VIB – Retail Credit Demand Slowly Recovered; High Credit Cost Continue to Pressure Earnings Growth
30-10-2023
: VIB
: Banking
: Tung Do
Tags:
- YTD Credit growth reached 5.5% in 9M/23 (granted credit growth quota: 14.25%), a marked improvement in lending activities from just under 1% in 6M/23.
- Q3/23 TOI rose by 30% YoY as (1) NII rose by 13% YoY to VND 4.3 trillion on a 9% YoY growth in lending book and a +20 bps YoY NIM expansion; (2) NFI surged by 34% YoY to VND 1,062 Bn on robust bancassurance and transaction fees; (3) Other income reached VND 641 Bn (vs VND -5 Bn in Q3/23), mainly driven by bad debt recoveries.
- A huge amount of provision for credit losses (VND 1.6 trillion, nearly 10x YoY) outweighed TOI growth and pressured PBT growth down to -4% YoY in Q3/23. And despite high provisioning, the NPL ratio flatted at 2.47% in Q3 (vs 2.45% in Q2).
- For 9M/23, PBT amounted to VND 8.3 trillion (+7% YoY), completing 68% of the full-year PBT target.
Thermal power firms' 3Q23 business results: A mixed picture
27-10-2023
: NT2, QTP, HND, PPC
: Utilities
: Hoai Trinh
Tags:
- Some of the thermal power companies on our updated and watched list (NT2, HND, PPC, QTP) have reported Q3/2023 financial results. NT2's NPAT incurred a record loss of VND 123.8 bn (Q3/2022 NPAT of VND 199.0 bn), QTP's NPAT recorded VND 11.6 bn (-95.3% QoQ, -92.1% YoY), PPC's NPAT recorded VND 84.1 bn (-49.8% QoQ, -45.6% YoY), while HND recorded an impressive PAT of VND 191 bn (+5.9% QoQ, +372.5% YoY). Furthermore, investors are currently interested in the group of defensive stocks with consistent dividend yields. In this article, we will answer two questions: (1) Why do the thermal power group's businesses have mixed profits? (2) Is this group's dividend yield interesting?
- For a one-year target price on thermal power firms, our last recommendations are NEUTRAL with NT2 (TP: 25,800 VND/share), ACCUMULATE with HND (TP: 15,500 VND/share), and ACCUMULATE with PPC (TP: 15,500 VND/share). The target price for this group of defensive stocks, as well as the firms' financial forecast results, will be thoroughly reviewed in the next updated reports.
Update on monetary market in Oct 2023
26-10-2023
: VDS
: Macroeconomics
: Ha My
Tags: Monetary market
- Credit growth for the whole year is estimated at 12%.
- Interbank interest rates increased again after the most intensive net withdrawal ever from the SBV.
- The dong continues to depreciate, but the pressure is still under control.
Seaport industry – Benefit from policy and the recovery in 2024
25-10-2023
: GMD, VSC, HAH
: Seaports
: Quan Cao
Tags: Seaport
- The estimated value of exports and imports containers via sea 9M2023 was USD 146 billion (-7% YoY) and USD 97 billion (-18% YoY). In which, Vietnam's major export markets are the US, China, and the EU, with export market shares of 28%, 12%, and 11% were USD 42.5 billion (-16% YoY), USD 18.1 billion (+1% YoY) and USD 15.7 billion (-11% YoY), respectively. Vietnam's three main import markets, China, South Korea, and ASEAN, with import market shares of 35%, 12%, and 11% were USD 34.3 billion (-19% YoY), USD 12 billion (-26% YoY), and USD 10 billion (-23% YoY), respectively.
- Accumulated 9M2023, total container throughput in Hai Phong and Vung Tau were 4.6 million TEUs (-2% YoY) and 3.5 million TEUs (-14%) respectively. The deepwater port cluster in Vung Tau serves mainly long distance routes to Europe and the US. When trade flows are gradually recovering, throughput in Q3-FY23 also improved compared to the first half of the year. Meanwhile, the Hai Phong area is a destination for shipping lines operating Intra-Asia with a less severe decline.
- After discussing with the BOD of major seaport companies in Hai Phong, VSC and GMD, we found consensus and determination in proposing amendments to Circular 54/2018/TT-BGTVT. Accordingly, two companies expect that the MoT will officially announce approval of the draft amendments in November 2023 and the new circular will apply from January 1, 2024.
Steel industry – Risk from material price fluctuations in 4Q2023
24-10-2023
: HPG, HSG, NKG
: Materials
: Thach Lam Do
Tags: Steel NKG HPG HSG
- 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.
30-10-2023
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