TCH – Company with potential land bank in Hai Phong city

: Real Estate
: Thach Lam Do, CFA
Tags:  TCH

  • Thuy Nguyen city will be the location of the administrative center of Hai Phong city, along with large industrial clusters and development orientation for new urban areas to attract residents. In terms of residential sector, TCH is the outstanding name with large-scale projects in this area (New City, Green River, Do Muoi), which has almost completed site clearance and they can be deployed in the period 2024-2025
  • For the FY2023 (from 01/04/2023 to 31/03/2024), we expect TCH to continue to record positive results from the real estate sector, when the Hoang Huy Commerce project (apartment project, opens for sale in the period 2021-2022) has been completed and began handing over from November 2023. With the expectation that the company can hand over ~70% of the total units in the 3rd and 4th quarters of the FY2023, we estimate that the company can record revenue of ~ VND 2,500 bn from handing over the HH Commerce project. Thereby, the company's FY23 profit can reach VND927 bn (+93% YoY; of which, for the 3 quarters of the FY2023, the company has reached 78% of the estimated profit).
  • TCH shares are traded at a P/B of 1.2x, lower than the industry average P/B (1.5x), which is a relatively attractive valuation compared to the potential to exploit the land bank in Hai Phong city (center of large industrial clusters in the Northern region). 

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Trade growth in Q1 2024 is high but the outlook is not really bright

: Macroeconomics
: My Tran

  • Trade outperformed in 2M2024 thanks to low base effects.
  • Exports of technology products led the recovery.
  • Low base effect supports double-digit trade growth in 1H2024.

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Oil and Gas Industry - Anticipating a New Cycle in 2024

: Oil & Gas
: Ngan Le


  • Amid tightening supply and rising demand, most forecasts expect Brent oil prices to hover around USD 83/barrel, with no signs of cooling off in 2024. This environment of elevated oil prices is expected to support the upward trend of oilfield service costs and revive exploration activities. At the same time, the focus of Vietnam's oil and gas sector in the 2024-2026 period will be on the B-O Mon block series of projects, which will create additional employment opportunities for upstream oil companies.
  • We forecast that 6 to 8 new oil and gas projects with a combined potential investment of USD 11 bn will be launched in the two years of 2024 - 2025.




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Textile & garment sector – Gradual recovery ahead

: Textile & Garment
: Hoai Trinh
Tags:  Textile & Garment

  • We believe that (1) the demand for textile products has not yet strongly rebounded globally, and (2) high inventory levels in the US market will cause the recovery of the Vietnamese textile & garment sector to slow down in the first half of 2024.
  • In the first three months of 2024, Vietnam's textile export turnover has shown signs of recovery from the low base of 2023, reaching USD 7.8 bn (+9.0% YoY). Specifically, in March, export growth was recorded at 1.4% YoY, a slowdown compared to the 13.4% YoY seen in the cumulative first two months of the year. For Q1/2024, the import volume of fabric reached USD 3.157 mn (+5.8% YoY). After two months of positive growth, March saw a decline in fabric import turnover, marking a decrease of 6.4% YoY. We note that Q1/2023 was a low base. Therefore, the fabric import growth in Q1/2024 could indicate that a surge in textile manufacturing orders in Q2/2024 might be unlikely.
  • For 2024, the Vietnam Textile and Apparel Association (VITAS) has planned for the export of textile products to reach a value of approximately USD44 mn (+9% YoY), with expectations pinned on a rebound in consumption and the leaner inventory in the export markets.

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Pharmaceutical industry – Step into the phase of stable growth

: Pharmaceuticals, Biotechnology
: Quan Cao

  • According to IQVIA, the total pharmaceutical market size in Vietnam reached USD 8.5 billion (+6% YoY), with revenue from the ETC and OTC channels reached USD 3.4 billion (+18% YoY) and USD 5.1 billion (-1% YoY), respectively.
  • In a favorable policy environment, we believe that the ETC channel will continue to be the primary growth driver for the pharmaceutical industry in 2024. The OTC channel is expected to experience stable growth in line with the overall industry growth rate.
  • In the long term, Vietnam’s pharmaceutical industry will benefit from an aging population and increasing population expenditure on pharmaceuticals.

