HPG - Maintaining long-term growth potential
29-08-2024
: HPG
: Materials
: Thach Lam Do, CFA
Tags: HPG
- In Q2 2024, HPG reported revenue of VND 39,600 billion (USD 1.6bn, +34% YoY, +28% QoQ). Construction steel sales volume continued to improve due to demand from public investment projects and real estate developments. However, hot-rolled coil (HRC) sales volume saw a slight decline compared to the previous quarter due to Europe's imposition of HRC import quotas. The gross profit margin in Q2 remained at 13.3%, with gross profit reaching VND 5,247 billion (USD 210mn, +26% QoQ, +64% YoY), supported by stable raw material prices and selling prices. As a result, HPG reached VND 3,320bn profit after tax (USD 133mn) that marked a strong growth of 129% compared to the same period last year.
- In 2H2024, the domestic market is expected to continue its recovery momentum that supports the company's sales volume. With risks arising from the export market (mainly for HRC products), HPG may proactively shift orders to meet the demand of local coated steel companies. Net profit in 2H2024 could reach VND 5,800 billion (USD 232mn, +16% YoY, -6% HoH). For 2024, we maintain our forecast for HPG's net profit at VND 12,000 billion (USD 480mn, +77% YoY), corresponding to an EPS of VND 1,775.
- The construction progress of the Dung Quat 02 project is meeting expectations that allows the plant to begin producing commercial products and generating revenue in Q1 2025. We maintain our expectation that the plant can operate at a relatively high efficiency in 2025 (80% for phase 01, equivalent to 2.2 million tons), with substantial support from the domestic market, especially as the Ministry of Industry and Trade takes measures to protect the domestic steel industry.
- By using a combination of the FCFE and PB methods, the fair value of HPG stock is estimated at VND 34,000 per share that corresponds to a total expected return of +33% (based on the closing price as of August 29, 2024). HPG leads industry position and has strategic investment plans to capitalize on the recovery cycle, as it remains our top pick in the steel sector for the 2024-2025 period.
Bach Hoa Xanh, Winmart: Vietnam's consumer characteristics create considerable medium-term growth opportunities
28-08-2024
: MWG
: Retailing
: Hung Nguyen
Tags:
- Vietnam's current transportation infrastructure is not yet conducive to strong growth in the automotive market in the medium term. Instead, the population is expected to maintain its “dominant motorcycle culture.” This trend favors the proliferation of traditional markets, convenience stores, and mini-marts such as Bach Hoa Xanh and Winmart, rather than the shopping mall/hypermarket model popular in developed countries like Thailand, China, and the United States.
- Regarding the competition between two models: (1) traditional markets and convenience stores, and (2) mini-mart chains like Bach Hoa Xanh and Winmart, we believe that mini-marts, with their appeal to the fast-growing young population (Gen Y, Z) and higher-income office workers who are gradually replacing the older generation (Gen X), have a strong foundation to quickly gain market share from traditional markets and convenience stores in the coming years from the current low base (~7-8%).
- However, traditional markets still hold significant strengths in terms of low prices, a wide variety of goods, fresh products, and their deep-rooted presence in Vietnamese consumer habits. Therefore, we believe that this model will continue to lead the market with a high share of 60-65% in the medium term, a decline from the current 85%.
- Among the mini-mart chains, Bach Hoa Xanh and Winmart have stood out in revenue growth over the past two years, particularly after their comprehensive restructuring campaigns. We expect these two chains to lead the growth ofthe mini-mart segment in Vietnam in the coming period.
NKG – Narrowing Margins, Growing Output
27-08-2024
: NKG
: Materials
: Dung Ma
Tags:
- In Q2/2024, the company reported net revenue of VND 5,661 billion (+7% QoQ, 3% YoY). Exports continued to be the main contributor, accounting for 62% of total sales in Q2/2024. Over the first six months of the year, the company achieved a production volume of over 531,000 tons (+24% YoY, fulfilling 53% of its annual production target). The gross profit margin stood at 9%, a decrease from 10.7% in Q1/2024 but remaining consistent with Q2/2023. Gross profit amounted to VND 512 billion (-10% QoQ, +3% YoY). NPATMI reached VND 220 billion (+46% QoQ, +75% YoY). The company maintained a cautious inventory policy, with an average inventory turnover of 102 days, and improved its interest coverage ratio by 8.7% QoQ.
- In 2H2024, domestic production is expected to grow by 12% due to the recovery in the residential real estate market. However, export profit margins may decline as the price gap between domestic and international steel narrows, coupled with a slowdown in steel demand in export markets (North America, Europe). As a result, the gross profit margin for 2H2024 may decline to 5.8%. NKG's net profit for 2H2024 and the full year 2024 is projected to reach VND 52 billion (+12% YoY,- 86% HoH) and VND 422 billion (+261% YoY), respectively. EPS for 2024 is expected to be VND 1,473.
- We value the stock using two methods: FCFE and P/B, arriving at a fair value of VND 24,500 per share, representing a potential return of +14% compared to the closing price on August 26, 2024. In the short term, NKG’s stock is under negative pressure due to declining HRC prices and the narrowing price gap between domestic and international steel. However, given the discount to the target price, investors might consider short-term trading opportunities in the stock if there is a recovery in the price of key raw materials (HRC).
