Airlines Business Update – Waiting for a Tailwind
05-09-2023
05-09-2023: HVN
: Aviation
: Tung Do
Tags:
- Robust recovery of international passenger volume has helped airlines witness rapid growth in transportation and ancillary revenue.
- Airlines have reduced losses significantly, but high fuel and financial costs are keeping them from profits.
- Optimizing fleet operations with expansion of international routes will help airlines' earnings outlook gradually improve going forward.
- HVN's fleet restructuring and transferring stake in Skypec plan in the near future are catalysts to help speed up the Company's profit recovery.
72 PPC – Eyes on the dividend income and S6 generator reoperation
31-08-2023
: PPC
: Utilities
: Hoai Trinh
Tags:
- PPC reported its 1H23 electricity sales volume of 1,357 mn kWh (-7.7% YoY), while net revenue was VND 2,708 bn (+14,4% YoY), owing to the high ASP (as thermal coal prices remained high). NPAT came at VND 201 bn (+29.7% YoY), climbed significantly mainly due to (1) a dividend income of VND 99.8 bn from associate companies in 2Q23 while 2Q22 was not recorded, and (2) a change in accounting method for major repair costs, which resulted in large repair costs of fixed assets in Q2 recorded at VND 5.1 bn (-94% YoY).
- 2H2023 earnings are mainly due to dividend income from associate companies. We believe that the dividend income in 2H will support PPC's business results when the company reports deducted revenue of VND 161 bn in Q3/2023 (due to a measurement error from December 2018 to March 2022). We also expect the S6 generator to operate again in September 2023 will help PPC increase power output. For FY23, we forecast PPC's net revenue and NPAT to be VND 6,089 bn (+15.4% YoY) and VND309 bn (-37.8% YoY), respectively.
- We maintain an ACCUMULATE rating with a one-year target price of VND 15,500/share. With an expected cash dividend of VND 800/share in the next 12 months, the total return is determined at 12% based on the closing price on Aug 31th 2023.
HPG – The bright spot from HRC makes up for the shortfall from the domestic market
30-08-2023
: HPG
: Materials
: Thach Lam Do
Tags:
- In 2Q2023, HPG recorded revenue of VND 29.5tn (USD 1.2bn, -21%YoY, +11%QoQ), with sales volume of 1.8 mn tons (-12%YoY, +13%QoQ). Construction steel volume is still at a low, while volume of Hot Roiled Coil (HRC) is the bright spot (~255,000 tons/month, which is 16% higher than the period 2021-2022), thanks to: 1/ HRC Vietnam has no import tax in ASEAN countries, 2/ Demand for HRC and downstream products (galvanized sheet, steel pipe) shows signs of recovery in ASEAN and European countries.
- The 2Q gross profit margin (GPM) was increased to 11% (from the low-level of 6.3% in 1Q23), and gross profit reached VND 3,195bn (USD 134.8mn, +91%QoQ, -51% YoY), when the main material (coking coal and iron ore) downed 19% and 11%, respectively. In term of the bottom line, HPG recorded the 2Q NPAT-MI of VND 1,702bn (-61% YoY, -+278%QoQ), and the 1H23 NPAT-MI reached VND 1,831bn (-85%YoY), fulfilled ~25% of our full-year forecast.
- For 2H2023, in term of domestic market, we expect the sales volume of construction steel can reach 1.7 mn tons (equivalent to 1H23), before the real estate market will officially recover from the end of the 4Q23. In term of exporting HRC, the company has had sales orders until the end of September; and we expect the company's HRC consumption volume can reach 1.1 million tons in 2H2023 (equivalent to 1H203). Thereby, we expect HPG's revenue in 2H23 to reach VND 49.25 tn (2.1 bn USD, down 13% YoY). In term of the bottom line, at the expected net profit margin of 11%, we estimate HPG’s 2H23 net profit of VND 5,436bn (USD 229mn), compared with net loss of VND 3,784bn in 2H22. For 2023, we expect HPG net profit of VND 7,267bn (USD 306.6mn,-14%YoY).
- We use two methods (FCFF and PB) to evaluate the stock; our fair value comes at VND 24,600 value per share, implying a total return of -9.6% as of the closing price on August 30th, 2023, equivalent to a NEUTRAL recommendation for Hoa Phat Group Jsc.
VSC – Persistent difficulties
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.
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: BFC 2Q23
- 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
