DRC – Leaving difficulties behinds, heading for more prosperous landscape in Q4-FY23 and FY24 : DRC : Automobiles : Hung Nguyen Tags:
In Q4-2023, we expect DRC's net margin will be constant at 7.0% (+17 bps QoQ) attributes to the decreasing of raw material price. For 2023, we project DRC's net revenue and NPAT to gain VND 4,580 bn (or USD 192 mn, -6.5% YoY) and VND 235 bn (or USD 9.8 mn, -23.8% YoY), resulting in an EPS of VND 1,857. In 2024, we project that the company's net revenue and NPAT will reach VND 5,276 bn (or USD 221 mn, +15.2% YoY) and VND 277 bn (or USD 11.6 mn, +17.9% YoY), respectively, resulting in an EPS of VND 2,189. It is driven by (1) lifting the capacity of production from its phase-3 radial factory, (2) higher sales in the US as Thailand tires is in the risk of being anti-dumping duties imposed by US ICT & DOC from Q1-2024, (3) the more active public investment & trading activities globally, (4) GPM will maintain at a satisfactory level by ending up the situation of Chinese & FDI corporate’s destocking & the favorable condition from its materials. We determine a one-year target price for DRC at VND 25,300/share, based on two methods: FCFF and P/E, with respective weights of 50% and 50%. Hence, we recommend that investors consider accumulating shares for DRC stock when the market undergoes a significant correction at a reasonable price.
Seaport industry – Good news from the policy but more time needed for the wave of recovery in commodity trade demand in 2024 : GMD, VSC : Seaports : Quan Cao Tags:
The Ministry of Transport has issued Circular 39/2023/TT-BGTVT, announcing the approval of an increase in container handling fees on 25/12/2023, and implementing them from 15/02/2024. Accumulated 11M2023, the estimated value of container via sea ex-im of goods were USD 181 billion (-5% YoY) and USD 121 billion (-15% YoY), respectively. Accumulated 11M2023, total nationwide container throughput was 21.5 million TEUs (-6% YoY). In which, the container throughput in Hai Phong and Vung Tau regions were 5.6 million TEUs (-1% YoY) and 4.4 million TEUs (-8% YoY), respectively. For 2024, the demand for ex-im may not recover strongly as leading indicators do not yet show convincing signs.
Update on monetary market in Dec 2023 : VDS : Macroeconomics : Ha My Tags: Monetary market
Credit accelerated in the last months of the year. Deposit interest rates fell to a record low. Money supply growth in 2023 recovered but at a slow pace
STK – Turnaround may take longer : STK : Textile & Garment : Hoai Trinh Tags:
4Q23 will be another rough season . We forecast that STK's net revenue and NPAT-MI will reach VND 389 bn/ USD 16.0 mn (+3% QoQ, -9% YoY) and VND 20 bn/ USD 0.8 mn (+20% QoQ, -53% YoY) in Q4, respectively. 2024 will be a brighter year compared to a relatively low base in 2023. We project that STK’s net revenue and NPAT-MI will reach VND 2,432 bn/ USD 100.3 mn (+66% YoY) and VND 157 bn/ USD 6.5 (+108% YoY), respectively. These projections are based on the assumptions that (1) the total yarn sales volume will recover by 52% YoY, (2) the proportion of recycled yarn will constitute 55% of the total revenue, and (3) additional interest expenses of VND 70 bn/USD 2.9 mn and depreciation costs of VND 120 bn/ USD 5.0 mn will be incurred as the Unitex factory becomes operational in Q3/2024. The corresponding EPS for 2024 is to be 1,670 VND per share.We maintain a NEUTRAL recommendation for STK stock with an adjusted target price based on the revised projections for the recovery prospects in 2024, which have slowed down compared to previous forecasts (adjusted down from the target price of 31,700 VND per share). Utilizing a combination of the DCF method and a P/E ratio (target P/E of 10.0x), we establish a new target price of 26,200 VND per share. This corresponds to an expected return rate of 3% based on the closing price as of December 25, 2023
Banking Sector - On the bumpy track : BID, CTG, ACB, VCB, VIB, MBB : Banking : Chinh Dang Tags:
