VCB - Pioneering Recovery Initiatives
22-09-2023
: VCB
: Banking
: Chinh Nguyen
Tags: VCB
- VCB reported total operating income (TOI) of VND 17.4 trillion (+9.4% YoY) in Q2/23, driven by a growth in net interest income (NII) reaching VND 14 trillion (+9.6% YoY) combined with non-interest income of VND 3.4 trillion (+8.6% YoY). Effective cost control measures led to a decrease in the cost-to-income ratio (TTM) by 100 bps to 30.6%, and a 7.2% YoY reduction in provision expenses, resulting in a maintained PBT at a high level of 9.2 trillion VND (+25% YoY). For the first 6 months of 2023, the total TOI and PBT reached 35.9 trillion VND (+10% YoY) and 20.5 trillion VND (+18% YoY), respectively.
- Sources of non-interest income were different as income from net fee reached 1.6 trillion VND (+133% YoY), offsetting the slowdown in foreign exchange and collection activities. Fee income recorded significant growth in the second quarter due to changes in insurance fee income recognition. Card and payment activities remained strong, compensating for the decline in trade finance and insurance activities.
- The second half of 2023 is expected to see stronger credit growth as demand from individual businesses and large enterprises in utility, construction, and infrastructure sectors pick up. Combined with long-term relationships with major importers and exporters, VCB has maintained its advantage in non-interest income sources such as payments, transfers, trade finance, and foreign exchange. In the base case scenario, we estimate that net interest income will grow by 8% to reach VND 57.5 trillion, with credit growth of approximately 11% and NIM maintained at 3.2%. Non-interest income is expected to reach VND 16.8 trillion (+13% YoY). Consequently, the estimated total TOI and PBT are VND 74.4 trillion (+9.3% YoY) and VND 43.4 trillion (+16.2% YoY), respectively.
- We recommend to ACCUMULATE VCB with a target price of VND 99,500, equivalent to a 11,42% return compared to the closing price on September 22, 2023
HAX - Mercedes-Benz cars demand is expected to be high in 2H2023
21-09-2023
: HAX
: Automobiles
: An Nguyen
Tags: Result Update Q2 2023 Mercedes-Benz
- Q2 2023, HAX sales and net profit were VND797 bn (-19.7% QoQ; -48.4% YoY) and VND2 bn (-51.5% QoQ; -97.9% YoY), respectively. The net profit growth was met by difficulties, including weak sales and higher operating costs. In 1H2023, HAX ‘sales and net profit were VND1,780 bn (-44.2% YoY) and VND5 bn (-96.1% YoY), respectively. This result only met 3% of the 2023 profit target.
- HAX ‘s expects strong sales in 2H2023 that will compensate for the modest sales of 1H2023. The main reasons are the decrease in loan rates and the decision to lower registration fees. In summary, we forecast 2023 sales and net profit to reach VND6,627 bn (-2.2% YoY) and VND228 bn (-4.8% YoY). The equivalent basic EPS is VND2,643 (-37.1% YoY).
- Based on the combination of FCFF valuation model (50%) and multiples comparison (50%), with an applied P/E of 6.6x, our new target price is VND18,300. Adding a cash dividend of VND500, the 12-months expected return is +19% compared to the closing price on Sept 20th 2023. Based on 1) the growth outlook of HAX since 2H2023; and 2) the positive expectations on Haxaco‘s business performance has partly been reflected on the share price movement, we recommend to ACCUMULATE this stock for the long term.
Industrial Park Real Estate - Draft law on industrial park, economic zones, and the impacts
20-09-2023
: LHG, KBC, IDC
: Industrial Land RE
: Hung Le
Tags: draft IP law Industrial parks
- After 30 years of development, Industrial Parks (IPs) and economic zones (EZs) have attracted significant investments and accelerated the industrialization process. However, they have also faced certain limitations in planning and investment efficiency. Consequently, the Ministry of Planning and Investment is currently reviewing a draft law for these areas, and it is anticipated that the 15th National Assembly will consider and potentially approve this draft within the next 12 months.
- The six major policies include: (1) Directions and plans for building industrial parks and economic zones in regional and provincial planning, (2) Regulations on conditions for investment in industrial park infrastructure and establishment of economic zones, (3) Incentives for industrial parks and economic zones in areas with difficult or extremely difficult socio-economic conditions, investment projects implementing industry linkages and industry linkage clusters in industrial parks and economic zones, (4) Promote the development of new types of industrial parks, new economic zones, new functional areas in economic zones, (5) Double incentives for priority and support enterprises, (6) State management of industrial zones, EZ.
- For businesses investing in and operating the infrastructure of industrial zones, we believe the new draft law will provide a clearer legal framework to support the process of seeking investment approval. Specifically, several policies within the draft law will impact the planning, establishment, and expansion of industrial zone projects. The remaining policies will serve as guidelines, supporting the investment and development of industrial zone projects.
