WCM – Signs of recovery have appeared in Q3 2023 performance : MSN : Retailing : An Nguyen Tags:
Q3 2023, Wincommerce (WCM) record sales of VND7,884 bn (or USD329 mn, +9.8% QoQ; +3.3% YoY). WCM continued presenting positive EBITDA since Q4 2020, witnessed at VND228 bn (or USD10 mn, +47% QoQ; -9% YoY) in Q3 2023. We find out some positive signals from the Q3 2023 performance, including (1) Sales per store per month recovered by quarter; and (2) Stable profitability We suppose that the fruitful result of the technology applications is hard to realize in the short-term because of the processing time. However, based on the performance of the global retailers who have applied AI & ML to operations; and the recent performance of WCM, we believe that applying AI & ML to retail operation is the right decision for long-term growth We believe that the positive net profit stage of WCM is coming. We suppose that when WCM completes their store expansion plan, then improving average sales per store per month to the NPAT breakeven level (expected at VND1.0 bn in general by RongViet Securities), equipped by costs optimization, they would record positive net profit
Overview of the MSCI Stock Market Reclassification Process and Its Impacts on the Stock Market : VDS : Financial Services : Tung Do Tags:
Typically, MSCI's upgrade process comprises four stages and, at the fastest, spans approximately two years. The phase of significant market rally usually occurs in the period from when a market is added to MSCI's watchlist for potential upgrade until MSCI begins consulting with investment institutions globally. Ideally, this process takes about 9-10 months. In the case of the inclusion of China's A-shares in the MSCI Emerging Markets Index, mid and small-cap indices exhibited superior growth compared to larger-cap indices. Excluding Saudi Arabia, the initial weightings of newly upgraded stock markets in MSCI Emerging Markets Index are generally below 1.0%.
MARKET IN JANUARY – THE 4TH QUARTER EARNINGS SEASON : VDS : Financial Services : Hung Le Tags:
In December, the stock market continued to exhibit a positive trend. However, both the momentum of growth and market liquidity experienced a slowdown. Foreign investors marked the month with their strongest net selling of the year. In our baseline scenario, we estimate that: (1) Fourth-quarter revenue may achieve a growth rate of 6.9% YoY, aligning with the GDP growth rate of the Q4; (2) Profit margins are expected to remain consistent with the levels seen in the first nine months of the year, corresponding to a +24% change YoY, and Q4 profits are anticipated to grow by approximately 31% YoY, with a 12-month cumulative change of 7% QoQ. Additionally, (3) We assume that the impact of the issuance of additional shares will be negligible and, with the VNIndex at 1,131 as of January 2, 2023, the P/E ratio could adjust downward by 7% to 13.15x, or an earnings yield (E/P) of 7.6%. This yield is significantly attractive compared to Vietcombank's 12-month savings rate of 4.80%.
VHC – Expect recovery in H2-2024 : VHC : Fishery : Hiển Lê Tags:
In Q4-2023, we estimate the revenue and NPAT-MI to be VND 2,509bn (or USD 105mn) (+1% YoY; -7% QoQ) and VND 174bn (or USD 7,2mn) (-9% YoY; -9% QoQ), respectively, assuming volume and average price (ASP) to decrease by 1% QoQ and 13% QoQ, respectively. The gross profit margin for Q4-2023 is expected to reach 12.8% (-10,900 bps YoY; +230 bps QoQ) due to (1) a decrease in feed costs QoQ and (2) raw fish price decreasing faster than selling price. In summary, the revenue and NPAT-MI for the year 2023 to be VND 10,152bn (or USD 423mn) (-23% YoY) with volume and selling price decease 17.7% YoY and 21.3% YoY, respectively. NPAT-MI will be VND 1,022bn (-48% YoY), equivalent to an EPS of VND 5,575 (-48% YoY). In 2024, we forecast the revenue at VND 11,577bn (or USD 482mn) (+14% YoY) with assumptions of volume and ASP increasing by 15% YoY and 5% YoY, respectively, as (1) demand rebounds in the U.S. and EU markets in the second half of 2024, and (2) the supply of raw fish decreases. The gross profit margin improves from 15.1% to 18.5% due to (1) a reduction in feed costs and (2) selling price increasing faster than raw fish price. This supports NPAT-MI to achieve VND 1,420bn (or USD 59mn) (+39% YoY). The EPS for 2024 is expected to be VND 7,746 (+39% YoY). We reduce our target price to VND 76,900 per share, a 2.7% reduction from the previous target of VND 79,000 in August 2023. Combined with a dividend of 2,000 VND, the expected return for the next 12 months is 4.9 % compared to the closing price on January 02, 2024. This adjustment is made by (1) reducing the WACC from 14.1% to 12.6%; (2) using the 2024 valuation year for the SoTP valuation method, and (3) decrease forecasted profits for 2023 & 2024 compared to the previous forecast. We recommend ACCUMULATE this stock for the long term.
HPG – The domestic market to drive growth in 2024 : HPG : Materials : Thach Lam Do Tags: HPG
In 3Q2023, HPG recorded revenue of VND 28.5tn (USD 1.2bn, -16%YoY, -3%QoQ), with the recovery of construction steel volume (with 3Q volume of 919 thousand tons, +17%QoQ); supported by demand from public investment projects, when major projects (ring road and expressway systems) have handed over 70% of the land and moved into the construction phase. The 3Q gross profit margin (GPM) continued to improve to 12.6%, and gross profit reached VND 3,595bn (USD 148mn, +13%QoQ, +259% YoY), when the imported material (coking coal and iron ore) was at low-level. In 4Q23, we expect HPG's construction steel volume to reach 1.15 million tons (+25%QoQ), when public investment projects increase disbursement in the 4Q. Thereby, revenue can reach VND 33.3 tn (USD 1.4bn, +17%QoQ, +29%YoY); gross profit to reach VND 3,240 bn (USD 133mn, -10%QoQ), with GPM of 9.7% (impacted by the surge of raw material prices). In term of profit, NPAT can reach VND 1,868 bn (USD 76.9mn, -7%QoQ, continuing to improve compared to net loss in the 4Q22). For 2024, we expect HPG's business results to record significant growth in domestic market, supported by: 1/The real estate projects will promote sales in 2024, along with the construction phase which increases demand for materials; 2/ Major public investment projects will accelerate the construction process in the period 2024-2025. Thereby, we expect HPG's revenue in 2024 to reach VND 145.1 tn (USD 6bn, +23%YoY) and gross profit of VND 18.3 tn (USD 753mn, +60%YoY). In term of the bottom line, we estimate HPG’s 2024 net profit of VND 11tn (USD 453mn, +94%YoY). The corresponding EPS in 2024 will be VND 1,782. We use two methods (FCFF and PB) to evaluate the stock; our fair value comes at VND 29,100 per share , implying a total return of +4% as of the closing price on December 29th, 2023, equivalent to a NEUTRAL recommendation for Hoa Phat Group Jsc. However, with the prospect of long-term recovery, investors can accumulate shares during the correction sessions.
Global Macro Economics in 2023: A Year of Resilience Growth : VDS : Macroeconomics : Luan Pham Tags:
The outperforming US economy. China: recovered less than expected. Japan: Long-term weakness. Eurozone: Modest growth. Impact of War: Economic and Oil Price Dynamics.
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.
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