VSC – Persistent difficulties
29-08-2023
29-08-2023: VSC
: Seaports
: Quan Cao
Tags:
- In 1H2023, VSC’s container throughput reached 460 thousand TEU (-3% YoY), in which the volume of VIP Green, Green, and Nam Hai Dinh Vu (NHDV) ports were 302 thousand TEU (-9% YoY), 140 thousand TEU (-3% YoY), and 18 thousand TEU, respectively. The total number of calls reached 320, 19 fewer than the SPLY.
- In 1H2023, net revenue and PBT were VND 998 billion (+2% YoY) and VND 105 billion (-61% YoY), respectively, completing 44%/47% of the 2023 plan, and 48%/47% of our forecast.
- For 2023, forecast VSC's container throughput (excluding NHDV port) will be 922 thousand TEUs (-3% YoY), the decline is expected to slow down because of the expectation that intra-Asia trade demand will gradually recover. We adjusted the revenue to VND 2,062 billion (+3% YoY) because the container handling service charges improved and adjusted down the NPATMI due to consecutive new investment projects such as ICD QBS, VIMC Dinh Vu, NHDV operating inefficiently and interest expenses increasing rapidly.
- We use the FCFF method (WACC: 10%, g: 1%) and EV/EBITDA (@ EV/EBITDA 10.4x), we recommend to ACCUMULATE at the target price of VND 29,700 per share.
59 Update on monetary market in August 2023
28-08-2023
: VDS
: Macroeconomics
: Ha My
Tags: Monetary market
- Redundant liquidity in the banking system.
- The dong depreciated sharply in August 2023.
- The SBV faces challenges in the interaction between loosening policy and financial stability
VHC – Gradual recovery
25-08-2023
: VHC
: Fishery
: Loan Nguyen
Tags: Monthly update 2H 2023 outlook
- In H1 2023, VHC earned VND 4,970 Bn revenue (USD 211 Mn) and VND 631 Bn NPAT-MI (USD 27 Mn), down 35% and 53% YoY. Q2 2023 had better results: revenue at VND 2,723 Bn (USD 116 Mn), down 35% YoY but up 23% QoQ, and NPAT-MI of VND 412 Bn (USD 17 Mn), down 48% YoY but up 88% QoQ.
- July sales showed a slight improvement from the previous month. We anticipate a stronger recovery in the coming months as importing countries enter their festive seasons.
- We forecast net revenue and NPAT to reach VND 10.0 Tn (or USD 425 Mn, -25% YoY) and VND 1.3 Tn (or USD 56 Mn, -32% YoY) in FY2023. 2023 EPS will be VND 7,275 (-32% YoY).
- VHC's challenges are behind us. Q2/2023 results exceeded expectations, and seafood demand recovery apparent in H2/2023. We're revising VHC's target price to VND 79,000 per share, implying an expected return of 12%.
TCB – Awaiting recovery from the second half of 2023
24-08-2023
: TCB
: Banking
: Chinh Nguyen
Tags:
- In Q2/23, TCB's total operating income was VND 9.3 trillion (-16% YoY), continuing to be affected by net interest income, which recorded at VND 6.2 trillion (-19% YoY, -3.6% QoQ). This was primarily due to NIM (annualized) decreasing by 160 bps YoY and 26 bps QoQ, as the bank had fully utilized its credit limit in Q1. Additionally, the increase in non-performing loans added pressure to the bank's risk provisions in the period totaling VND 807 billion (+93% YoY). This resulted in the bank's pre-tax profit continuing to decline, reaching VND 5.6 trillion, down 23% YoY.
- The cost of funds (annualized) in Q2 increased at a slower rate, by 21 bps. However, the asset yield recorded a decrease of 10 bps, causing the bank's NIM to further decline to 3.9%. This was due to the bank's shift in lending towards corporate customers and the implementation of a "flexible interest rate" policy to reduce interest rates for some struggling customers. As a result, the average interest rate for loans with interest rates below 8% and above 10% decreased significantly compared to the end of 2022. However, this interest rate support is expected to be offset as customers' financial health improves.
