Banking sector – A glance at 1Q22 announced results

• The polarized earnings growth among banks for 1Q22 is within our expectations. We think that the trend will continue in 2Q22 before banks benefit from the low comparison base and lifts in credit growth quota in the second half of 2022.
• Quoted deposit rates have been going up at the private banks. This was also reflected in the ramping up of average deposit rates in 1Q22 in comparison to 4Q21. Meanwhile, the state-owned banks have maintained the rate level since mid-2021. We witness a slowdown in the pace of rising deposit rates at top private banks, thereby, expecting quite stable quoted deposit rates in 2Q22. Rates will still go up from this level to the year end.

TNG – 1Q2022 results and AGM updates

• In Q1/2022, TNG achieved revenue and NPAT of VND 1,260 billion (+38% YoY) and VND 38 billion (+74% YoY), respectively. This increase is driven by improving labor productivity and increasing demand for apparel products, especially from Decathlon.
• TNG sets 2022 guidance with revenue and NPAT of 6,000 billion (+10% YoY) and 280 billion (+21% YoY), respectively. This guidance is not included the real estate segment. Son Cam Industrial Park could start contributing to TNG’s profit in 2H2022.
• 2022 – 2025 strategy: (1) increasing by 33% to reach 383 garment lines in 2025, bolstering 2025 revenue to surpass VND 10,000 Bn; (2) expanding orders from existing customers (especially Decathlon and Columbia); (3) developing residential real estate projects.  

Updates on monetary market in Apr 2022

• Bank loan demand to remain strong.
• Deposit interest rates showed signs of rising on a larger scale.
• VND liquidity was less tight, USD demand increased.

Bank loan demand to remain strong

According to the SBV, credit growth reached approximately 2.7% compared to the beginning of the year by the end of Feb 2022, which was a slight increase compared to the increase of 2.5% in Jan 2022. Thus, credit growth in Feb did not change much compared to the previous month, consistent with the normal status when the demand for loans slowed down during the Lunar New Year period. However, credit accelerated significantly in Mar-Apr, according to the SBV, credit growth is estimated at 5.0% by the end of Mar 2022 and at 6.4% as of 19 Apr. Elsewhere, Ho Chi Minh City's credit balance reached VND3 trillion as of the end of Apr 2022 (equivalent to 27% of the system's outstanding loans), recording a strong growth of about 7% compared to the beginning of the year.

MWG – 2022 AGM Note

• 2022 Guidance: revenue and NPAT increase 14% YoY/30% YoY to VND123 trillion/ VND 4,901 billion. This plan implies that net profit margin will improve in 2022, which we believe will come from optimizing the operation of key chains, especially Bach Hoa Xanh (BHX).
• For TGDD & DMX, we believe that the main growth driver will come from the market share consolidation of Apple products and consumer electronics as Topzone and DMX chains to further expand their physical store network amid impacted purchasing power due to inflation, causing the expected growth of the CE market standing at single-digit this year.
• Regarding the BHX chain, 2022 will be the year in which the management will radically revamp back-end operations (ensuring the quality of fresh goods, improving the shopping space, optimizing the inventory forecasting), in order to create a solid foundation for expansion in the following years. The AGM also approved the private placement plan of BHX with a maximum offering rate of 20% to raise investment capital for logistics investment.
• While the plan for TGDD & DMX is in line our expectations, the changes of BHX's operation strategy, as well as the expansion of other chains such as An Khang, AVA Kids, and EraBlue (in Indonesia), are material changes to our projections. Therefore, the current target price – VND 163,500 – is being reviewed for these new development plans.

LHG – Conservative guidance

• In 2021, LHG recorded revenue and NPAT-MI of VND 782bn (+16% yoy) and VND 295bn (+49% yoy), in line with our forecast. The IP segment brought strong growth to LHG in H1 2021, with IP land sale reaching 12 hectares (+20% yoy) and the rent reaching 200 USD per sqm (+5% yoy).
• In 2022, the IP land demand will the growth of the IP segment, as well as LHG’s revenue and earnings growths in total. As a result, revenue and NPAT-MI are expected to grow strongly in 2022, estimated at VND 918 bn (+17%) and VND 373bn (+28%), which translates to an equivalent EPS of VND 7,016 per share.
• LHG's current target price is VND67,500 per share, representing a total return of 27.1% compared to the closing price on April 21^st, 2022. Forward P/E 2022 valuation of 7.6x and P/B of 1.6x, lower than the P/E and P/B levels of 2021 (9.7x and 1.8x).

