Update on monetary market in May

• SBV net injected for the third month in a row.
• Credit growth recovery is bumpy.
• Monetary policy focuses on supporting growth.

Vietnam’s T&G sector – Exports remain weak, eyes on brands’ destocking cycle & consumption recovery

• In the first four months of 2023, Vietnam's garment export turnover was USD 9.7 tn (-17.9% YoY). Due to the destocking cycle of brands, while consumption outlook remains weak, brands turned more conservative in placing new orders. Yarn export turnover also plummeted, recording USD 1.3 tn (-32.8% YoY) due to a significant decrease in imports from China (-37.0% YoY).
• We expect that 1Q23 earnings will bottom for T&G companies. Due to the brand's destocking cycle, we expect new orders to improve in 2H2023. Hence, we still recommend that investors wait for clearer signs of textile & garment companies’ improved order volume. We still prefer buy-rated STK (TP of VND 32,500); maintain accumulate on MSH (TP of VND 40,000), neutral on TNG (increase TP of VND 20,200 for TNG on the back of higher 2023 earnings estimates); reduce-rated on TCM (TP of 39,800) due to high priced with limited catalysts in sight.
  

HAX – Expected recovery in 2H2023 will partly compensate for the expected weak sales in 1H2023

• Q1 2023 net sales and NPAT-MI were VND993 bn (-37.9% QoQ; -40.2% YoY) and VND4 bn (-92.6% QoQ; -93.6% YoY), respectively. Mercedes car sales were down on an unfavorable basis of comparison and high loan rates, but repair services sales went up driven by stricter car registration regulations. The significant negative growth of net profit is due to higher SG&A and financial expenses.
• 2023 sales are forecast to be VND6,627 bn (-2.2 %YoY) based on 1) higher selling prices; and 2) higher market share. NPAT-MI to reach VND VND236 bn (-1.6% YoY). In the context of weak sales and rising SG&A costs, the expected commissions from Mercedes-Benz Group cannot help to deliver positive net profit growth. The equivalent EPS is VND3,274.
• With the combination of FCFF valuation model (50%) and multiples comparison (50%) with an applied P/E of 5.8x, our target price is VND20,200. Adding a cash dividend of VND500, the 12-months expected return is 14.4% compared to the closing price on May 23rd 2023. We suppose that HAX shares may could bottom out when any signals of sales growth appear (might be in 2024). Therefore, we recommend to ACCUMULATE this stock for the long term.

Real estate market update – wait on recovery

• The market absorption is its lowest point. The HCMC only has three new condominium projects, and Villa & Townhouse market did not record any new supply. The average price of the condo market increased by 2% QoQ; and the market-wide price of landed property remained the same, while the price of townhouse segment decreasing by 8% QoQ.
• States Banks of Vietnam (SBV) and The Ministry of Natural Resources and Environment have taken steps to ease pressure for the real estate sector. Especially In term of legal issues, The Ministry has sent  document No.3054/BTNMT-QHPTTND to the People's Committees of provinces to guide the solution of legal difficulties. We highly appreciate the efforts of SBV and MNRE, and we expect the market recovery to happen from late 4Q2023, when: 1/The amended Land Law and related decrees are finalized, 2/ Economic factors are reformed and SBV has ample room for decreasing regulatory rates.
• In April, the government approved a project to construct affordable "social housing" for low-income people by 2030. According to the project, the total number of completed social apartments in localities will reach about 1.06 million aparments. They also assigned SBV to implement a credit program worth around VND 120,000 bn through specific credit packages for developers and homebuyers of social housing projects. We think that the credit packages are the first steps for the social housing target, and in the long-term, developers with experience in developing social apartments (Nam Long Group with E-homeS, in example) will benefit.
• Real estate developers are cautious in their 2023 pre-sales plan, and they also have policies to support customers and push pre-sales value, with flexible payment terms and better interest package. We expect developers with financial capability, projects with fully-comply regulations (including NLG and KDH) can reach target for condominium products, due to customers’ demand and flexible payment terms. However, with low-rise units, we expect they will delay the sales launch event until the market can clearly recover (in late 4Q2023, as our expectation).

HAH – Going through a difficult period for the entire maritime industry

• In Q1/2023, HAH's container handling and transportation volume reached 86 thousand TEU (-7% YoY) and 82 thousand TEU (-4% YoY), respectively, completing 21% and 25% of the 2023 plan. Revenue and NPATMI in Q1-FY23 reached VND 655 billion (+ 0% YoY and -23% QoQ) and VND 119 billion (-41% YoY and -31% QoQ), respectively, equivalent to complete 22% and 24% of the 2023 plan.
• Regarding the 2023 plan, HAH sets a target that volume of container handling and shipping can be flat compared to that of 2022. Revenue and NPAT both grew negatively, at VND 2,958 billion and VND 492 billion, respectively, down 8% and 40% compared to 2022. This year HAH is expected to receive two new 1,800 TEU ships. In order to ensure capital for investment activities, the company plans to issue convertible bonds with a total value of VND 500 billion at a maximum interest rate of 6% with a tenor of four to five years.
• At the end of 2023, HAH is expected to receive two new-built ships with a capacity of 1,800 TEUs. In order to supplement capital for ship investment, HAH plans to issue convertible bonds with a total value of VND 500 billion, maximum fixed interest rate of 6%/year, term of 4-5 years.
• Forecast for 2023, revenue and NPAT of HAH will reach VND 2,770 billion (-14% YoY) and VND 526 billion (-36% YoY), respectively. In which, revenue from the port operation, transportation and other activities reached VND 206 billion (-4% YoY), VND 2,337 billion (-16% YoY) and VND 227 billion (-10% YoY), respectively. HAH's NPAT dropped sharply during the year due to (1) freight rates and charter rates are reduced by 25% YoY and 70% YoY, respectively (2) outsourcing expenses, depreciation and interest expenses increasing rapidly during the year. We use the multiplier comparison method, target P/B and target EV/EBITDA are 0.95x and 3.7x respectively. We recommend to ACCUMULATE HAH  with a target price of VND 42,300/share.