In Q3/23, a decline in broad-based profit growth was observed across most banks, with the industry's TOI growth (calculated based on 27 listed banks) recording a flat performance . Among the groups, state-owned banks showed the most positive results , with an average YoY growth rate of 8%, driven by the growth of VCB and CTG as these two banks effectively controlled provision expenses. Meanwhile, Tier 1 banks experienced a significant decline in NIM, and Tier 2 banks faced pressure on provisioning at high levels. The industry's NPL continued to rise to 2.24% (+16 bps compared to the previous quarter). However, there were differences between bank groups, with state-owned banks showing signs of a gradual reduction in the formation of non-performing loans, while the deterioration of asset quality for private banks continued, especially as the average and low- income customer segments were heavily affected by signs of economic slowdown. The total outstanding loans (principal and interest) in Circular 02/2023 increased sharply from VND 96 trillion (USD 4,067 mn) at the end of July to VND 158.6 trillion (USD 6,721 mn) (accounting for 1.24% of credit share) as of October 31. We also anticipate a more favorable outlook for Net Interest Margin (NIM), supported by recent signals of interest rate cuts as the industry's deposit interest rates have decreased since March, reaching lower levels after the pandemic. This move is expected to officially alleviate pressure on mobilization costs as demand deposits at high levels in Q4/2022 officially mature, providing a favorable premise for balancing NIM and completing the bottoming-out process. However, the recovery potential of NIM needs to be considered in light of several factors. After some bottlenecks related to real estate and corporate bond markets were eased to protect the banking system, bank stock prices rebounded to an average level over the past 10 years. However, the deceleration in the economic picture for 2023 has brought bank stock prices back to below 1 standard deviation. Therefore, despite existing challenges, we believe this is an attractive valuation for long-term investors to invest in some bank stocks with good asset quality to overcome the difficult period and capitalize on the recovery.
MWG – Looking forward to a less stressful year ahead : MWG : Retailing : An Nguyen Tags:
Q3 2023, MWG booked net sales of VND30,288 bn (or USD1,252 mn; +2.8% QoQ; -5.4% YoY). The gross margin recovered by quarter at a modest rate owing to the improvement in TGDD/DMX ‘s gross margin as the pressure from de-stocking ICT/CE inventory was softened. MWG ‘s net margin improved in line with the gross margin trend but remained at the low level. Consequently, Q3 2023 net profit reached VND39 bn (or USD1.6 mn, +129% QoQ; -96% YoY). We expect 2023 sales and NPAT-MI to reach VND122,595 bn (or USD5,066 mn, -8.1% YoY) and VND422 bn (or USD17 mn, -89.7% YoY), respectively. The equivalent EPS is VND288. 2023 is a bad luck year for MWG. The high-cost ICT/CE inventory, low demand, and the abnormal costs from BHX restructuring projects drive the net profit to the lowest level since 2013 until present. We predict 2024 average sales per store per month of TGDD/DMX and BHX chains will be VND2.1 bn (+4% YoY) and VND1.8 bn (+17% YoY), respectively. Meanwhile, we assume the number of TGDD/DMX and BHX stores in 2024 will be 3,144 and 1,706, respectively. In summary, we forecast 2024 sales and NPAT-MI to be VND132,323 bn (or USD5,468 mn, +7.9% YoY) and VND1,278 bn (or USD53 mn, +203% YoY), respectively. The equivalent EPS stands at VND873. Based on the SoTP model, we revise down target price (TP) to VND51,500 from the TP of VND57,600 in Jul-2023. Our new target price is backed by the assumptions of (1) NPAT-MI will grow at a triple-digit rate in 2024, (2) BHX chain has found an effective operating model that will generate a 2023-2027 CAGR in MWG ’s net profit of +70%, and (3) the 12-month expected return is +20.6% compared to the closing price on Dec 21st 2023, we recommend to BUY MWG stock for long-term holding.
