that in 2020. Operating profit was negative due to technical problems.    
• In 2021, PPC faced both external and internal difficulties. Revenue and NPAT were VND 3,885 bn (or USD 169 mn) and VND 285 bn (or USD 12 mn), -51% YoY and 72% YoY. This is a record low earnings since 2015 even though the company recorded a high financial income of VND 452 bn (or USD 20 mn).
• In 2022, core business is expected to recover. Based on its contracted volume of roughly 3.2 bn kWh, we forecast revenue and NPAT to be VND 6,414 bn (or USD 279 mn) and VND 484 bn (USD 21 mn), +65% YoY and + 70% YoY, respectively. 
• Potential growth for this stock in the medium term is limited because Pha Lai 3 plant will be  constructed in the period from 2026 to 2030. Hence, cash dividends is the only catalyst to hold this stock. Our latest target price for PPC is VND 23,000. For the current target price with VND 500 dividend, implying a total return of 6% as of March 10^th, 2022. We have a NEUTRAL rating.

KBC – Strong growth thanks to cheap real estate landbank

• Q4-2021, KBC has not achieved strong growth compared to expectations, with revenue and NPAT-MI reaching VND1,232 billion (+0.1%) and VND 212 billion (+9.3%) , due to delays in handover and revenue recognition from Nam Son Hap Linh IP.
• In 2021, revenue reached VND 4,093bn (100% yoy) and NPATI-MI reached VND 783bn (+250% yoy), with positive industrial park (IP) land sale progress. Gross profit margin improved from 32% to 57% thanks to a large contribution from Quang Chau IP, which has high leasing prices and low costs.
• In 2022, we estimate that revenue and NPAT-MI will grow strongly, reaching VND10,694 billion (+148%) and VND 3,409bn (+335%) respectively. Residential real estate will be the main growth catalyst, bolstered by unlocking Trang Cat landbank.
• KBC has a forward EPS of VND 5,980 and a  forward BVPS of VND 39,260, corresponding to a forward P/E of 12.7x and a forward P/B of 1.4x based on the closing price on March 9^th. These are pretty attractive valuations compared to the market valuations with P/E of 38.3x and P/B of 2.2x. We have an optimistic view for KBC based on the strong catalyst of unlocking the Trang Cat real estate project.
• KBC will issue 150 million shares, corresponding to 26.3% chartered capital. We assume the private placement will take place in the second half of 2022. We are reviewing our forecasts, and KBC's valuation will be updated in the near future, to include the effect of the private placement.

VPB – High Credit Growth on Strong Capital Base

• VPB announced 2021’s consolidated PBT was roughly VND 14,580 billion (+12% YoY), completing 88% of the year’s guidance, with the parent bank playing a leading role in growth while the unsecured consumer finance segment at FEC struggled in 2H2021. In detail, PBT of the parent bank surged by 50% YoY to VND 14,011 billion (excluding one-off income) and PBT of FE Credit (FEC) plummeted by 84% YoY to VND 610 billion. Thus, the parent bank contributed 96% and FC added 4% to the total PBT of VPB.
• The strong increase in equity thanks to the sale of 50% of FEC at 2021-end and the private placement of 15% in 1H2022 will support credit growth. However, it still temporarily put pressures on ROE this year. VPB will announce the plan to use new capital sources in the near future and that may affect our forecast.
• The target price of VPB, adjusted for the dilution after the private placement, was adjusted from VND 42,800/share to VND 46,200/share. Comparing the forward P/B at the end of 2022 of 1.7x and the end of 2023 of 1.5x with the current P/B of 2.0x, VPB is now trading at an attractive valuation. Based on the closing price on March 9, 2022, we recommend to BUY VPB with a total return of 26%.

PNJ – Cemented Market Leadership to Underpin Record High Retail Sales

• Expanding market share, tailored marketing strategy, coupled with resilient purchasing power of targeted customer segmentation, help PNJ keep posting record-high monthly retail sales post lockdown.
• Soaring gold prices lend support to average selling prices, bolstering profit margins expansion.
• The private placement is likely to be completed in Q2-2022, providing necessary capital of up to VND 1.4 trillion for the company to intensively expand its store network and production capacity in 2022-23.
• On the back of solidified market leadership position and potential margin expansion, we revise our forecasts upward, resulting in respective projected net sales and NPAT of VND23,044 bn (+18% YoY) and VND1,394 (+35% YoY), equivalent to 2022F diluted EPS of VND5,745. Consequently, updated TP comes at VND118,500, implying a 2022F P/E of 20.6x. We reiterate ACCUMULATE recommendation on PNJ.