PNJ – Takeaways from Q3 2021 AM

PNJ held its online Analyst Meeting yesterday sharing some key points in (1) post-lockdown overall market demand along with sales performance in October; and (2) its strategy to maintain profit margins and market leadership, including long-term store count target by 2025F, and the promotion of digital sales channel; and (3) private placement progress.

BFC - Hard to maintain the gross margin amid the rally in fertilizer prices

• Sales volume reported was 163 tons in 3Q2021, up 10% YoY but down 30% QoQ.
• The 3Q2021 average selling price increased 16% YoY and 16% QoQ to VND11,132 per kg.
• 3Q2021 gross profit margin was 9.7%, down from 12.4% in 1Q2021 and 10.9% in 2Q2021.
• The company accelerated the accumulation of raw material for NPK production amid the surge of input fertilizer prices.
• Revenue and NPATMI are estimated at VND 7,575 bn (USD 336.7 mn) (39,8% YoY) and VND 195 bn (USD 8.7 mn) (46,6% YoY), respectively in 2021.
• We recommend sell for BFC with the target price of VND 28,330 as the business result is not positive in 2022, compared to 2021. However, we believe that the company can pay a higher cash dividend (around VND2,000) on the back of good result in this year.

Global tax agreement. Should Asian countries care?

• It intends first to halt the effort by multinational companies to shift profits into low-tax havens through a new global minimum tax of 15% for multinational companies. 
• It also attempts to address the increasingly digital nature of international commerce by taxing companies, in part, on where they do business instead of where they book profits.
• What is in it for Asia?

VSC - Operating Cost Reduction Has Driven NPAT-MI Growth In 9M2021

• Reduction in outsourcing port operation and cutting operating cost has expanded VSC’s gross margin to 31.6% (+ 672 bps YoY) in 9M2021. An abnormal other income of VND 10 Bn additionally pushed up the growth rate of NPAT-MI in Q3/2021 by 69% YoY to reach VND 109 Bn. As the result, the NPAT-MI in 9M2021 was VND 258 Bn (+ 45.4% YoY). We expect that the NPAT-MI will reach VND 361 Bn in 2021F (+ 50.1% YoY). VSC is trading at P/E 2021F of 12.5x, comparing to a 3Y historical mean of 8.0x.  The fair valuation is still under review.
• Revenue has grown in line with throughput growth in VIP Green and Green Port on the back of stable throughput growth in the Hai Phong area. In 9M2021, port throughput in VIP Green and Green Port increased by 14% YoY, driving the revenue to VND 1,386 Bn, increasing by 12.6% YoY. We expect that total throughput will reach 1,1 Mn TEUs in 2021F (+ 4% YoY) and revenue will reach VND 1,862 Bn (+ 10.3% YoY) in 2021F.
• VIMC Dinh Vu (VSC’s associate since Sep 2021) and two deep-water port projects, namely Cat Hai in Hai Phong and Lien Chieu in Da Nang, are long-term stories, given that VIP Green and Green Port are operating at their designed capacity. However, we believe the earnings from these projects are rather elusive given limited competitive advantages of VIMC Dinh Vu to attract international shipping lines and pending investment planning approval as well as lack of capital for deep-water ports, including Cat Hai (in Hai Phong) and Lien Chieu (in Da Nang).

BMP – The most difficult period has passed

• BMP’s business activities were seriously affected by stricter social distancing and difficulty in the transportation of goods in 3Q. Although SG&A expenses were lower, the dropping demand and increasing input prices led to a negative net profit after tax.
• The demand has recovered strongly after easing social distancing measures in early October, especially allowing construction activities.
• PVC resin prices have been dropping, easing pressure on BMP’s gross margin. Besides, selling volume can recover in 4Q and 2022 from a low-base in 2021 due to more dynamic construction activities.
• In spite of being hit by surging material prices, BMP is still the leading company in the domestic market and is able to stabilize consumption, hence a stable cash flow and high cash dividend.
• We recommend investors ACCUMULATE this stock with a target price of roughly VND 67,700/share. Together with a cash dividend in the next 12 months of VND 1,500/share, the total expected return is 11% as of the closing price of VND 62,200 on November 04th, 2021.

TCB – Hesitation amid outstanding 3Q21 performance

• The 3Q21 results slightly beat our estimates as TCB posted strong growth across the board.
• Although the pandemic situation in 3Q21 lies within the scenarios of the portfolio stress review conducted at the end of 2Q21, the insignificant deterioration in the asset quality surprises us. Our concern arises from the proactive slowdown in the credit cost ratio during this uncertain period despite TCB’s good provisioning buffers ahead of the recent disruption. However, we think there has not been any change in its provisioning policy or risk governance.
• 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). We see potential upside for the 2021 PBT in the cases of flattened credit cost curve or stable CASA in 4Q21. 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 32% from the closing price of November 03 2021.