Oil and Gas sector – High oil price support E&P activites
19-09-2023
: PVD, PVS, PVT
: Oil & Gas
: Ngan Le
Tags: Oil price Russia Saudi Arabia
- The extension of Saudi Arabia’s output cut of 1.0 mbpd, along with Russia’s extension of its 300,000 barrels/day of export cut through year-end supports the price of Brent crude.
- In 3Q23, OPEC has pumped an average of 27.4 mbpd (31% of global supply), 1.8 mn less than it believes consumers needs.
- The average price of Brent oil forecast in 4Q23 will be from USD 83 – 93/barrel, higher than the 9M23 average of USD 81/barrel.
- With pressure to increase oil and gas production output, we believe that PVN will try to push key projects into operation soon, boosting the business results of some upstream Vietnamese companies.
VIB – Current Macro Landscape Poses Challenges To 2023 Profit Growth Prospects
18-09-2023
: VIB
: Banking
: Tung Do
Tags: Business Update 2023 outlook Banking Industry
- Although credit growth improved slightly to 3% from 0.8% at the end of Q2/23, the gap with the granted credit growth quota (14.25%) remains large.
- NIM may decline slightly in 2H/2023 to selectively boost credit growth causing NII growth to decelerate.
- Credit risk provisions and provision processing are expected to remain high in the second half of the year to ensure asset quality and bring the NPL ratio down to 2%.
- Given decelerating NII growth and a sharp increase in credit risk provision, the ability to complete the 2023 PBT plan is relatively challenging and will depend more on NFI growth, CIR optimization and recognizing bad debts recoveries income.
Update on trade in August 2023
15-09-2023
: VDS
: Macroeconomics
: Ha My
Tags: Trade
- Exports continue to recover, we expect a modest positive growth in Q4/2023.
- Exports to the US market improved.
- Deepening Vietnam - US economic links in dependence on trade activities with China.
Seaport – Draft amendment to Circular 54/2018/TT-BGTVT on changing container handling service charges
14-09-2023
: GMD, SGP, PHP
: Seaports
: Quan Cao
Tags:
- Vietnam Maritime Administration (VMA) sent a draft to the Ministry of Transport on the amendment of Circular 54/2018/TT-BGTVT for the second time, in which the important content refers to the adjustment of container handling service charge. In particular, Hai Phong, the South region and deep-water ports will be increased by 10% compared to the present. In addition, deep-water ports can apply 110% of the new price because these are key national projects.
- We expect that the draft will be adopted soonbecause higher service charges will bring more income to the state budget but still ensure competitiveness as the current price is much lower than other countries in Asia.
- If the draft is adopted, the policy will promote rapid growth for the whole seaport industry as the profit margins expand. In particular, GMD, SGP, and PHP are listed companies that greatly benefit from the deep-water port.
Chinese property market – Change the approach to increase housing sentiment.
13-09-2023
: KDH, NLG, HDG
: Real Estate
: Thach Lam Do
Tags: KDH NLG HDG
- Real estate plays a fundamental role in China’s economy, accounting for 30% of GDP considering sectors both upstream and downstream, and real estate speculation has risen tremendously. As prices continue to rise rapidly, investment and speculation have become a way for common people to accumulate large amounts of wealth. To prevent house prices from continuing to rise, regulators introduced the “houses are for living in, not speculation” policy, with the aim to prevent the speculative behavior. The government has issued strict rules for buyers to purchase a second-home, or even tough terms for first-home mortgages. In terms of real estate developers, they have been prevented from using financial leverage to hoard land by the “Three Red Lines” regulatory requirements.
- With the economy in difficulty that lowered customer’s income, the China property market has faced a tough period since 2021. Since the beginning of 2022, the real estate giant Evergrande has repeatedly reported failed overdue coupon payments; and when the company first announced it was facing unprecedented difficulties, the Chinese government had to move in to control the spillover effects. For another developer giant – Country Garden – the high land-bank exposure to low-tier cites (where new-home sales declined the most) is the main reason for its overdue coupon payments failure in August 2023.
- As the negative effects of strict regulations on the property market – the economy’s main asset – while other industries have not recovered, the Chinese government has changed its policies to support the market and increase liquidity. The support package focuses on demand-side, which still follows the rules “houses are for living in, not speculation”. Tier-I cities have recorded a recovery in demand, and policymakers have ample room to loosen first-home purchase policies in those cities. Developers who recorded positive sale growth (Yuexiu, COLI) also have high exposure on tier-I and strong tier-II cities.
- For the Vietnamese market, we see some similarities. However, the Vietnamese government has packages to support both buyers and developers, with: 1/Reduction in borrowing rates, 2/ Resolving projects’ legal issue, and 3/Infrastructure development. As the result, the Vietnamese market may bottom out sooner (in late 4Q2023, per our expectation); and major cities (Hanoi, Hochiminh city) will recover first, which is similar to the Chinese market.
