PC1 – Bright outlook as investment in power sources and transmission lines accelerates
18-12-2024
: PC1
: Utilities
: Thang Hoa
Tags:
- The power construction segment continues to maintain stable, even though investments in power generation projects trail the Power Development Plan 8’s guidance. In Q4/2024, PC1 secured several power construction contracts of which total value was over VND 2,300bn (USD 91mn).
- We forecast stellar 2024F results with revenue of VND 9,596bn (+23% YoY; USD 381mn) and NPAT of VND 486bn (+247% YoY; USD 19mn).
- For 2025F, we project stable results with revenue of VND 9,144bn (-5% YoY; USD 363mn) and NPAT of VND 518bn (+7% YoY; USD 21mn). While prospects for PC1’s construction, power, and real estate segments are brighter, we expect earnings would edge up by a single-digit due to the underperformance of nickel mining segment.
- Based on a Sum-of-the-Parts (SoTP) valuation approach, we have an ACCUMULATE rating for PC1 shares with a target price of VND 26,500 per share (USD 1.05), which is equivalent to a 2024F forward P/E of 17x and an expected return of 17% based on the closing price on December 17th, 2024
The trend of liquid milk in Vietnam – The foothold of 100% fresh cow's milk enterprises is increasing
17-12-2024
: VNM
: Food, Beverage & Tobacco
: Hung Nguyen
Tags:
- The liquid milk market includes 3 types: UHT fresh milk, HTST fresh milk, reconstituted milk. People in developed countries mainly consume fresh cow's milk instead of reconstituted milk, which is common in poor/developing countries.
- In Vietnam – a developing country, we have noticed an increasing trend in the consumption of fresh cow's milk products when consumers are increasingly strict with the origin of production materials and product quality, believing that reconstituted milk products have gone through many stages of processing, so the nutritional content decreases. Milk producers have therefore shifted to producing more fresh milk.
- In terms of dairy stocks on our watch list – Vinamilk (HSX: VNM), the company is not out of the trend of shifting from reconstituted milk to fresh milk from cows with GreenFarm products, 100% Organic..., with the increase in the number of cows over the years. However, VNM's gross margin still depends heavily on the development of raw milk powder, because the amount of fresh milk ingredients from self-operated farms contributing to VNM's production structure is not high.
- In addition, the use of both self-exploited cow's milk and cow's milk imported from farmers makes the risk of liquid milk quality uneven, implying that it is difficult to create a competitive advantage in terms of taste and origin of milk in the consumer insights in our view. This has contributed to the decline in the market share of VNM liquid milk in recent years.
- In the coming years, VNM will continue to make efforts to increase the source of fresh milk from cows as a way to regain the lost market share in the liquid milk segment. We recommend investors to closely monitor the development progress of this milk source as this is a prerequisite for the Company's growth prospects in the medium term
2024 Steel industry – Output sales to recover
16-12-2024
: HPG, HSG, NKG
: Materials
: Thach Lam Do, CFA
Tags:
- 2024 marks the recovery in output of Vietnam's construction steel market, with consumption recorded significant growth and reached 15.8% YoY, supported by the recovery of civil and infrastructure construction activities. Flat steel products for construction activities (galvanized steel sheets, steel pipes) maintained output growth, in addition to domestic demand, these products also recorded demand from foreign markets (major markets including ASEAN, EU and the US).
- Hot-rolled coils recorded the same output as in 2023, in which the domestic market (accounting for 62% of total output) faced competitive pressure from China's HRC imported into Vietnam; the export market is also facing difficulties due to trade remedy activities in the EU market in 2H2024.
- To address the risks related to China's increasing steel exports, the Ministry of Industry and Trade has taken anti-dumping investigation measures to protect domestic manufacturers, with: 1/ Decision No. 1535/QD-BCT (AD19) on galvanized steel products originating from China and Korea; 2/ Decision No. 1985/QD-BCT (AD20) on hot-rolled steel products originating from China and India. In the base case scenario, we assume that dumping duties (temporary) will be imposed on flat steel products (HRC, galvanized sheet) in Q1/2025.
