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.

Real estate industry – Supply stagnancy remained in Q1 2022

• HCMC's condo market in Q1 2022 was stagnant given the negative impact of the licensing issue from 2019, landbank scarcity and cautiousness of homebuyers after experiencing two years of the pandemic. Total sold units were 1,247 (-78% QoQ and -53% YoY), a result of new supply scarcity, with Akari project of Nam Long (884 units) was the main contributor of the market. Despite of that, the absorption rate of new project is around 90%, exhibiting resilient demand of homebuyers. The ASP continuously went up (+7.8% YoY) and reached VND 55 Mn/sqm (or USD 2,390).
• We expect the market to recover from 2H2022 with new launches and the fact that large developers are still approaching the market cautiously backed by the rapid rally of materials costs. Businesses with ready-to-launch projects will strongly benefit from prices spike and strong demand. New launches in 2022 are mainly attributed by Thu Duc City, Nha Be, District 7, and Binh Chanh. The tightening of loans and bonds issuance in 2022 remains as our main concern as it will slow down the pace of supply recovery in 2022. While it would pose a stiff challenge to developers having large reliance on loans, firms with strong execution capability and high absorption rate products would be less affected.

Textile and garment industry – Positive growth in 1Q2022

• In 1Q-2022, Vietnam’s textile and garment export value grew 23% YoY to reach USD 8.8 Bn, driven by the strong pent-up demand after lockdown in many developed countries and the recovery of domestic production activities after the lockdown. Many companies (e.g. TCM, TNG, MSH) have received full orders until the end of 3Q2022.
• The fashion industry is facing high material price pressure because of the Russia-Ukraine war and Shanghai lockdown. However, given by high demand from fashion brands, we expect these companies can increase their selling prices to maintain gross profit margin equal to the level of 2021.
• In 2022, many companies set business guidance with positive profit growth. Companies which start operating new factories or book one-off revenue from the real estate segment in 2022 will also be the catalysts for these companies to see a surge in their 2022 business results.

SZC – Rapidly utilizing the residential real estate landbank

• In 4Q2021, SZC retrieved a robust growth with revenue of VND 145 bn (+198% YoY) and NPAT reached VND 68 bn (+187% YoY). Accumulating in 2021, revenue reaped VND 713 bn (+65% yoy) and NPAT gained VND 324 bn (+74% yoy).
• In 2021, SZC raked in revenue and NPAT respectively were VND 713 bn (+65%) and VND 324 bn (+74%), driven by the leasing land of 60.8 hectares in Chau Duc Industrial Park with an estimated average net rental price lifted up by more than 30% YoY. Gross profit margin expanded from 54% to 63%, attributed to solid growth in net rental price (excluding land-use levy).
• SZC is expected to grow constantly with a prophecy of revenue and NPAT will reach VND 1,169 bn (+64%) and VND 365 bn (+13%), respectively in 2022. The crucial driver will come from the residential real estate segment, we assume that SZC will hand over and record over 260 land plots, with an estimated selling price of around VND 1.2 - 1.4 bn/plot. Accordingly, the residential real estate segment will largely contribute VND 346 bn and VND 66 bn in revenue and gross profit, corresponding to 30% and 12%,
• As the market price as of April 7^th, 2022, forward P/E 2022 and P/B 2022 of SZC respectively was 20.6x and 3.9x which is lower than the current 23.2x of P/E and 4.8x of P/B.

DGW 2022 AGM Note

• AGM Approved 2022 financial guidance, in which targeted revenue/NPAT grow by 25% YoY/22% YoY to VND 26.3 trillion/VND800 bn. This guidance matched with previously announced plan in the last AM.
• For 2022, DGW will start distributing home appliances products from Whirlpool, along with notable new distribution ICT brands namely TCL, Alcatel.
• Preliminary Q1-2021 results are solid with revenue surging by 39% YoY, largely driven by 62% YoY/36% YoY growth of laptops/mobile phones, and net profit nearly doubling.

Large hydropower and gas-fired power plants to benefit from coal thermal group input deficiency

• Total electricity volume in 1Q2022 reached 63.03 bn kWh, +7.8% YoY, higher-than-planned volume. Maximum power (Pmax) reached 40.144 MW, +5.9% YoY.
• Input deficiency for the coal thermal group is going to benefit large hydropower and gas-fired power plants in Competitive Generated Market (CGM) as we illustrate below while the renewable energy group is going to have higher mobilization rates.

Banking sector – Expected recovery in credit – deposit growth and ample liquidity

• The expansion of credit and deposit in the economy was in line with our expectations regarding pace and driver. As the banks update on their guidance, we review and specify our target range and average expected value of the industry’s credit and deposit growth rate. Particularly, our projections for credit and deposit growth are revised to 14.3% and 11.8% respectively.
• Despite several disruptions, the situation on the interbank market falls within our expected scenarios, including the movement of rates and market liquidity. We continue to observe ample VND and USD liquidity in the market and expect that the level of interbank rates will slightly ease if those disruptions are resolved or mitigated. We keep our view that deposit rate hikes will occur in the second half of 2022.

Dairy industry – Vietnamese Dairy Companies Set A Conservative Plan for 2022 Period

• Vietnamese dairy companies set a conservative 2022 business plan due to rising input costs. In detail, 2022 expected net profit of VNM, IDP and MCM – the three largest market capitalization listed dairy companies – are VND9,775 bn (-7.2% YoY), VND452 bn (-45.1% YoY), and VND344 (+7.7% YoY), respectively. 
• Consumer behavior towards dairy products has changed because of Covid-19 pandemic. Mentioned by Kantar Worldpanel, dairy products are one of the categories have presented a sustain growth during the outbreak of Covid-19 pandemic in Vietnam. We believe that there is still a room for Vietnam dairy industry to grow in the future.
• To prepare for future growth, Vietnamese dairy companies will focus on strengthening their inner capacity. We suggest that those investing in production capacity, distribution system, and cow herds, such as VNM or MCM, will show further improved business performance, leading to higher ROE, when the pressures of rising input costs fade.