Steel industry – Risk from material price fluctuations in 4Q2023
24-10-2023
: HPG, HSG, NKG
: Materials
: Thach Lam Do
Tags: Steel HPG HSG NKG
- In 3Q2023, Vietnam's HRC price was relatively stable at USD 570/ton, through which galvanized steel companies (NKG, HSG, GDA) could maintain the GPM equal to the second quarter. In 4Q23, due to weak demand, HRC prices tend to decrease, specifically with Chinese HRC prices trading at the price of USD 520/ton (the lowest level in 2023). However, we assess that the adjustment of Chinese HRC prices is short-term, because at this price steel manufacturers are loosing USD 50/ton and they will tend to decrease the utilization rate, according to Mysteel. Thereby, Vietnamese HRC prices will only be under short-term price pressure, and we expect the average price to stay at USD 570/ton, which will minimize the negative impact on the business results of galvanized steel companies in the 4th quarter.
- For the material price of blat furnaces, we seen significant fluctuations in September, due to: 1/ demand improvement in the Asian market (especially since India has resumed production of iron ore pellets in Mangalore to meet the demand from infrastructure development); 2/ restocking activities before China's mid-autumn festival, 3/ concerns about supply shortages of Australian coking coal. If this trend continues in the first months of the fourth quarter, the gross profit margin (GPM) of steel enterprises using blast furnaces (Hoa Phat, Pomina,…) may be negatively affected.
- Construction steel prices have not been adjusted corresponding to raw material price fluctuations, due to domestic demand shortage and competitive pressure from imported Chinese steel. The stock prices of steel manufacturing companies (HPG, HSG, NKG) have recorded a 15-25% correction compared to the peak and they are traded at an average PBR of 1.3 (the low-level in the period 2019-2023), shows that the market has started to reflect the risk of profit margin decline in the 4Q. we recommend that investors should monitor material price movements, especially in October, before making decisions to invest in construction steel companies, including HPG (HOLD, TP: VND 24,600/share), HSG (ACCUMULATE, TP: VND 19,200/share) and NKG (ACCUMULATE, TP: VND 21,000/share).
PVP – Attractive valuation with the potential fleet expansion
23-10-2023
: PVP
: Oil & Gas
: Vu Tran
Tags:
- PVP announced 3Q2023 results with revenue of VND563bn and NPATMI of VND56 bn. Although the bottom line decreased by 68% YoY in 3Q2023 as PVP recorded abnormal profit last year, transportation segment continued to grow thanks to higher freight rate of Apollo tanker.
- The MR - Pacific Era has started contributing to PVP’s topline in 3Q2023 but we believe that this tanker will only start to generate profit in 2024 if the charter rates maintain above 20,000 USD/day.
- On the back of earnings forecast to remain around VND 200 bn during 2023-2024, we believe that PVP is quite attractive as (1) cheap valuation with 2023-2024 P/E at 7.3x (2) Ability to pay stable cash dividends (3) good financial situation for fleet expansion.
NTC – The sale of NTU 3 started kicking off
20-10-2023
: NTC
: Industrial Land RE
: Hung Le
Tags: NTC
- In Q3 2007, NTC recorded net sales of VND 54.3 billion, an increase of 2% over the same period last year. NTC's NPAT also increased by 35% to VND76.7 billion. Cumulatively in 9M2023, NTC recorded net revenue of VND172.5 billion, a decrease of 9% over the same period last year. However, the company's NPAT still increased by 11% YoY to VND232 billion.
- Implementation of the NTU3 project has been slower than expected due to bottlenecks in land price valuation process from the authority. However, sales progress is positive with 50 ha of Memorandum of Understanding contracts signed.
- NTC invested an additional VND131 billion in Binh Long Rubber Industrial Park Joint Stock Company (UPCOM: MH3) in Q3 to implement Minh Hung 3 Industrial Park expansion project. Investments in joint venture companies continue to generate high and steady dividends.
- Based on the sum of the part valuation method (SOTP), we maintain our Buy recommendation and keep the target price to VND256,000/share. Combined with a cash dividend of at least VND6,000/share in the next 12 months, the expected total return is +39% (compared to the closing price on October 19, 2023).