PVT – Freight rates increase support business results : PVT : Oil & Gas : Ngan Le Tags:
PVT announced its financial results for 3Q2023, reporting revenue and net profit of VND 2,551 bn (USD 108 bn; +9% YoY) and VND 249 bn (USD 10.5 mn; -8% YoY). With the higher TC rates, we expect 4Q2023 bottom line will rise by 17% YoY to VND 242 bn (USD 10 mn). As a result, the NPAT-MI of PVT will reach VND 982 bn (USD 41 bn) for the full year 2023, representing a growth rate of 14% YoY. Correspondend EPS is VND 2,853. Assuming current freight rates remain high level in 2024 and the fleet continues to expand, we maintain a positive outlook for PVT's stock as profits are expected to grow by 12% YoY to VND 1,099 bn (USD 46 mn). Correspondend EPS is VND 3,190. However, we believe that the growth prospects are currently priced in, so we only recommend a NEUTRAL with the target price of VND 28,800.
HDG – Business outlook to recover in 2024 : HDG : Real Estate, Utilities : Thach Lam Do Tags: HDG
In 3Q23, as the El Nino has negatively affected the hydrological condition and the output of hydropower plants (the 3Q output of hydropower plants reached 288mn Kwh, -29%YoY), the revenue from the power segment has decreased by 30%YoY. The company has not recorded any revenue from residential real estate, because the Charm Villas project has handed over all units of the previous phase, while the third phase has not yet been launched for sale. For the first 09 months of 2023, NPAT-MI was VND 423bn (or USD 17.4mn, -52%YoY), which met ~48% of company’s business plan. In the 4Q2023, we expect the 4Q electricity output to reach 413mn kWh (+16%QoQ, with hydropower output may increase by 20%QoQ, because the fourth quarter is usually the peak mobilization period for hydropower plants in the Central region). HDG's revenue can reach VND 667bn (USD 27.4mn, -42%YoY, +45%QoQ), and the NPAT-MI reach VND 217 bn (-13%YoY, +157%QoQ). For the whole year 2023, the parent company's PAT will reach VND 639 bn (-42%YoY, reaching 66% of the company's business plan). The corresponding EPS in 2023 will be VND 2,091. For 2024, we expect that the output of hydropower plants will improve from the 2H 2024 (the peak period of HDG's hydropower plants, also the probability of El Nino will decrease and be replaced by the Neutral/La Nina phase). For the real estate segment, with the expectation that the market can recover in 2024, the company has started to implement key projects, including: 1/~110 low-rise units of phase 03 - Charm Villas project, 2/ Green Lane, an apartment project in District 8, HCMC. We estimate 2024 NPAT-MI of VND 765bn (+20%YoY, USD 31.5mn). The 2024 equivalent EPS is VND 2,500. Using the SoTP (Sum-of-the-parts) method, we maintain the target price of VND30,900/share (Upside +11.2%) , equivalent to an ACCUMULATE recommendation for Hado Group Jsc. We like the company’s asset with power plants and high-potential residential land bank, and with the 2024 business results could be improved, we recommend investors can accumulate the stock for long-term investment.