Update on monetary market in August 2024
26-08-2024
: VDS
: Macroeconomics
: Ha My
Tags:
- The USDVND exchange rate is expected to revolve around the current level until the end of the year.
- The SBV continued net pump in the OMO for the second consecutive month.
- Credit growth recovered in August 2024.
Petroleum Sector – Markable points in the Third Draft Decree on Petroleum Trading
23-08-2024
: PLX, OIL
: Oil & Gas
: Ngan Le
Tags: Revised Decree Petroleum
- The domestic petroleum distribution segment is dominated by state-owned enterprises from supply to retail. Major wholesalers like PLX and OIL account for nearly 70% of the country's retail petroleum market share. Despite the emergence of electric vehicles, Vietnam's petroleum consumption is projected to grow by over 4% annually from 2024 to 2050.
- The Ministry of Industry and Trade (MoIT) has released the Third Draft (June 27, 2024) of the Decree on Petroleum Trading and announced that they will submit the decree to the Government for issuance in 3Q24. Accordingly, we believe that the positive aspects of the Draft come from (1) the components of the operating price will be directly determined and announced by the MoIT, instead of being divided between the Ministry of Finance and the MoIT as before, which helps minimize intermediaries and overlapping management between authorities, and (2) the reflection of operating costs in the Regulate petroleum prices will be more reasonable based on data periodically provided by companies, as well as the fluctuation of CPI announed yearly.
- PLX and OIL stock prices have shown a positive trend since mid-May until now, largely reflecting investors’ expectations that the revised Decree could have a favorable impact on the companies. However, we believe that assessing the extent of its impact on the companies' business results will be more accurate after the MoIT officially announces the new Decree.
The Supply issue of gold material will create divergence in the jewelry industry
22-08-2024
: PNJ
: Retailing
: Quyen Nguyen
Tags: PNJ
- Jewelry is considered a luxury product and operates under regulated business conditions, subject to strict management. The significant fluctuations in domestic gold prices, particularly the wide disparity between SJC gold bars and global gold prices at times, have prompted regulators to tighten control over gold sourcing in 2024.
- The jewelry market is under pressure to secure gold material for production, leading to a more pronounced divergence within the industry. Specifically, branded jewelry manufacturers and (or) those with strong financial capabilities are expected to maintain a more stable supply of production material, thereby increasing their market share in the retail jewelry sector
PC1 –2024 earnings recovery fueled by power construction, power generation and mining segments
21-08-2024
: PC1
: Utilities
: Thang Hoang
Tags:
- PC1 achieved stellar results in Q2 2024 with revenue of VND 3,091 bn (+110% YoY) and NPAT-MI of VND 62bn (vs a loss of VND 13bn in Q2 2023), which are driven by contribution of nickel mining segnebt. PC1’s 6M 2024 revenue was VND 5,256bn and NPAT-MI was VND 143bn, fulfilling 37% and 24% our full-year forecasts, respectively.
- For the second half of 2024 (H2 2024), we forecast revenue of VND 10,709bn (+33% YoY) and NPAT-MI of VND 299bn (+122% YoY), which are mainly driven by the power segment. For FY2024F, revenue is estimated at VND 10,225bn (+31% YoY) and NPAT-MI to achieve VND 422bn (+224% YoY), equivalent to EPS of VND 2,168.
- Based on the Sum of Components (SoTP) method, we set a target price for PC1 stock of VND 30,000/share, equivalent to a forward 2024F P/E of 20x and an expected return of 2% based on the closing price on August 20, 2024. In our view, PC1's current valuation has reasonably reflected the company's 2024 recovery prospects.
VHC – Expected strong growth in business results in the second half of 2024
20-08-2024
: VHC
: Fishery
: Hien Le
Tags:
- Net revenue in Q2-2024 reached VND 3,196 billion (+17% YoY; +12% QoQ), driven by strong growth in the C&G segment, Sa Giang, and other products, while pangasius fillet volume only slightly increased by 9% YoY, with a 15% YoY rise in volume but the average selling price remained lower than the same period last year. The low selling price was the main reason for the 21% YoY drop in NPAT-MI to VND 314 billion.
- For 2024, we have adjusted revenue upwards to VND 12,514 billion (+24.7% YoY), corresponding to a 26% YoY increase in exported pangasius volume, while the selling price in USD is expected to decline by 8.8% YoY due to higher-than-expected production. Additionally, we raised NPAT-MI to VND 1,193 billion (+30% YoY), as lower-than-expected selling and administrative expenses. EPS for 2024, after adjusting for an 8% stock dividend, is VND 5,319 (+8% YoY).