DCM – “A dark horse” in fertilizer industry
19-10-2023
: DCM
: Fertilizer
: Ngan Le
Tags:
- In 2Q2023, DCM announced revenue of VND 3,291 bn (USD 138.9 mn; -19% YoY) and a gross margin of 11% (-22% bps YoY), resulting in VND 311 bn NPAT-MI (USD 13.1 mn; -69% YoY).
- 2Q23 revenue outperformed 1Q23’s thanks to NPK sales, which increased dramatically to VND 632 bn from VND 69 bn in 1Q23. NPAT-MI also increased by 36% QoQ in 2Q23, supported by a decline in SG&A to sales, from 15% in 1Q23 to 5% in 2Q23.
- When the urea plant finished depreciation in 4Q23, we expect the GPM will expand by 16% bps QoQ to 28% (4Q22: 29%). The GPM, therefore, expand from 16% in H1 2023 to 20% in H2 2023, which results in VND 678 bn NPAT (USD 28.6 mn; -61.3% YoY).
- FY2023 revenue and NPAT are expected to be VND 13,203 bn (USD 557 mn; -17% YoY), and VND 1,220 bn (USD 51.5 mn; -72% YoY), respectively. The 2023 correspondent EPS will be VND 2,075.
- We believe the current market price reflects the expectation of a higher 2024 NPAT as a result of urea plant reduced depreciation. We still recommend investors to hold onto the stock in order to receive an attractive dividend of VND 2,000/share in 2023F-24F.
FPT – Q3-2023 Result Update: Education and investment sector beat expectations, bolstering the group's profits growth momentum
18-10-2023
: FPT
: Technologies
: Tung Do
Tags: Business Update
- Q3-2023 revenue grew by 23% YoY, of which, the IT sector jumped by 30% YoY, the Telecom sector increased by 7% YoY, and the Education and Investment sector increased by 55% YoY. PBT of the IT/Telecom/Education and investment sectors increased by 11% YoY/8% YoY/77% YoY, thereby bringing the group's PBT up by 20% YoY.
- Cumulatively in 9M-2023, FPT's revenue and PBT grew by 22% YoY and 19% YoY, respectively. Overall, this result was in line with our previous expectations with actual PBT fulfilling 75% of our full-year forecast.
- For 2023F, we slightly adjusted the NPAT forecast to VND 6,350 billion (+20% YoY) to reflect the better-than-expected developments in the Education and Investment sector. For 2024F, the PAT forecast remains unchanged at VND 7,759 billion (+24% YoY). EPS for 2023F/24F is 5,000 VND/6,250 VND respectively.
- We roll our valuation forward to 2024F and raise TP to 109,300 VND, corresponding to a total expected return including cash dividends of 20%. Recommended BUY on FPT.
Update on trade in September 2023
17-10-2023
: VDS
: Macroeconomics
: Ha My
Tags: Trade
- Export turnover in Q4/2023 is estimated to increase by 4-6% YoY.
- Electronics and agriculture are the main drivers for export growth.
- The high-interest rate environment is an obstacle to global demand recovery.
The busy season is coming for Vietnam retailers
16-10-2023
: MWG, PNJ, FRT, MSN
: Retailing
: An Nguyen
Tags: shopping season retail industry
- Based on the historical performance of Vietnam leading retailers, except during the Covid-19 pandemic period (2020 – 2022), sales reached the highest quarterly level in Q4 & Q1. For 2023, we believe that consumers will go back to their shopping habits as before the pre-pandemic period. Together with the easing of inflation, lower interest rates, modest economic recovery, and consumption buffer policies, we expect that Q4 2023 sales would present a better performance than Q3 2023.
- Vietnam retailers have opened new stores in 1H2023. We suppose that this expansion will help retailers to enlarge their coverage, increasing their accessibility to customers. When the economy recovers (expected in Q4 2023), retailers will be able to boost stores’ traffic, supporting sales.
- We consider that retailers would need a lot of effort to increase average sales per store in the mid-term. We believe that the economy should not grow strong, instead of, it will recover step-by-step to a normal level. Therefore, incomes of households will not rise at a high rate, partly limiting the willingness to pay for high value products. Consequently, while Q4 2023 sales per store is expected to recover from Q3 2023, it might not exceed the prior-year level.
