DBD – Nhon Hoi anti-cancer factory continues to miss out with GMP – EU standards approval plan

• By the end of the first half of 2022, DBD recorded net revenue and PBT of VND 696 billion (+16% YoY) and VND 135 billion (+17.6% YoY), completing 43% and 63% of the annual plan, respectively. The two main sales channels were ETC (hospital) and OTC (pharmacy) with positive growth, recording net revenue of VND 369 billion (+13% YoY) and VND 257 billion (+13% YoY).
• DBD has been expanding coverage in drugstores thanks to the data ownership of 40,000 pharmacies that has been standardized to build a Master Coverage Plan (MCP) for the sales team. The company pushed the number of retailers up from 14,800 in 2021 to 17,500 in 6M2022.
• The process of approving the GMP – EU standards for Nhon Hoi anti-cancer factory could not be completed with the plan because the approval of the factory abroad has not been given priority by the European health organizations. The company set new plans to achieve GMP – EU standards for the production line of injectables and pills (belonging to Nhon Hoi anti-cancer factory) in June 2023 and March 2024, respectively.

The drilling market is gaining strength

• Demand for drilling rigs worldwide, especially in the Middle East, has increased sharply.
• There is a shortage of rig supply as there has been no newbuild rig in the last few years while the older rigs have left the market.
• The rig supply-demand gap is forecasted to narrow until mid-year 2024, which will support the global rig day rate as well as in Southeast Asia. Currently, the rig day rates and utilization rates in Southeast Asia are higher compared to the pre-Covid period.

PC1 – Financial expenses ate most of gross profit in 2Q2022

• In 2Q2022, PC1 posted revenue and NPATMI of VND 1.518 bn (or USD 63.3 mn) and VND 63 bn (or USD 3 mn), -49% YoY and -81% YoY, respectively. PC1 hit a 3-year trough in terms of NPATMI. We forecast core earnings in 2022 to grow by 10% YoY (excluding financial income from revaluation in 2021). Revenue and NPATMI are forecasted to be VND 7.342 bn and VND 477 bn (or USD 306 bn and 20 mn), -25% YoY and -31% YoY, respectively.
• Earnings are expected to recover and climb to a new high level owing to (1) The power construction segment will likely benefit from the upcoming wind power market; (2) Nickel mine will be the growth engine in the medium term; (3) Numerous real estate projects are waiting to contribute to profits.
• We raised our target price for by 25% to VND 43,800 factoring the nickel mine and its industrial park real estate, offering an upside of 6% compared to the closing price as of Sep 06^th, 2022. Hence, investors can ACCUMULATE this stock when the market encounters a deep correction. 

Flat Steel Sector – Prices have started to rebound but profit recovery might take long

• Overseas prices have stopped falling; domestic prices started to regain.
• Domestic consumption to recover from September amid high competition.
• Gloomy outlook for the bottom line of flat steel producers in Q3 before sunshine comes from Q4.
• We currently have an ACCUMULATE recommendation on NKG with the target price of VND 25,100/share.

LTG – Plant protection business: challenges in 2022 create growth opportunities for 2023

• 1H2022 revenue of the plant protection business (also named LTV) of Loc Troi Group (Upcom: LTG) had a negative growth of -6.6% YoY to VND1,948 bn. In Dec-2021, LTG terminated the partnership with Syngenta (accounting for ~30% of total sales of LTV), dragged down the revenue of LTV in 2022.
• To fuel long-term growth of this business without Syngenta, LTG is restructuring its selling policy. Consequently, the Q2/2022 gross margin of the LTV segment went down to 20.6% (-2,890 bps QoQ; -1,450 bps YoY).  We expect that LTG will continue extending the new selling policy in 2H2022. As a result, 2022 gross margin of LTV will have a hard time to improve.
• We believe that the 2022 performance will reflect all of the negative effect of the termination of the Syngenta partnership. 2023 results  are expected to show growth due to 1) 2022 low-base; 2) higher market share thanks to the successful selling strategy; and 3) LTG ‘s agriculture ecosystem.