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PHR – The Land Conversion Story Becomes Increasingly Clear

: Industrial Land RE
: Hung Le

  • The proposed  master plan for Binh Duong province reveals a clearer path for land conversion, opening up numerous opportunities to realize the value of PHR's rubber land for future socio-economic development projects. According to estimates, the total area of land PHR can convert by 2030 is up to 3,972 ha.
  • In our baseline scenario, we project that PHR's revenue and net income for the year 2024 will reach VND 1,623 billion (USD 66 million) and VND 694 billion (USD 28 million) respectively, marking increases of 20.1% and 11.5% year-over-year. This forecast is based on the scenarios where 1) the revenue from the VSIP 3 project continues, and the NTU3 project begins deliveries this year, and 2) the average selling price of rubber for the year is VND 41 million per ton. The corresponding EPS for 2024 is anticipated to be VND 5,042.
  • Based on the Sum of The Parts (SOTP) method, the target price has been adjusted to VND 68,900 per share due to our updates on new projects and the benefits from land compensation in the proposed  master plan of Binh Duong province. Coupled with an expected dividend of VND 4,000 per share over the next 12 months, the total expected return is 22% (based on the closing price on April 8, 2024), corresponding to a BUY recommendation for long-term investment objectives

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TCM – Eland will be the main growth driver in 2024

: Textile & Garment
: Hien Le

  • Q1-2024 revenue is estimated at USD 39 million (+6% YoY) and net profit is estimated at USD 2.5 million (+9% YoY). Revenue and net profit growth as the low base of 2023 and orders increase.
  • The business plan for 2024 targets a revenue of VND 3,707 bn (or 157,7 mn) (+12% YoY) as a doubling of Eland orders compared to the same period. Gross margin is expected to improve due to changes in the sales portion, with net profit is expected to reach VND 161 bn (or 6.8 million USD) (+ 21% YoY).
  • We believe that the company's revenue plan for 2024 is feasible due to the doubled of order volume from the major customer/shareholder Eland (with Eland’s revenue in 2023 amounting to VND 746 billion). Additionally, we expect net profit growth to be higher than planned as the sale of the Trang Bang factory and land in the Vinh Long area will be realized this year.
  • We are reassessing the valuation of TCM as we need to observe additional factors affecting the industry and the company's prospects. The stock is currently trading at a P/E ratio of 36x, higher than the 5-year average P/E ratio of 19x.

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ACB - Promising outlook for recovery

: Banking
: Chinh Dang

  • The bank has presented a relatively cautious plan for 2024 at its annual General Meeting of Shareholders (AGM). Total assets are expected to grow by 12%, reaching approximately VND 805,050 bn (USD 32,857 mn). It is important to note that the 14% credit growth target in the plan represents the limit allocated for the entire year for ACB. Additionally, we anticipate that ACB may be granted additional credit limits by the end of the year based on evaluations by the State Bank of Vietnam
  • Preliminary net profit before tax (PBT) for Q1/2024 amounted to VND 4,900 bn (USD 200 mn), a decrease of 5% year-on-year (YoY), achieving 22.27% of the 2024 plan. The decline in Q1 PBT was mainly influenced by non-interest income sources, particularly bancassurance fees, and high collection in Q1/2023. Meanwhile, based on the bank's disclosed PBT level, we estimate that net interest income will grow by approximately 12.6% YoY to VND 7,000 bn when credit growth reaches 3.7% year-to-date (YTD) and the net interest margin (NIM) increases by 20 basis points (bps)
  • Our forecast for 2024’s PBT is VND 23,059 bn (USD 942 mn), marking a 15% YoY increase and a 4.8% increase compared to the bank's plan. Earnings per share (EPS) and book value per share (BVPS) stand at VND 4,710 and VND 22,000, respectively. Our latest target price is VND 32,300 per share, combined with a dividend of VND 1,000 per share, equivalent to a return of 22% compared to the closing price on April 5, 2024. Therefore, we recommend a BUY for ACB

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DRC – The growth path is less bumpy over past year