CTG – Strengthening Asset Quality for a New Growth Phase
13-10-2023
: CTG
: Banking
: Dang Chinh
Tags:
- In Q2 2023, total operating income (TOI) reached VND 17.7 trillion (+11.5% YoY) due to the net interest income (NII) being VND 12.7 trillion (+6.6% YoY), combined with a high growth in non-interest income, totaling VND 5 trillion (+26% YoY). For the first half of 2023, the total TOI and profit before tax (PBT) were VND 34.8 trillion (+15.9% YoY) and VND 12.5 trillion (+8% YoY) respectively, achieving about 54% of the bank's 2023 profit plan.
- The non-performing loan (NPL) ratio is well-controlled at 1.27% compared to 1.28% in Q1 2023. Group 2 loans decreased to 2.59% compared to the previous quarter. CTG has also made provisions of VND 6.4 trillion in Q2 (+10% YoY and -4% QoQ). As a result, CTG's loan loss reserve (LLR) was maintained at 168.9% compared to Q1.
- For the second half of the year, the net interest income is expected to grow by 12% compared to the first half (+10% YoY), providing a boost to TOI (+5% YoY and +4% HoH). In a conservative scenario, it is expected that the bank will maintain cost provisions at a level equivalent to the first half, which is VND 12 trillion. Therefore, the estimated PBT for the second half is VND 12.1 trillion (+28% YoY), remaining stable compared to 1H 2023. For the full year, TOI and PBT are estimated to be VND 71.1 trillion (+10.9% YoY) and VND 24.7 trillion (+18% YoY) respectively. Projected net profit and earnings per share (EPS) are VND 19.8 trillion and VND 3,632, respectively.
- CTG is currently trading at a P/B ratio of 1.2, which is a 12% discount to the 5-year average of 1.34, making it an attractive valuation compared to the P/B ratios of other state-owned commercial banks. Therefore, at a target price of VND 34,900/share, corresponding to a forward P/B of 1.12 in 2023, it is recommended to buy CTG shares for medium to long-term holding.
NT2 – Tough in the near term, but negatives partly priced in
12-10-2023
: NT2
: Utilities
: Hoai Trinh
Tags: NT2
- Full electricity market prices were down significantly in August, falling to 783 VND/kWh (-48.2% YoY). This abrupt decline is primarily attributable to the numerous bouts of heavy rain that occurred in both the North and South in July and August. Due to the significant rainfall, hydroelectric power plant reservoirs received an increase in water flow. Falling temperatures also resulted in a decrease in the consumption of electricity and the mobilization of thermal power plants.
- NT2 recorded 365 mn kWh of electricity in Q3/2023 (-65% QoQ, -59% YoY). The factory was allocated a low Qc in August (44.53 mn kWh) while the full electricity market price (FMP) was low, so the real output was low. NT2 overhauled the plant beginning September 7, and because the FMP price was lower than variable costs, the plant operated with an output of 5 mn kWh in the first six days of the month. Correspondingly, we forecast NT2's Q3/2023 revenue and NPAT to reach VND 817 bn (-63% QoQ, -62% YoY) and - VND 123 bn, respectively.
- For FY23, we lower net revenue to VND 7,216 bn (-17.9% YoY) on the assumption of (1) lowering forecast electricity output to 3.5 bn kWh (-13.8% YoY); (2) average gas price forecast at 9.0 USD/mn BTU (-3.2% YoY); and (3) including compensation for exchange rate losses of VND 155 bn expected to be received in Q4. The NT2 overhaul costs (estimated at VND 407 bn) will be disbursed gradually beginning in Q4/2023 and continuing for the next few years. As a result, we expect 2023 NPAT to be VND 449.7 bn (-49.1% YoY), corresponding to an EPS of 1,729 VND/share.
- We maintain a NEUTRAL rating with a one-year target price of VND 25,800/share. With an expected cash dividend of VND 1,500/share in the next 12 months, the total return is at 10% based on the closing price on Oct 12th, 2023.