- The non-performing loan ratio in Q2 reached 1.07%, up 22 bps from Q1 and 50 bps from the same period last year, with non-performing loans from the corporate and SME groups reaching 1.96% and 1.51% respectively. Notably, there were no non-performing loans in the business segment.
- Despite modest growth prospects in 2023 due to challenging conditions, we are optimistic about TCB's long-term outlook for balance sheet growth. This is due to TCB's leadership in retail banking, supported by (1) leading technology infrastructure, (2) strong capital buffers, and (3) a well-connected ecosystem. These factors will enable the bank to grow rapidly during periods of economic prosperity. Therefore, improving ROE as the bank navigates through difficult times will help revalue the stock. TCB is currently trading at a P/B ratio of 0.9, lower than the industry average and its long-term prospects. Therefore, we recommend accumulating TCB with a target price of 39,500 VND, corresponding to a PBR of 1.1, offering a potential return of 17% compared to the closing price on August 24, 2023.
BFC - Positive signals for 3Q 2023 business results
23-08-2023
: BFC
: Fertilizer
: Ngan Le
Tags: 2Q23 BFC
- In 2Q 2023, BFC achieved a net revenue of VND 2,335 bn (USD 98.5 mn, +29% YoY) and an NPAT MI of VND 53 bn (USD 2.2 mn, YoY flat), owing mostly to an improvement in sales volume due to decreased selling prices.
- After posting a low gross margin of 6.2% in 1Q 2023 due to the high-price inventory while NPK prices were falling, the gross margin bounced back to 11.2% in 2Q 2023 (2Q 2022: 11.6%) as the burden on raw material expenditures eased.
- We forecast that BFC can achieve VND 7,732 bn revenue (USD 329 mn, -9.9% YoY) and VND 111 bn NPAT MI (USD 4.7 mn, -21.1% YoY), respectively with the main assumption (1) sales volume of 577 thousand tons, (2) ASP of VND 13,600/kg, (3) gross margin of 10.2%. The correspondent EPS is VND 1,752.
- The 2023 forward PER will be 10.6x, which is not attractive in our opinion. As 2023 plan, the company will pay VND 1,500 cash dividend, representing an 8% dividend yield/year at the current market price. As a cash dividend player and no upcoming projects, we are NEUTRAL with a target price of VND 19,200/share.
VNM - Expect double-digit net profit growth YoY in Q4 2023
22-08-2023
: VNM
: Food, Beverage & Tobacco
: An Nguyen
Tags: Result Update Q2 2023
- Q2 2023 sales and net profit reached VND15,195 bn (+9.2% QoQ; +1.8% YoY) and VND2,198 bn (+18.4% QoQ; +5.5% YoY), respectively. The domestic market is the growth driver. Net profit rose at a higher pace than revenue, encouraged by 1) the downward trend of imported raw milk powder prices; 2) SG&A optimization; and 3) rising financial income.
- We forecast 2H2023 net sales and NPAT-MI of VND33,419 bn (+7.3% YoY) and VND4,973 (+19.3% YoY), respectively. Assuming that prices of imported raw milk powder tends to decrease under low demand from China, the gross margin is expected to see an upward trend between Q3 and Q4 2023. Together with the low base of Q4 2022, Q4 2023 net profit is forecasted to present high double-digit growth YoY.
- We maintain our forecast on VNM ‘s 2023 sales at VND62,532 bn (+4.3% YoY), but revise up 2023 NPAT-MI to VND9,028 bn (+6.0% YoY), equivalent to a 2023 EPS of VND3,888 (+7% YoY). The main reason is that the price of imported raw milk powder decreased faster than expected.