MWG – 7M 2022 Update

• BHX sales grew for the fifth consecutive month despite the closure of about 400 stores in recent months. TGDD & DMX revenue, on the other hand, decreased slightly compared on monthly basis amid the low season.
• We project that MWG is likely to miss this year's profit guidance mainly due to BHX's large loss after the restructuring process, but we believe that the chain's efficiency will improve more clearly in 2023.
• Forecasted revenue / NPAT are VND 139 trillion (+13% YoY) / VND5,900 billion (+20% YoY) for 2022F and VND 162 trillion (+16% YoY) / VND 8,500 billion (+44% YoY) for 2023F. 2022F/2023F EPS stay at 4,000 VND / 5,700 VND respectively. 2022F/2023F P/E are4x/12.9x,<

Updates on monetary market in Aug 2022

• Credit growth slowed down in 3Q22.
• The pressure to loosen the credit room is strong, the SBV may have to be more flexible in granting credit room.
• Lending interest rates will increase more strongly in the second half of the year.

HAX – Favorable business conditions support strong growth

• A 50% reduction in registration fees for domestically produced cars  which expired in 1H2022  and rising private car demand after Covid-19 pandemic helped HAX sales growth by 23.3% YoY in Q2 2022 to  VND1,546 bn. Q2 2022 NPAT-MI surged to VND81 bn (+1,287 %YoY) thanks to higher average selling prices and huge financial profit from bank deposit ‘s interest (VND11.9 bn).   
• 2022 sales are forecast to be VND6,043 bn (+8.9 %YoY) based on 1) favorable business conditions; and 2) higher market share thanks to the launching of the new showroom “Mercedes-Benz Haxaco Cần Thơ”. Accordingly, 2022 NPAT-MI of HAX should reach VND280 bn (+75% YoY), backed by 1) higher ASP; 2) absence of abnormal expenses related to Covid-19 pandemic; and 3) commissions from Mercedes-Benz.
• With a FCFF valuation model (50%) and multiples comparison (50%) with an applied P/E of 5.5x, our target price is VND26,500. Adding a cash dividend of VND500, the 12-months expected return is 9.8% compared to the closing price on Aug 25th 2022. Therefore, we recommend to ACCUMULATE this stock.

Shipping line – Shipping costs might ease until 2023

• Global shipping rates have cooled down.
• Yet It Might Stand At A High Level in 2022.
• Global Shipping Costs Might Ease Until 2023. We expect domestic shipping rates to ease in 2023.

PHR – Potential valuation is unlocked by rubber land transformation

• In 1H2022, PHR’s revenue posted VND 607 bn (USD 26.4 mn, -19.6% YoY) and NPAT reached VND 355 bn (USD 15.43 mn, +109.1% YoY). Revenue deteriorated due to rubber and wood processing segments. The surge in the bottom line was the result of compensation payment from VSIP 3 and helped lifting performance of the first half.
• PHR has planned to convert 5,600 hectares out of 15,000 hectares rubber farm in Vietnam into industrial parks. Of which, 2,600 hectares area of four IPs including NTC 3, VSIP 3, Tan Lap 1 and Tan Binh expansion might be put into operation in 2022-2024. Which is a huge land bank to develop in long-term.
• In 2022, we estimate that the total revenue and net income will be VND 1,703 bn or USD 73.09 mn (-12.5%YoY) and VND 1,041 bn or USD 44.68 mn (+103% YoY) respectively. Correspondingly, the EPS will be VND 5,194. Based on the sum-of-the-parts valuation (SOTP), the target price is 88,400/share. Adding an annual cash dividend of VND 4,000 per share, the total expected return will be +31.35% (compared to the closing price as of 08/22/2022).

SMC – Q3 Could be the Hardest Time of the Year

• Profits reduced 82% YoY in 1H2022 because gross profit margin dropped to 3% from 10.1% in 1H2021, a sharp increase in losses from exchange rate difference and high interest expense.

• Processing orders are weak and plans to invest in new factories are being delayed.

• In 2H, we expect a loss in Q3 due to high-priced inventories before a recovery in Q4. HRC price seem to have bottomed in August but is not likely to rally quickly in a short time, amid high uncertainties of pandemic, geopolitics and high inflation. Pressures on the profit margin of the processing segment will be high as the material inventory period of this segment is higher than that of the trading segment.

• For the whole year 2022, we forecast revenue and NPAT-MI to arrive at VND 24,164 bn (+13% YoY) and VND 106 bn (-88%) with a loss of VND 62 bn in Q3.

• SMC is now trading at a TTM PER of 4.8x, higher than 2.9x of 2021. However, as this year profit will be lower compared to the peak of last year, the PER forward for 2022 is 13.7x. Thus, the stock seems unattractive at the current valuation. We recommend to OBSERVE SMC until demand shows signs of firm recovery.