PVD – Positive earnings to last 2Q2023 as well as FY 2023

• PVD recorded revenue of VND 1,226 bn and NPATMI of VND 52 bn in 1Q2023. Overall, 1Q2023 performance improved robustly compared to the same period last year with the main driver coming from drilling segment. Specifically, the rig utilization  rate reached 100% compared to 55% of the same period, the rig day rate also increased by 20.7% YoY from USD 58,000 /day to USD 70,000/day.
• PVD booked 100% provision for the receivables from Kris Energy. In the time to come, the receivables of Kris Energy and PVEP will be the potentail reserves for the bottom line.
• PVD is likely to secure new contracts for 2024 with better day rates than the current one. In which, PVD I and VI  are negotiating with PCSB (Petronas) for contracts with the rig day rate ranging from USD90,000 /day to USD100,000 /day. In addition, PVD III is negotiating with Hibiscus for a better term compared to the 2023 contract whose price only ranged from USD60,000/day - USD70,000/day.
• PVD's business results are expected to keep improving from 2Q2023 onwards thanks to increased rig day rate. In addition, the potential for profit enhancement will maintain in 2024 if PVD can sign new contracts at better rate. In this context, we still maintain our POSITIVE recommendation with PVD stock at a target price of VND 26,800/share.

Current inflation in the US

Current inflation is still high. Figure 1 illustrates this point. Personal consumption expenditures (PCE) inflation, the black line, stands at 4.2 percent, and core PCE inflation, the red line, stands at 4.6 percent for year-end March 2023.

Seafood industry – Slow recovery

•  Pangasius exports to China unexpectedly took a sharp downturn in April, opposing the conventional thinking of a strong rebound after the economic reopening. The turning point of pangasius export to this market is likely to trail towards Q4/2023. We expect that pangasius processors may experience more positive business results in late Q3/2023.
• Shrimp exports show no sign of recovery yet. A significant drop in sales is foreseen for shrimp companies. However, companies that demonstrate effective management of input materials or expand their farming areas can mitigate production costs, thus contributing to maintaining profitability this year.

ACV – Q1 results and 2023 AGM update: International passenger volume is expected to recover to 80% pre-pandemic level

• Revenue jumped by 124% YoY, which was higher than the growth of total passenger volume (72% YoY) due to a sharp increase in international arrivals volume of 1471% YoY from the low base of the same period in 2022.
• NPAT grew at a slower rate of 87% YoY as (1) ACV recorded an exchange rate loss of VND 775 billion in the period while Q1-2022 recorded an exchange rate gain of VND 268 billion due to the appreciation of JPY and (2) SG&A expenses increased by 156% YoY.
• For 2023, ACV's core EBIT growth rate is targeted at 83% YoY on the back of the continued recovery of international inbound tourism, especially the Chinese market.
• Reiterating BUY recommendation on ACV with a TP of VND 96,600.

World steel market: Prices sliding amid skepticism on China’s demand outlook

• The world's largest steel production and consumption market – China - is going through a period of a lack of leading information as mixed signals are affecting the commodity futures markets.
• Iron ore, coking coal, hot rolled coil went down again in the first half of Q2/2023: unfavorable signals for Q3/2023 business results.

Trade in 4M2023: Short-term outlook was gloomy

• Trade has yet to flourish.
• Last month's recovery was only temporary.
• The export outlook in the short term will not improve much

IMP - Results will rise substantially by the convergence of positive factors in 2023

• In Q1/2023, IMP's net revenue and PBT were VND 479 billion (+53% YoY) and VND 99 billion (+50% YoY), completing 27.4% and 28.3% of the 2023 target. In which, The ETC and OTC channel revenue were VND 178 billion (+241% YoY) and VND 297 billion (+15% YoY), respectively. Q1/2023 revenue and PBT are both completing 23% of our latest 2023 forecast.
• IMP has set a plan for net revenue and PBT of VND 1,750 billion and VND 350 billion respectively, increasing by 7% and 20% compared to 2022. IMP's growth driver in 2023 could come from the contributions of two factories IMP2 and IMP4.
• We adjust up our forecast for net revenue and NPAT at VND 2,110 billion (+28% YoY) and VND 346 billion (+48% YoY), respectively, of which ETC and OTC revenue are VND 964 billion (+58% YoY) and VND 1,075 billion (+14% YoY), EPS for 2023 is VND 4,413 (+43% YoY). We increase our target price  to VND 65,800/share, equivalent to a forward P/E valuation of 12.75x that is lower than the 5-year average P/E of 17x. We maintain our ACCUMULATE recommendation on IMP.