HND – No tide to lift the boats in the short run
12-09-2023
: HND
: Utilities
: Hoai Trinh
Tags:
- HND recorded 3,528 mn kWh of power generation in 6M/2023 (-10.0% YoY). Meanwhile, net revenue was VND 5,938 bn (+14.4% YoY), owing to a high ASP (due to high input coal costs). Despite the company changing the way it estimates major repair costs (not deducting 50% in advance and has reversed 150.4 bn VND after review), NPAT reached VND 341 bn (-36.5% YoY) primarily due to (1) a shortage of coal in Q1 leading to a decrease in 6M/2023 output and (2) input coal prices remaining at a high level, preventing HND from being profitable in the competitive electricity generation market (CGM) and affecting profit margins in PPA.
- Business prospect will be less favoerable in 2H23. HND stated that the second half of the year's electricity production output will be impacted by (1) the major overhaul of the S1 generator (from September 20 to November 10 - 20 days later than expected) and (2) the minor overhaul of the S3 generator (from August 2 to August 31). Concerning input coal, per HND, the price of mixed input coal has dropped substantially since August 2023. Coal supply and stockpile levels remain stable, allowing for adequate output in the second half of the year. Furthermore, with additional substantial repair expenses recorded in Q4/2023, we expect NPAT to be low in Q3 and a loss in Q4.
- We lower our revenue and NPAT forecasts for 2023, which are estimated to be VND 11,170 bn (+6.3% YoY) and VND 417 bn (-23.8% YoY), respectively, due to power output adjustments and increased major repair expenses. In 2023, the equivalent EPS is 855 VND/share.
- 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 15% based on the closing price on Sep 12th 2023.
MSN - Profits is forecast to improve since 2H2023
11-09-2023
: MSN, MCH, MSR, MML
: Consumer Staples, Food, Beverage & Tobacco
: An Nguyen
Tags: Result Update Q2 2023
- Q2 2023, MSN illustrated a resilence sales with VND18,609 bn (-0.5% QoQ; +4.3% YoY) despite of challenging business environment. The backbone of the resilence is the healthy performance of the consumer-based businesses. Q2 2023 NPAT-MI dropped to the lowest level in the last twelve quarters with VND105 bn (-51.2% QoQ; -89.3% YoY). The key reason is the surge of non-operating expenses (including interest expenses, tax, and minority interest).
- We calculated that MSN ‘s net profit will improve since 2H2023. The primary catalyst is the decrease of the interest expenses. We forecast the 2023 sales and NPAT-MI to reach VND78,320 bn (+2.8% YoY) and VND1,228 bn (-65.6% YoY), equivalent to 2023 EPS of VND863 (-65.6% YoY). Compared to our previous forecast, we downgraded the NPAT-MI by 10% because MSN reported a higher tax rate and higher minority interest rate in 1H2023.
- Based on SOTP valuation method and our new forecast, our new target price for MSN shares is VND95,700. In the viewpoint that 1) MSN will succeed in exploiting growth oppotunites of the consumer sector in the long-term; and 2) the profit will improve since 2H2023, we have a BUY recommendation on this stock for the long term.
Fertilizer update – Eyes on China!
08-09-2023
: DPM, DCM, BFC
: Fertilizer
: Ngan Le
Tags:
- After China successful closing the India’s urea bid of 1.1 mn tons, it has asked some urea producers to suspend urea exports in September. This move raises a concerns about a shortfall of the domestic supply – as in late 2021.
- Although global urea benchmark currently appear “indifferent” to this event, it is still expected to rise, driven mostly by demand in India and Brazil in the short-term.
- For Vietnamese domestic urea producers, export motivation in 3Q23 is unclear, but domestic producers could still benefit from increased rice cultivation.
KBC – The situation remains favorable
07-09-2023
: KBC
: Industrial Land RE
: Hung Le
Tags:
- In 1H2023, KBC reported revenue of VND 4,551 billion (USD 189.63 million), which was 4.2 times higher than the same period last year and 6% higher than the pre-audit figure. KBC's NPAT for the first half stood at VND 1,921 billion (USD 80.04 million), representing a 16% increase compared to the pre-audit amount and achieving 57% of our full-year forecast.
- KBC's potential handover of 193 hectares in 2023 is expected to contribute VND 8,241 billion (USD 343.38 million) to its total revenue, fulfilling 92% of its guidance. Additionally, NPAT is projected to reach VND 3,344 billion (USD 139.33 million), completing 84% of its guidance for the year.
- Based on the sum of the parts methodology (SOTP), we lifted the target price to VND 40,000/share as we reflect the positive progress outlook of Phuc Ninh Urban project, and the current average market price of the surrounding area in Phuc Ninh project (up more than 2 times as they first sold the phase 2) in revaluating the remaining area of the project . The total expected return in the next twelve months will be +16.3% (based on the closing price as of September 6th, 2023).
22-09-2023
87 