ACB – Building the buffer

• ACB posted flat earnings growth in 3Q21 due to the surge in credit costs. The bank also witnessed a deterioration in its balance sheet health regarding NPL, LLR and restructured debt. It has made full provisions of restructured debt earlier than required.
• We value ACB’s conservative provisioning policy in the context of increasing restructured loans, group 2 debt degradation and NPL formation which might last for one or two quarters. Concern arises as ACB attempts to boost credit growth in the last quarter while the economy is in an uncertain recovery. In the base case, we think the tension on earnings will continue to last. We revise down the 2021-2022 PBT forecasts to VND 12.4 trillion and VND 15.5 trillion, translating to year-on-year growth of 29% and 26%.
• Despite the potential of posting weak earnings growth in the short-term, ACB is expected to take advantage of the economic recovery. The 2021-2022 book value per share is estimated at VND 16,788 and VND 20,692. As we shift the 2022-2025 ROE curve upward due to lower pressure on the provisioning policy, we also upgrade the target price to VND 39,100/share, up 5% from the previous valuation. This translates to an upside of 20% from the closing price of November 01, 2021 and a BUY recommendation.

Leading to the economic recovery

• Manufacturing activities have gradually revived.
• Accelerating vaccinations across the country.
• Looking forward to the Covid-19 socio-economic recovery plan.

Livestock market – Live hog price to recover from 4Q21

• The downward trend in live hog prices accelerated in 3Q21 as the impact of strict social distancing in the South of Vietnam caused live hog prices to drop by 40% QoQ in 3Q. With production cost of around 35,000 VND/kg, even companies with fully integrated value chain are recording a loss of 25% on production cost.
• We expect pork demand in the South to improve from 4Q21 driven by (1) the opening of traditional markets and the resumption of on-site restaurant chains from Oct 28^th, (2) accelerating the vaccination program for children according to the school opening schedule and (3) the recovery of inter-provincial transportation.
• DBC's 3Q21 revenue reached VND 2,682 Bn (USD 116 Mn, +5% YoY) and PBT of VND 169 Bn (USD 7.3 Mn, -61% YoY). In 9M21, the company completed 64% and 88% of revenue and PBT guidance, respectively.
• We expect that live hog price will bottom in Oct 28^th, DBC's profit in 4Q21 will reach positive QoQ recovery as live hog price is increasing toward the company's production cost. Besides, we expect the recovery trend to extend in 1Q22 on the back of buoyant pork consumption in the New Year holiday.

VHC - Better-than-expected 4Q-FY21 NPAT outlook

• We revise up our target price by 17% to VND70,000/share as we raise our 2021 and 2022 NPAT forecasts to VND 957 Bn (or USD 42 Mn, +36% YoY) and VND 1,198 Bn (USD 52 Mn, +25% YoY), respectively, after 3Q-FY21 NPAT beat our expectations, showing signs of maintaining high fillet export volume and solidly selling price increase. With an expected return of 12% including a 2% cash dividend yield for a one-year horizon, we recommend to ACCUMULATE.
• VHC released positive 3Q-FY21 results with revenue of VND 2,231 Bn (or USD 97 Mn, +24% YoY) and NPAT-MI of VND 255 Bn (or USD 11 Mn, +46% YoY), mainly driven by high fillet selling prices and cooling-down logistics costs.
• In 4Q-FY21, we project revenue and NPAT to be VND 2,433 Bn (or USD 106 Mn, +25% YoY and +9% QoQ) and VND 308 Bn (or USD 13 Mn, +101% YoY and 20% QoQ), respectively.
• For FY21, we project revenue and NPAT to reach VND 8,795 Bn (or USD 382 Mn, +25% YoY) and VND 957 Bn (or USD 42 Mn, +36% YoY), respectively. The 2021 EPS will be VND 5,176 and 2021 forward PER 13.5x.

FPT – 9M 2021 Business Results Update

• FPT posted Q3-2021 business results, in which net sales and PBT grew by 16% YoY and 20% YoY, respectively, to VND 8,725 bn and VND 1,639 bn. In terms of revenue, the IT sector (+24% YoY) continued to lead growth, compensating the deceleration of the Telecom sector (+8% YoY) and Education & Investment (-15% YoY). Meanwhile, PBT growth of IT/Telecommunications/Education & Investment reached 24% YoY/12% YoY/18% YoY.
• 9M-2021 net revenue and NPAT-MI posted VND 24,953 bn (+18% YoY) and VND 3,031 bn (+19% YoY), accomplishing 72% and 69% of our full-year forecast. Profit results trailed our forecasts mainly due to losses derived from newly invested businesses.
• Our current 2021F/22F forecasts and target price for FPT of VND 108,800 are under review.