2023 Review: Trade bottomed out but slowly improved : VDS : Macroeconomics : Ha My Tags:
Exports and imports in 2023 are estimated to decrease by 5% YoY and 10% YoY. Agriculture is a bright spot in the export picture in 2023. China contributed the most to trade growth for the whole year
BID – NPL are under control : BID : Banking : Chinh Dang Tags:
In Q3/23, BID's PBT was VND 5.9 trillion (-12% YoY). For the first 9 months of 2023, the accumulated pre-tax profit reached VND 19.7 trillion (+11% YoY), completing 78% of the bank's profit plan for 2023. During 9M2023, credit growth reached 8.3% YTD, a relatively high level compared to other state-owned banks. This growth was primarily driven by the customer loans, while the balance of corporate bonds recorded a 33% YTD decrease (contributing 0.5% to credit compared to 0.8% at the end of 2022). BID also showed an increase in the contribution ratio of retail customers, rising back to 44% after a slight decrease to 43% in Q2. The cost of funds (annualized) decreased by 32 bps in Q3, reflecting interest rate reductions across the entire system. Meanwhile, with a 33 bps decrease in asset yields, there was a slight decline in NIM by 2 bps compared to the Q2/2023 period. In the short term, the rapid and substantial reduction in deposit interest rates is seen as the most positive factor impacting NIM. This trend is expected to continue in Q4/2023, helping to stabilize NIM and complete the bottoming-out process. BID's asset quality remained stable, with the consolidated non-performing loan ratio for customer loans staying flat compared to the previous quarter at around 1.59%, and the group 2 loan ratio decreasing by 30 bps from the previous quarter. For Q4/2023, it is expected that total operating income will recover by 12% YoY, driven by the gradual recovery of credit growth towards the end of the year, reaching 12.5% YTD, and NIM (TTM) is expected to be maintained at 2.66%. In the medium term, BID is expected to maintain internal bad debt according to its set targets. Therefore, estimated provision expenses are expected to remain at a level equivalent to Q3/2023, around VND 5.6 trillion, to provide a basis for handling NPL in the final months of the year. The PBT for Q4/2023 is projected to reach VND 6.1 trillion (+14% YoY). The forecast for the whole year 2023 anticipates a PBT of VND 25.9 trillion (+12.5% YoY). The corresponding net profit after tax and earnings per share (EPS) are expected to be VND 20.4 trillion and VND 3,218, respectively. Our target price for BID is VND 43,500/share, equivalent to a target PBR of 2.1, providing a return of 5% compared to the closing price on December 15, 2023.
Fisheries Industry – Overcoming Challenges in 2023 : VHC, FMC, ANV, IDI : Fishery : Hien Le Tags:
After experiencing a sharp decline in the first half of 2023 due to the high baseline (in the Chinese and U.S. markets) compared to the same period in 2022, the export value of pangasius has shown a tendency to stabilize and slightly improve since September 2023. This improvement, according to our observation, is mainly due to the recovery of consumption levels in the Chinese and U.S. markets. Meanwhile, consumption in the European market has maintained a relatively stable trend. We anticipate that this mild positive trend will persist in the final quarter of 2023. However, the gross profit margin of the pangasius industry in Q4-2023 is expected to face challenges in growth due to the forecasted decrease in the average selling prices while raw material prices may rise again. Companies with a high export proportion to the EU are likely to have lower average selling prices compared to companies with a high export proportion to China (CN) and the United States (U.S.). The shrimp market continues to maintain a competitive advantage, particularly in the case of deep-processed products. The gross profit margin in the shrimp industry is expected to improve in Q4-2023 for companies harvesting self-cultivated shrimp. The net profit margin will see improvement in companies effectively controlling transportation costs.
Vietnam Home Appliance Market – More aggressive competition in the context of saturated phase : MWG, FRT, DGW : Retailing : Hung Nguyen Tags:
In 9M-2023, total value of Vietnam major & small home appliances market declined respectively by -10.0% & -8.0% YoY. As of which, except air-conditioner segment (+5.8% YoY), remaining segments recorded a negative growth. The main reason is the downturn phase of real estate & the decreasing of disposable incomes on the economic landscape. The annual boost-sale season will be the primary driver of this market's recovery in Q4-2023, but profit margins for these corporates will be squeezed by the continuously low-pricing strategy & discount/promotion policy to stimulate demand & clear all of hard-to-sell inventories. In the last 8 years, much more brand/distributor/retailers have entered the Vietnam home appliances market, while some key segments (air conditioner, refrigerator, washing machine) have gradually become saturated with higher-and-higher penetration rates, hence, it may force them to compete more fiercely in terms of price/innovation/coverage rate. We believe that the revenue for all home appliance corporates will barely reach robust growth rate in FY24
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