PNJ - Net margin is expected to recover from Sept-2023
11-10-2023
: PNJ
: Retailing
: An Nguyen
Tags: Jewelry retail PNJ
- In Aug-2023, PNJ recorded revenue and net profit of VND2,303 bn (-2.6% MoM; -1.1% YoY) and VND76 bn (-13.6% MoM; -3.8% YoY). Although the retail segment remained the largest contributor to total revenue, the gold bar presented the highest sales growth among business segments at VND704 bn (+3.9% MoM; +55% YoY). Profit decreased at a higher pace than revenue due to the higher contribution of gold bar to total revenue.
- We forecast Q3 2023 sales and net profit to be VND7,089 bn (+5.7% QoQ; -3.7% YoY) and VND258 bn (-22.8% QoQ; +2.4% YoY), respectively. On the back of the upcoming wedding season (mid-Sept), we expect that retail sales would recover from Sept-2023, resulting in a higher gross margin. With the assumption of stable opex/sales ratio, we believe that the net margin will move in the same trend as the gross margin.
- Based on the combination of FCFE valuation model (50%) and multiple comparison (50%), with an applied 2024 P/E of 15.1x, our target price is VND88,000. Adding a cash dividend of VND2,000, the 12-months expected return is +12.1% compared to the closing price on Oct 11st 2023, equivalent to an ACCUMULATE recommendation.
NLG – Sales to recover, profit to be accrued in 4Q
10-10-2023
: NLG
: Real Estate
: Thach Lam Do
Tags: NLG
- In the 2Q2023, NLG recorded revenue of VND 953bn (USD 39.2MN, -23%YoY), due to the handover of villas in the Aqua sub-division (66 high-value villas, with a price range from VND 10-20 billion/unit). The gross profit margin (GPM) was maintained at 59% owing to the contribution of high-end projects. Gross profit reached VND 561bn (or USD 23.1mn, +329%YoY, +11%QoQ). With VND 37bn income from associates, NLG had 2Q23 net profit-after-tax-and-minority-interest (NPAT-MI) of VND 121bn (+1,629%QoQ, +9%YoY). To sum up, in 1H23, the company recorded NPAT-MI of VND 128bn (USD 5.3mn), met ~22% of our full-year forecast.
- In 3Q, we see recovering housing demand in HCMC and neighboring provinces. Particularly, in September, the block AK-10 of Akari recognized pre-sale value of VND 700bn (met ~33% of our 2H23 forecast for Akari project). In addition, from our observation, we see that villas in the Park Village sub-division have started recorded transactions. As a result, we maintain our expectations that NLG can have 2H23 pre-sale value of VND 5,817bn (USD 239 mn) and total 2023 pre-sale value of VND 6,684bn (USD 275mn, 71% of the company's plan).
- In 2H23, we expect the company to recognize revenue of VND 2,776bn (USD 114.2mn, +11%YoY) and NPAT-MI of VND 445bn (USD 18.3mn, equivalent to 2H22 NPAT-MI). FY2023, revenue and NPAT-MI will be VND 3,964bn and VND 573bn, fulfilling 98% of the company’s FY2023 guidance. EPS will be VND 1,434. The risk of our estimation would come from lacking the Paragon Dai Phuoc divestment income if the legal processing takes longer time than our expectation.
- Using the RNAV method, we have a target price of VND 37,500/share (upside +14.5%, including cash dividend of VND 500/share), equivalent to an ACCUMULATE recommendation.
HAH – The low freight and time charter rates are putting pressure on the profit outlook for 2024.
09-10-2023
: HAH
: Seaports
: Quan Cao
Tags: Seaports HAH
- Accumulated in 8M2023, containers volume of handling and shipping were 268 thousand TEU and 261 thousand TEU, respectively, completing 64% and 66% of the 2023 plan (before adjustment), completing 68% and 64% of our forecast, respectively.
- HAH adjusted the plan for the year 2023, net revenue and NPATMI are VND 2,669 billion (-17% YoY) and VND 400 billion (-51% YoY) respectively, representing a 10% and 19% reduction compared to the initial plan.
- Forecast for 2024, net revenue and NPATMI will be VND 2,700 billion (+1% YoY) and VND 92 billion (-77% YoY). EPS is 868 VND for 2024. We use the multiple method, target P/B and target EV/EBITDA of 1,2x and 4.6x respectively. We recommend to REDUCE with a target price of VND 32.300.
24-10-2023
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