Combining FCFF valuation model (55%) and multiples comparison (45%) with an applied 2023 P/E of 21.0x, our new target price for VNM is VND87,600, which is higher by 8.0% compared to the latest target price (VND81,100) on Jun-2023. Adding an expected cash dividend of VND3,850, the 12-months expected return is 26% compared to the closing price on Aug 22nd 2023. Therefore, we have a BUY recommendation on this stock for the long term.
BID – Provisions for credit losses are controlled and will support profit before tax
21-08-2023
: BID
: Banking
: Chinh Nguyen
Tags:
- In Q2, total operating income decreased slightly by 4% YoY. However, effective control for provision for credit losses has been the driving force behind BID's PBT maintaining a growth rate of 6% YoY.
- The cost of funds (annualized) in Q2 increased at a slower pace, rising by 45 bps (compared to an increase of 81 bps in Q1). Meanwhile, lending rates experienced delay in rate adjustments, with the average rate increasing by 17 bps, resulting in a 36 bps increase in yield on earning assets). The gap in the rate increases between these two components narrowed, leading to a 3 bps decrease in BID's NIM compared to the previous quarter, reaching 2.64% in Q2 2023. Additionally, allocating a higher proportion to high-yield loans in the total interest-earning assets positively contributed to NIM, offsetting the relatively low yields on bond investments.
- With a higher credit granted in the latter half of 2023 and the advantage in mobilization, which helps improve NIM, we project that credit growth for 2023 will reach 12.8%, driving net interest income to VND 63.9 trillion (+14% YoY) and total operating income to VND 76.4 trillion (+9.9%). The expected credit cost of 1.4% is anticipated to enable the company to maintain the PBT at VND 27.6 trillion (+20% YoY). We expect BID's ROE to improve above 20% and additional equity capital to provide a basis for maintaining high credit growth in the coming years.
- Our target price is VND 54,200 per share, equivalent to a PBR of 2.3, with a return of 19% compared to the closing price on August 21, 2023. Therefore, we recommend to BUY BID.
REE – The 2023 stepping stone boosts mid-term growth momentum
18-08-2023
: REE
: Utilities
: Hoai Trinh
Tags:
- Hydropower contribution to business results has been reduced from Q2/2023. 6M/2023 results saw NPAT-MI with a slight decrease although revenue continued to grow primarily due to (1) a decrease in profit contribution from hydroelectricity due to hydrological conditions (-8.7% YoY), (2) contribution from the office leasing segment also recorded a slight decrease YoY when the occupancy rate of office buildings for lease decreased (-1.6% YoY), and (3) the M&E segment recorded a drop in profit (-44.6% YoY) due to additional provision for doubtful receivables.
- In the first half of 2023, the energy segment, particularly hydropower, remained the most important component of REE's revenue and NPAT. However, poor hydrological conditions are predicted to stifle profit increase in 2H2023. We expect REE's revenue and NPAT-MI to be VND 8,827 bn (-6% YoY) and VND 2,479 bn (-9% YoY), respectively. EPS is 6,068 VND/share.
- The year 2023 will serve as the foundation for the next stage. The E.town 6 building project, which would add 26% to the existing leasable floor area, is projected to be completed by the end of Q4/2023. In addition, the Light Square residential project, which includes low-rise houses (phase 1), is scheduled to be completed by Dec 2023, with results expected in 2024. At the same time, as a result of its solid financial position and abundant cash flow from operating activities, REE will pursue future M&A projects.
- We have a BUY rating with a target price of VND 74,000/share based on a sum of the part (SoTP) valuation. With an expected cash dividend of VND 1,000/share in the next 12 months, total return is determined at 24% based on the closing price on Aug 18th, 2023.
US Fed and Economic Growth
18-08-2023
: VDS
: Macroeconomics
: Bernard Lapointe
Tags: FED
- US GDP increased at a 2.4% annualized rate in 2Q vs 2.% on 1Q.
- The rise in central bank policy rates to fight inflation continues to weigh on economic activity.
