DPM – Lower earnings in 2023 but attractive cash dividend

• DPM announced 1Q2023 results with revenue of VND 3,289 bn (down 44.1% YoY) and NPATMI of VND 260 bn (down 87.6% YoY). The bad results mainly came from the drop in selling prices as well as the high gas input in the first 3 months.
• We believe that 2Q2023 number will be lower than the same period last year but improve QoQ thanks to a better selling price and higher sales volume.
• For 2023, we project that revenue and NPATMI will decrease by 28.5% and 69.4% respectively, which is mainly due to low selling price and high input gas price. Currently, we see the Brent forecast around 80 USD/barrel – 90 USD/barrel.
• With the 2023 earnings forecast of VND 1,704 bn, the P/E 2023 will be 7.5x, which is not attractive in our opinion. However, the remaining cash dividend of 2022 ~ VND 3,000/share, could be the short-term catalyst for DPM share. So we stay NEUTRAL for DPM with the target price of VND31.900.

QNS – 4M 2023 results: Sugar segment to lead growth

• QNS witnessed robust growth in the first four months of 2023, with consolidated net revenue reaching VND 3,410 billion (+28% YoY) and EBT hitting VND 580 billion (+98% YoY). The sugar segment drove most of the profit growth, while the soy milk segment remained stable.
• We expect QNS's business performance to peak in Q2/2023 due to increased sugar output and selling prices. However, the second half of 2023 may not see the same rapid profit growth as the first half, given the high base level of 2022 and the potential cooling down of sugar prices.
• We have revised up QNS's valuation to 47,000 VND/share (implying an upside of 16% including a 7% cash dividend yield), considering the positive performance of the sugar segment. Nevertheless, investors should be cautious, as business results may decline in 2024 due to the reduced sugar segment activity. It is advisable to capitalize on peak quarterly results and monitor sugar and raw soybean prices closely.

MBB – Credit cost pressure eased

• 1Q23 results witnessed a cooled off momentum across all sources of income, resulting in a modest top-line growth of 3% YoY. Net interest income reached VND 10.2 tn (or USD 433 mn), up by 22% YoY and continued to expand its contribution to total operating income amid challenges on the service activities front. Meanwhile, non-interest income dropped 20% QoQ and 48% YoY. PBT grew by a greater extent compared to TOI, +10% YoY, ending at VND 6.5 tn (or USD 276 mn) owing to credit cost reductions.
• SBV has released Circular 02 on April 23rd that provides a backdrop for banks to retain loan group and smooth provisioning expenses for the next couple of quarters. In 2023, TOI is expected to be boosted by interest income while non-interest income might encounter difficulties due to unfavorable conditions for life insurance activities, IB and securities trading. The forecast of NPAT for 2023-2024 are VND 20,011 (or USD 846mn, +15%) and VND 23,348 bn (or USD 987 mn, +17%), respectively. Correspondent book value will be 20,600 and 25,000, respectively. We see valuation pressure coming from the weak market sentiment and probability of non-performing loan formation. The stock price has come to attractive valuation.
• In the time to come, as the bank’s core advantages on the interest income front regarding high yields and low costs of funds remain, coupled with potential from fee income sources and consumer finance segment, we expect MBB to return to its growth trajectory by riding on affordable funding costs when market conditions become more favorable in 2024. Our current target price is VND 22,000/share, offering an upside of 17% from the closing price as of May 31st, 2023, hence we recommend to ACCUMULATE this stock for long term investment.  

DPR – Core earnings will be gloomy in 2023

• DPR ’s revenue was VND 180 billion (USD 7.8 million) in 1Q2023, down 12% YoY. However, its NPAT reached VND 55 billion (USD 2.39 million), up 45% YoY due to the higher earnings contribution from the tree liquidation segment and provision reversal.
• Totally, we estimate that the 2023 revenue of will reach VND 1,070 billion or USD 46.5 million ( -12 %YoY), NPAT-MI will be VND 221 billion or USD 9.6 million (-11 %YoY) and the corresponding EPS will be VND 5,143.
• Based on the sum of the parts methodology (SOTP), we revised the target down to VND 58,000/share (-13%) compared to the previous valuation as we delay and prolong the plan to handover of land to Binh Phuoc province further. When combined with the expected cash dividend of 3,000 VND/share in the next 12 months (or 15% after stock dividend), the total expected return is +7.6% (based on the closing price on 30/5/2023).