Vietnamese FMCG producers are expected to continue to show a positive sales outlook in 2022

• FMCG producers continue capturing the increasing trend of FMCG consumption despite of Covid-19 pandemic, resulting in a rosy outlook for top-line performance in 2022. In detail, local FMCG producers such as MSN, KDC, DBC or Nova Consumer will be one of the most beneficiaries from this trend, in lights of 1) more favourable selling price compared to imported FMCG products; 2) more familiar with the taste of Vietnamese consumers; and 3) lower number of imported FMCG products due to potential global supply chain disruption.
• Total sale growth of FMCG producers is expected to present the highest growth rate among the year in 3Q2022. To explain, thanks to the spread of Covid-19 vaccine, on-premise channel is expected to show a strong recovery in 2022. The on-premise activities was shut down due to Covid-19 pandemic in 3Q2021, thus 3Q2022 sales will illustrate a strong growth thanks to the low-base. We expect to see FMCG producers ‘sales growth to reach a high level in 2022, then normalize in 2023.
• However, rising input costs still put pressure on the profitability of FMCG producers. We expect that large companies who own a close value chain, and diversified product portfolio will easily mitigate the negative effects of rising cost as well as passing the higher cost into selling price. Together with the stronger growth in revenue and the advantage of economic of scale as the FMCG giants, their profit growth might show a light positive sign in 2022.

We have entered financial repression

• Asia rates and bonds continue to sell off, underpinned by both global drivers and domestic macro and policy shifts.
• Within Asia, inflation prints are climbing and, in several economies, are now some distance above central bank target and forecast levels.
• We are in for more volatility and economic and social disruption for at least the next six months.

FRT 2022 AGM Note – A Rapid Expansion of Long Chau and Resilient ICT to Drive 2022 Earnings

• The AGM approved the 2022 financial guidance, in which targeted revenue/NPAT grow by 20% YoY/30% YoY to VND 27 trillion/VND720 bn. Our current 2022 forecasts for net sales and PBT are both 6% higher than approved guidance.
• Approved cash dividend policy for 2021 and 2022 are VND 500 and VND 1,000 per share, respectively. The cash dividend for 2021 was equivalent to a payout ratio of 8.9%, while that of 2022 comes at 20.7% of our 2022F NPAT-MI.
• Preliminary Q1-2021 results are solid with revenue surging by more than 65% YoY and net profit increasing fivefold to approximately VND 150 bn.

Export growth diverged in 1Q2022

• Trade balance turned into surplus in Mar 2022.
• Export growth diverged in items and markets.
• Imports declined in consumer goods and machinery and equipment.

Trade balance turned into surplus in Mar 2022

In Mar 2022, Vietnam's exports continued to prosper with an increase of 17.0% over the same period, higher than the increase of 15.5% in Feb 2022. In which, exports of the FDI sector continued to improve with a growth rate of 17.8% over the same period, higher than the growth rate of 14.9% of the domestic sector. Compared to the Jan-Feb period, the export growth momentum of the domestic sector showed signs of slowing down in March. On the other hand, Vietnam’s imports grew more slowly than exports in Mar 2022, growing 14.6% over the same period, lower than the 22.3% increase in Feb 2022. The slowdown in imports is quite similar for both the FDI and domestic sectors. As a result of weaker imports, the trade balance recorded a surplus of about US$2.0 billion in the past month. In 1Q22, the country's exports increased by 13.4% over the same period, imports increased by 15.2%, the trade surplus is estimated at US$1.5 billion, lower than the trade surplus of US$2.8 billion in the same period last year.

BID – 2022/2023 outlook: Strong earnings growth ahead with volatile credit costs

• The bank managed to control the formation of bad debt in 4Q21 with the support of bad debt reclassification to better loan groups following the removal of restrictions, while maintaining credit cost margin to account for the restructured loans. BID has made full provisions for those loans in 2021, which is ahead of the deadline according to Circular 03. This helps solidify its buffer.
• BID is expected to propose 2022 PBT target of VND 18.5-20.5 trillion in the upcoming AGM. 2022-2023 credit cost margin forecasts are revised down. Therefore, we revise up the 2022 PBT estimate to VND 21.0 trillion (USD 0.9 bn, 54% YoY) mainly due to lower provisions and CIR. 2023 PBT projection is adjusted downward to VND 23.9 trillion (USD 1.0 bn, 14% YoY) due to lower fee income.
• The forward 2022 book value per share is VND 18,921, translating to a forward P/B of 2.1x. We currently factor in the private placement in 2023 because the bank is witnessing some challenges and the projection is uncertain. As we roll over the forecasts and increase the sustainable ROE moderately, we raise our target price to VND 41,000/share. This is equivalent to a NEUTRAL recommendation with an upside of 4% from the closing price of April 15, 2022.