- Our base case remains that a downturn in the US economy is coming, along with a pronounced slowdown in inflation, with the key question remaining the lags in monetary policy
DBD – Sustained double-digit growth
17-08-2023
: DBD
: Pharmaceuticals, Biotechnology
: Quan Cao
Tags:
- In Q2-FY23, net revenue and PBT were VND 414 billion (+8% QoQ/+23% YoY) and VND 84 billion (+6% QoQ/+23% YoY), respectively. Accumulated 1H2023, net revenue and PBT were VND 796 billion (+14% YoY) and VND 173 billion (+28% YoY), completing 45% and 58% of the 2023 plan, respectively achieving 45% and 48% of our forecast.
- In a favorable policy environment in 1H2023, the total bid-winning value was VND 394 billion (+37% YoY), which is a positive indicator to ensure growth for 2H2023. For the second half of the year, forecasted ETC channel revenue is VND 521 billion (+8% YoY). For 2024F, ETC channel revenue forecast is VND 1,116 billion (+14% YoY).
- For 2H2023, forecast OTC channel revenue is VND 329 billion (+2% YoY). For 2024F, forecasted OTC channel revenue is VND 685 billion (+7% YoY). OTC channel revenue will decrease compared to the period 2020 – 2022. The CAGR of 7% is equivalent to the growth of the industry as the number of new pharmacies opened slows down.
- We maintain our forecast that revenue and NPAT will be VND 1,753 billion (+13% YoY) and VND 298 billion (+22% YoY) respectively. EPS for 2023 will be VND 3,980. We recommend to BUY at the target price of VND 65,800 per share because (1) reducing the WACC in the FCFF method due to the risk-free rate and ERP decreasing and (2) raising the target P/E valuation to 17x expecting that the appearance of foreign strategic investors with premium valuation will be a positive catalyst for the stock.
Update on trade in July 2023
16-08-2023
: VDS
: Macroeconomics
: Ha My Tran
Tags:
- Slow recovery in trade activity.
- Exports to China are improving.
- Demand for production materials of domestic enterprises is recovering.
NKG – Demand recovery on foreign market
15-08-2023
: NKG
: Materials
: Thach Lam Do
Tags: Steel NKG
- In 2Q2023, NKG recorded revenue of VND 5,500bn (USD 232mn, -24%YoY, +26%QoQ), with sales volume of 236.6 thousand tons (-9%YoY, +21%QoQ). Of which, c. 67% was to exported markets (ASEAN, EU) owing to the demand recovery, especially from 2Q23. The 2Q gross profit margin (GPM) was increased to 9% (from the low-level of 3.1% in 1Q23), and gross profit reached VND 496bn (USD 20.9mn, +260%QoQ), when the main material (Hot Roiled Coil - HRC) is trade at the average price of USD 637/ton (-9% QoQ). It has also decreased its days of inventory on hand to 107 in 2Q, to avoid the risk of HRC price instability. As a result, NKG recorded the 2Q NPAT-MI of VND 125bn (-38%YoY), after recorded net loss in 1Q23.
- For 2H2023, we expect the sales volume can reach 464.4 thousand tons (increased by 8% compared to 1H23), mostly comes from export markets, and currently there is no new trade interventions (such as anti-dumping and countervailing duties) from key markets (EU, ASEAN). The 2H23 revenue will be VND 8,397bn (USD 354.3mn, -4%YoY).
- Because of the uncertainty of China’s residential market - the main customer, the material price may be at the current low-level of USD 600/ton. However, there is risk that strong fluctuation might occur in 2H2023, and with the appropriate inventory policy, we expect NKG can maintain the GPM of 7% in 2H. In term of the bottom line, at the expected net profit margin of 2.8%, we estimate NKG’s 2H23 net profit of VND 234bn (USD 9.9mn), compared with net loss of VND 775bn in 2H22.
- We use two methods (FCFE and PB) to evaluate the stock; our fair value comes at VND 20,100 value per share, implying a total return of -1.5% as of the closing price on August 15th, 2023, equivalent to a NEUTRAL recommendation for Nam Kim Group Jsc.