: Automobiles
: Hung Nguyen

  • Radial TBR tire maintains the riding role for DRC’s performance in 2024F of 25% YoY, owing to (1) the improvement of global goods rotation, (2) the elevated capacity in its phase-3 radial factory from 0.75 to 1.0 mn units/year from Q2-2024; and (3) the increased sales of the US market as we believe DRC’s products is able to be substitute for Thailand’s TBR tires in H2-2024.  
  • In 2024, we anticipate DRC’s operating margin will improve by +6 bps YoY due to the historic lows of 2023 coupled with our assumption that DRC will increase the natural rubber inventory reservation or level up its selling price to partly offset the upward shifts from this material. In summary, for 2024, we project DRC’s net revenue and NPAT to gain VND 5,349 bn (or USD 221 mn, +19.0% YoY) and VND 235 bn (or USD 12.2 mn, +19.9% YoY), resulting in an EPS of VND 2,331.
  • We determine a one-year target price for DRC at VND 30,300/share, based on two methods: FCFF and P/E, with respective weights of 50% and 50%, which is -11% lower than the closing price on April 4th 2024. However, DRC maintains a stable dividend policy, with an average payout ratio in 2024 of ~60%. Hence, we suggest that investors following the arbitrage strategy can consider accumulating DRC stock when the market undergoes a significant correction at a reasonable price. Investors who prefer stable dividends can flexibly disburse when the cash dividend yield is attractive more than the bank deposits.

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SCS – Raise TP to VND 95,600. Reiterate BUY recommendation

: Aviation
: Tung Do
Tags:  Q1/2024 results

  • We have adjusted the target price for SCS to 95,600 VND, up 6% from the latest TP, implying an expected total return (including a cash dividend of 5,000 VND/share) of 36% as of April 3rd, 2024. We reiterate a BUY recommendation for SCS.
  • The volume of international cargo has shown robust growth following collaboration with Qatar Airways. International volume in Q1/24 is estimated to reach nearly 43 thousand tons (+40% YoY), while domestic volume reaches 15.8 thousand tons (+23% YoY).
  • For the year 2024, projected revenue and net profit after tax (NPAT) are VND 974 billion (+38% YoY) and VND 659 billion (+32% YoY), respectively. The forecasted EPS for 2024F is 6,300 VND.

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HPG – Dung Quat 02 Complex to be the long-term growth driver

: Materials
: Thach Lam Do, CFA
Tags:  HPG

  • The Dung Quat 02 Steel Complex (DQ02) has a designed capacity of 5.6 mn tons of HRC/year, divided into 2 phases. In which, phase 01 has the capacity of 2.8 mn tons/year, and it is expected to start trial production in the 4Q24, and begin operation from the 1Q25. As of March 2024, the project has completed 50% of phase 1’s total progress, in which HPG has completed 90% of the construction of main items (roller mills, steel smelting, iron smelting, coke smelting, and raw material processing plants) and completed more than 50% of the total steel structure.
  • With the current construction progress of the Dung Quat 02 complex, we believe the factory will be able to be put into operation from the 1Q25 as planned, with relatively high efficiency (utilization rate of 80% for phase 01, corresponding to 2025 HRC output of 2.24 million tons). Thereby, HPG's revenue in 2025 can reach VND 197 tn (USD 8.1bn, +35%YoY), with 2025 gross profit can reach VND 30.6tn (USD 1.3bn, +59%YoY), and net profit to reach VND 21tn (USD 864mn, +85%YoY). The corresponding EPS in 2025 will be VND 3,380.
  • We use two methods (FCFF and PB) to evaluate the stock; our fair value comes at VND 36,600 per share, implying a total return of +20% as of the closing price on April 02nd, 2024, equivalent to a BUY recommendation for long-term investment purpose for Hoa Phat Group Jsc

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Anticipated PCE inflation signal for the Fed’s first rate cut

: Macroeconomics
: Luan Pham

  • Fed’s key inflation indicator holds steady, as anticipated.
  • A normalization of super core PCE and services inflation.
  • PCE inflation trends point towards a rate cut in June.

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