Power industry - Thermal plants come back

• The draught is expected to come back as the El Nino probability is gradually higher for 2022, indicating that thermal plants are going to enter a brighter phase.
• Coal thermal plants in the Northern part of the country are expected to benefit sooner than that in the Southern part based on the weather forecast and economic recovery.
• High contract volume in 2022 will ensure thermal companies’ profit. Furthermore, it will capture high price in CGM to earn profit. Hence, earnings from the thermal group are expected to grow in 2022.

FMC – 2021 preliminary results: Earnings beat the guidance

• We maintain our target price of VND 61,000 and have an ACCUMULATE rating for FMC, implying an expected return of 19% on one-year investment horizon, based on the closing price on Jan 06^th 2022. We think FMC will be suitable for investors looking to invest in a seafood company with profits that are less volatile compared to the industry and grow steadily year over year.
• FMC announced its preliminary results for FY2021 with export revenue of USD 213 Mn (~VND 4,900 Bn, +12% YoY) and EBT of VND 280 Bn (+18% YoY).
• Key drivers of FY2022-2023 earnings growth are: (1) favorable shrimp sector prospects driven by high demand and the US antidumping duty on Indian shrimp, (2) selling prices to grow faster than raw shrimp prices, (3) two new factories to start operating in 2022. We project revenue and NPAT to reach VND 5,698 Bn (or USD 248 Mn, +16% YoY) and VND 338 Bn (or USD 15 Mn, +28% YoY) in 2022. 

MSN – Consumer ecosystem to lead core profit growth in 2022

• We recommend to Accumulate on MSN with the total expected return of 8.7%, including nearly 0% cash dividend.
• We estimate Masan Group’s FY2022 core NPAT to be VND 6,795 Bn (USD 294 Mn, +40% YoY), driven by MCH (+17% YoY), TCB (+28% YoY) while VCM will make positive operating profit. We estimate this retailing chain to record VND 113 Bn in EBIT in FY2022 (versus VND -172 Bn in FY2021) with EBIT margin of +0.3% (+83 bps YoY) in FY2022.
• We view that the capital divestment from the animal feed segment is a decision with a long-term growth perspective, driven by (1) supporting business to decrease exposure to the commodity-based segment given the fact that Vietnam’s animal feed industry is in a saturation phase, and (2) the restructuring of capital investment to the branded meat industry, possessing growth potential to provide higher business upside in the long term for both MML and MSN.
• To concentrate on the consumer-focused business, we expect that MSN will soon accelerate the capital divestment from MSR to no longer be exposed to the non-consumer business. In addition, the cash proceeds from the animal feed segment’s spin-off and capital raising for The CrownX will be an important source for acquiring other leading domestic consumer brands to diversify the F&B product portfolio.

PVS – Waiting for new domestic M&C backlog

• 3Q/2021 revenue of VND3,984bn (USD177.1mn) and NPATMI of VND221bn (USD9.8mn), down 33.2% YoY and 12.2% YoY, respectively.
• JVs profit posted VND198bn (USD8.8mn), compared to the loss of VND36bn (USD1.6mn) in the same period last year.
• VND54bn (USD2.4mn) from reverting the warranty of construction work in 3Q2021.
• PVS has been awarded 3 new contracts with value of USD610mn, from international projects, not domestic ones.
• For 2021, revenue and NPATMI are projected at VND13,265bn (USD589.5mn) (34.3% YoY) and VND730bn (USD32.4mn) (16.9% YoY), respectively.
• PVS is the leading player in EPCIC segment. However, the shortage backlog for M&C, especially from domestic oil gas projects, is likely to impact the company’s prospect. Currently, we see some positive movements, which can solve the bottleneck but it’s soon to expect a good 2022 earnings for PVS in 2022. So we recommend REDUCE for PVS stock with the target price of VND 22,700.

2022 looks to be another good year for trade activities

• Trade is an economic bright spot in 2021.
• Export growth varied across countries due to an uneven global recovery.
• 2021’s winners are steel, machinery, and wooden products’ exporters.
• 2022 looks to be another good year.

Insurance Industry: Reformation is coming

Earnings of insurance companies have thrived in 2021, as a result of technical factors and claim payment deferral, which we consider temporary. In our view, this will not hold into 2022 and hardship will come in the shape of higher expenses, although we see opportunities for premium sales to continue its high grow momentum. Looking further, there will be structural changes triggered by the coming new insurance business law that is expected to come into effect from July 1st 2023.

TCB – Capitalizing on the advantages

• The 2021-2025 strategy marks an acceleration phase capitalizing on competitive advantages: invested infrastructure, thick capital base and strong ecosystem. Its firmly established funding structure which is backed by a leading retail franchise focusing on high-profile customers is the foundation for cross-board expansion in various scenarios.
• Enabled by the potential recovery of economic backdrop in 2022, TCB has solid foundation to deliver extensive organic growth and continuous improvement in efficiency. Besides the widening NIM and high credit growth, financial ability of the customers and good provisions buffer helped TCB deliver robust growth across the board in 9M2021. We expect TCB to have good growth when capitalizing on its competitive advantages in a favorable macro environment, thereby improving its ROE with an intact top-tier capital base.
• We maintain the estimated 2021-2022 PBTs of VND 23,010 bn (USD 1.0 bn, +46% YoY) and VND 29,357 bn (USD 1.3 bn, +28% YoY). The 2021-2022 book value per share figures are VND 26,224 and VND 32,746 respectively. We currently have a target price of VND 71,000/share and a BUY This translates to an upside of 45% from the closing price of December 27 2021.

HPG – NPAT remains high in 4Q owing to stronger selling volume

• Steel production costs can remain stable in 4Q as iron ore and coking coal prices moved in opposite direction.
• Construction steel segment’s GPM will be flat, while HRC’s can decrease caused by weakening selling prices in 4Q.
• NPAT can remain high in 4Q as selling volume has been recovering.
• For 1H2022, while the construction steel segment’s gross margin can remain stable, profitability in the flat steel segment is forecasted to decrease.
• Regarding Dung Quat 2 steel plant, the company is processing the land cleaning stage and plans to start the building stage in early-2022. The first one is expected to come into operation in the second half of 2023.
• Based on the FCFF and PER methods, we recommend investors BUY this stock with a target price of roughly VND 63,000/share. Together with a cash dividend in the next 12 months of VND 500/share, the total return is 40% as of the closing price of VND 45,100 on December 22^nd, 2021.

GEG - Growth from wind power

• Revenue was VND 313 bn (or USD 14 mn) in 3Q2021, -11% YoY and -2% QoQ. Hydropower’s revenue increased 20% YoY in line with our expectations while that of solar power experienced a decline of 10% YoY due to volume curtailment during 3Q2021. Earnings in 3Q2021 were relatively low, VND 53 bn (or USD 2.3 mn), -1% YoY and -17% QoQ.
• The hydropower segment will perform well in 4Q2021 because the volume curtailment is expected to ease for solar power plants. We forecast earnings in 4Q2021 to be VND 109 bn (or USD 4.7 mn), +37% YoY.
• Our target price for GEG is VND 23,000, implying a total return of 10% compared to the closing price on Dec 22^nd, 2021. Hence, we recommend to ACCUMULATE this stock. The company has numerous potential projects in its pipeline consisting of wind and solar power. This could be a strong catalyst for this stock.