NKG: Flat steel market remains blurry, unfavourable to improve in the medium term

• Quarterly earnings are full of risks and uncertainties, especially when sales are heavily dependent on exports.
• Steel market does not provide favorable conditions for results to improve in the medium term.

Update on monetary market in May

• SBV net injected for the third month in a row.
• Credit growth recovery is bumpy.
• Monetary policy focuses on supporting growth.

Vietnam’s T&G sector – Exports remain weak, eyes on brands’ destocking cycle & consumption recovery

• In the first four months of 2023, Vietnam's garment export turnover was USD 9.7 tn (-17.9% YoY). Due to the destocking cycle of brands, while consumption outlook remains weak, brands turned more conservative in placing new orders. Yarn export turnover also plummeted, recording USD 1.3 tn (-32.8% YoY) due to a significant decrease in imports from China (-37.0% YoY).
• We expect that 1Q23 earnings will bottom for T&G companies. Due to the brand's destocking cycle, we expect new orders to improve in 2H2023. Hence, we still recommend that investors wait for clearer signs of textile & garment companies’ improved order volume. We still prefer buy-rated STK (TP of VND 32,500); maintain accumulate on MSH (TP of VND 40,000), neutral on TNG (increase TP of VND 20,200 for TNG on the back of higher 2023 earnings estimates); reduce-rated on TCM (TP of 39,800) due to high priced with limited catalysts in sight.
  

HAX – Expected recovery in 2H2023 will partly compensate for the expected weak sales in 1H2023

• Q1 2023 net sales and NPAT-MI were VND993 bn (-37.9% QoQ; -40.2% YoY) and VND4 bn (-92.6% QoQ; -93.6% YoY), respectively. Mercedes car sales were down on an unfavorable basis of comparison and high loan rates, but repair services sales went up driven by stricter car registration regulations. The significant negative growth of net profit is due to higher SG&A and financial expenses.
• 2023 sales are forecast to be VND6,627 bn (-2.2 %YoY) based on 1) higher selling prices; and 2) higher market share. NPAT-MI to reach VND VND236 bn (-1.6% YoY). In the context of weak sales and rising SG&A costs, the expected commissions from Mercedes-Benz Group cannot help to deliver positive net profit growth. The equivalent EPS is VND3,274.
• With the combination of FCFF valuation model (50%) and multiples comparison (50%) with an applied P/E of 5.8x, our target price is VND20,200. Adding a cash dividend of VND500, the 12-months expected return is 14.4% compared to the closing price on May 23rd 2023. We suppose that HAX shares may could bottom out when any signals of sales growth appear (might be in 2024). Therefore, we recommend to ACCUMULATE this stock for the long term.

Real estate market update – wait on recovery

• The market absorption is its lowest point. The HCMC only has three new condominium projects, and Villa & Townhouse market did not record any new supply. The average price of the condo market increased by 2% QoQ; and the market-wide price of landed property remained the same, while the price of townhouse segment decreasing by 8% QoQ.
• States Banks of Vietnam (SBV) and The Ministry of Natural Resources and Environment have taken steps to ease pressure for the real estate sector. Especially In term of legal issues, The Ministry has sent  document No.3054/BTNMT-QHPTTND to the People's Committees of provinces to guide the solution of legal difficulties. We highly appreciate the efforts of SBV and MNRE, and we expect the market recovery to happen from late 4Q2023, when: 1/The amended Land Law and related decrees are finalized, 2/ Economic factors are reformed and SBV has ample room for decreasing regulatory rates.
• In April, the government approved a project to construct affordable "social housing" for low-income people by 2030. According to the project, the total number of completed social apartments in localities will reach about 1.06 million aparments. They also assigned SBV to implement a credit program worth around VND 120,000 bn through specific credit packages for developers and homebuyers of social housing projects. We think that the credit packages are the first steps for the social housing target, and in the long-term, developers with experience in developing social apartments (Nam Long Group with E-homeS, in example) will benefit.
• Real estate developers are cautious in their 2023 pre-sales plan, and they also have policies to support customers and push pre-sales value, with flexible payment terms and better interest package. We expect developers with financial capability, projects with fully-comply regulations (including NLG and KDH) can reach target for condominium products, due to customers’ demand and flexible payment terms. However, with low-rise units, we expect they will delay the sales launch event until the market can clearly recover (in late 4Q2023, as our expectation).