- We are currently reviewing VHC's target price as we need to reassess the company's long-term growth. With a 2024 EPS of VND 5,319, the stock is trading at a forward P/E of 13,5x which is the higher than P/E level in VHC’s 10-year history at 8x
TCB – Maintaining Good Profit Growth Momentum and Expecting Asset Quality Improvement in 2H-2024
19-08-2024
: TCB
: Banking
: Tung Do
Tags: TCB
- TCB reported a consolidated PBT of VND 15.6 trillion in the first half of the year, marking a 39% increase YoY. This growth was driven by robust increases in various income streams from a low base in the previous year, offsetting a 113% YoY rise in provisioning expenses. Specifically, NII, NFI, and other non-interest income grew by 40% YoY, 17% YoY, and 32% YoY, respectively. This PBT has fulfilled 57% of TCB's annual target and 55% of our current PBT projection
- Asset quality slightly deteriorated in Q2, with new non-performing loans (NPLs) amounting to nearly VND 2.2 trillion, up from VND 1.8 trillion in the previous quarter, despite a lesser impact from the CIC compared to the last quarter. The NPL ratio rose by 10 bps QoQ to 1.28%. The majority of these new NPLs resulted from the rolling forward of Group 2 loans, which spiked in the previous quarter. Nonetheless, the formation of new Group 2 loans has notably decreased compared to the previous quarter, signaling a positive outlook for NPL trends in the second half of the year
- Given the better-than-expected performance of NIM, non-interest incomes, and cost-to-income ratio (CIR), we are revising our 2024 pre-tax profit forecast upward by 4% to VND 29.2 trillion. Growth in NII (+30% YoY), based on a projected NIM of 4.4% (+30 bps YoY), and the SBV's approval of additional credit quota for TCB, raising the annual credit growth to nearly 19%, will help absorb increased credit costs (1.1% before bad debts recovery) and serve as the main driver of profit prospects
- We are also adjusting our target price for TCB upward by 3% to VND 28,700, representing a total expected return of 31% as of August 19th, 2024, reiterating the BUY recommendation
KDH – Handover of the Privia project is a bright spot for 2H2024 revenues
16-08-2024
: KDH
: Real Estate
: Giao Nguyen
Tags:
- Accumulated in 6M2024, the parent company's total revenue and profit after profit recorded VND 978.5 billion (-2.8% YoY) and VND 341.8 billion (-23.6% YoY), respectively, thanks to the handover of low-rise products of the Classia project, completing 25% of the revenue target and 43% of the profit plan for the whole year.
- KDH's inventory continued to grow for the 5th consecutive quarter, reaching VND 21.5 trillion (+65.7% YoY, +5% QoQ in Q22024). During the period, the company mainly invested in the BT – Binh Trung Dong project.
- For the whole year of 2024, we estimate total revenue and NPAT-MI to reach VND 4,704 billion (+125% YoY) and VND 981 billion (+37% YoY), respectively, with a focus on the handover of The Privia project (Binh Tan). EPS in 2024 is expected to reach VND 1,137.
- Using the SOTP (Sum-of-the-parts) method, we set a target price of VND 42,000/share after adding the value of the Loc Minh project to the inventory. The total expected return is 13% compared to the closing price on August 16, 2024), which is equivalent to a ACCUMULATE recommendation for long-term investment purposes.
Update on trade growth in July 2024
15-08-2024
: VDS
: Macroeconomics
: My Tran
Tags:
- Trade continues to be robust in July 2024.
- Export growth is more comprehensive across many products.
- The proportion of imported goods from China continues to increase in 7M2024.
- US retailers' need to stock up on goods is driving growth.
PHR - The approved master plan serves as the foundation for the land conversion story to be realized
14-08-2024
: PHR
: Industrial Land RE
: Hung Le
Tags:
- PHR's net sales reached VND 272 billion (USD 11 million), an increase of 146% over the same period last year. However, the parent company's NPAT decreased by 45% YoY due to the absence of income from rubber tree liquidation as in the previous year.
- In the second half of the year, PHR expects to achieve sales of VND 992 billion (USD 41 million; +8% YoY), with NPAT reaching VND 426 billion (USD17 million; +56% YoY). Factors contributing to the growth in 2H compared to the same period last year include (1) rubber prices remain high compared to last year, (2) the NTC 3 project business will contribute significantly to profit/loss from joint ventures and associates, (3) compensation income from VSIP III is expected to surge as the project completes land handover to customers, (4) rubber tree liquidation activities will be recorded in 2H2024. For the full year 2024, PHR's total revenue is estimated at VND 1,587 billion (USD 65 million; +17.4% YoY), with NPAT at VND 564 billion (USD 23 million; -9% YoY). The corresponding EPS is VND 4,161.
- The master plan for Binh Duong Province for the period 2021-2030, with a vision to 2050, outlines the development of industrial parks, industrial clusters, and waste treatment facilities, including the conversion of 4,575 hectares of rubber land owned by PHR. By 2030, we maintain our expectation that the Tân Lập 1 Industrial Park project (51% owned by PHR), Lai Hung Industrial Park (600 hectares), and Tan Long Solid Waste Treatment Facility (400 hectares) will be the next projects eligible for investment approval. As a result, PHR may receive compensation when these projects are reclaimed for development
- Based on the sum of the parts (SOTP) method, the target price is maintained at VND71,000/share due to. Combined with the expected dividend over the next 12 months of VND3,000/share, the total expected return is 33% (based on the closing price on August 13, 2024).
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