HAH – Going through a difficult period for the entire maritime industry

• In Q1/2023, HAH's container handling and transportation volume reached 86 thousand TEU (-7% YoY) and 82 thousand TEU (-4% YoY), respectively, completing 21% and 25% of the 2023 plan. Revenue and NPATMI in Q1-FY23 reached VND 655 billion (+ 0% YoY and -23% QoQ) and VND 119 billion (-41% YoY and -31% QoQ), respectively, equivalent to complete 22% and 24% of the 2023 plan.
• Regarding the 2023 plan, HAH sets a target that volume of container handling and shipping can be flat compared to that of 2022. Revenue and NPAT both grew negatively, at VND 2,958 billion and VND 492 billion, respectively, down 8% and 40% compared to 2022. This year HAH is expected to receive two new 1,800 TEU ships. In order to ensure capital for investment activities, the company plans to issue convertible bonds with a total value of VND 500 billion at a maximum interest rate of 6% with a tenor of four to five years.
• At the end of 2023, HAH is expected to receive two new-built ships with a capacity of 1,800 TEUs. In order to supplement capital for ship investment, HAH plans to issue convertible bonds with a total value of VND 500 billion, maximum fixed interest rate of 6%/year, term of 4-5 years.
• Forecast for 2023, revenue and NPAT of HAH will reach VND 2,770 billion (-14% YoY) and VND 526 billion (-36% YoY), respectively. In which, revenue from the port operation, transportation and other activities reached VND 206 billion (-4% YoY), VND 2,337 billion (-16% YoY) and VND 227 billion (-10% YoY), respectively. HAH's NPAT dropped sharply during the year due to (1) freight rates and charter rates are reduced by 25% YoY and 70% YoY, respectively (2) outsourcing expenses, depreciation and interest expenses increasing rapidly during the year. We use the multiplier comparison method, target P/B and target EV/EBITDA are 0.95x and 3.7x respectively. We recommend to ACCUMULATE HAH  with a target price of VND 42,300/share.

PVD – Positive earnings to last 2Q2023 as well as FY 2023

• PVD recorded revenue of VND 1,226 bn and NPATMI of VND 52 bn in 1Q2023. Overall, 1Q2023 performance improved robustly compared to the same period last year with the main driver coming from drilling segment. Specifically, the rig utilization  rate reached 100% compared to 55% of the same period, the rig day rate also increased by 20.7% YoY from USD 58,000 /day to USD 70,000/day.
• PVD booked 100% provision for the receivables from Kris Energy. In the time to come, the receivables of Kris Energy and PVEP will be the potentail reserves for the bottom line.
• PVD is likely to secure new contracts for 2024 with better day rates than the current one. In which, PVD I and VI  are negotiating with PCSB (Petronas) for contracts with the rig day rate ranging from USD90,000 /day to USD100,000 /day. In addition, PVD III is negotiating with Hibiscus for a better term compared to the 2023 contract whose price only ranged from USD60,000/day - USD70,000/day.
• PVD's business results are expected to keep improving from 2Q2023 onwards thanks to increased rig day rate. In addition, the potential for profit enhancement will maintain in 2024 if PVD can sign new contracts at better rate. In this context, we still maintain our POSITIVE recommendation with PVD stock at a target price of VND 26,800/share.

Current inflation in the US

Current inflation is still high. Figure 1 illustrates this point. Personal consumption expenditures (PCE) inflation, the black line, stands at 4.2 percent, and core PCE inflation, the red line, stands at 4.6 percent for year-end March 2023.