Update on Vietnam’s trade in 11M2024
13-12-2024
: VDS
: Macroeconomics
: My Tran
Tags:
- Export growth slows down in Q4/2024.
- Review of growth trends of key export items 2024 and prospects for 2025
PVT – Expanding fleet capacity in positive industry outlook
12-12-2024
: PVT
: Oil & Gas
: Huong Le
Tags:
- PVT plans to expand its fleet for 2024-2025. For 11M2024, the company has added 7 new vessels, bringing its total fleet size to 56, including 47 owned ships and 9 bareboat chartered vessels. We estimate that PVT will dispose of older vessels to reinvest in younger ships, aiming to increase profits.
- The oil tanker market remains positive, with expectations that charter rates for 2024-2025 will stay higher over the 2022-2023 period. Although some segments are predicted to experience oversupply due to an increase in vessel availability, potentially leading to lower rental rates, we expect that PVT will maintain its operational efficiency. This is primarily due to its advantage of keeping management and operational costs 10-15% lower than foreign competitors and contributions from its newly added vessels.
Understanding AI Factories: Definitions, Roles, Benefits, and Challenges
11-12-2024
: FPT
: Technologies
: Tung Do
Tags:
- AI Factory is a concept referring to a comprehensive platform for large-scale data processing and training AI models, based on the hardware and software infrastructure developed by Nvidia.
- AI factories play a crucial intermediary role in the global AI value chain, connecting input elements (hardware, software, and data) with output applications built on AI models.
- AI factories, instead of producing physical products like industrial manufacturing plants, create AI models and services that can be applied across various industries and sectors.
- As the value creation hub of the AI industry, AI factories hold significant short-term and long-term potential in the context of the rapidly growing demand for large-scale data processing infrastructure and AI model training. This growth is expected to accelerate in line with the overall AI industry's expansion. According to Infinitive Data Expert, the AI market is projected to reach USD 1.6 trillion by 2030, expanding at a CAGR of 39% from now until 2030.
- Investing in AI factories faces barriers such as very high initial investment costs, scarcity of specialized human resources, U.S. government regulatory restrictions on the export of high-capacity AI equipment, Technological Obsolescence risks, and dependence on a limited number of suppliers. To mitigate financial pressure and limit these risks, technology service companies often establish strategic partnerships with major partners like Nvidia, AWS, or other tech giants and divide the AI factory development process into phases.
Fertilizer Industry – Vietnam's Fertilizer Import Demand
10-12-2024
: DCM, DPM, BFC
: Fertilizer
: Hien Le
Tags:
- Vietnam's total fertilizer demand is approximately 10-11 million tons, with the demand proportions for Urea/NPK/DAP/SA/Potash at 16%/35%/9%/9%, respectively. In 2023, while nitrogen fertilizer (Urea) and phosphate fertilizers (P) had demand of 1.9 million tons and 1.6 million tons, there was an oversupply of 900,000 tons and 350,000 tons, respectively. Meanwhile, potash fertilizers (K) and ammonium sulfate (SA) (demand of 840,000 tons and 780,000 tons) are entirely imported, and Diammonium Phosphate (DAP) imports reached 418,000 tons.
- Vietnam imports SA and DAP fertilizers mainly from China, while Potash is imported from Laos. Although Vietnam's total fertilizer imports have decreased over the past two years, the country remains in a trade deficit for fertilizers since Urea and NPK cannot fully replace SA and DAP.
- DAP-producing companies like DDV and DGC still have potential for production growth if they maintain competitive pricing, as domestic production capacity has not exceeded domestic demand.
- Companies with a high share of NPK and Urea fertilizers tend to have lower gross and net profit margins compared to global companies. As a result, the P/E ratios for firms like DPM, DCM, and BFC tend to be lower than the industry average.
Vietnam's laundry care market – The opportunity for domestic businesses to enter the market is low
09-12-2024
: MSN
: Food, Beverage & Tobacco
: Hung Nguyen
Tags:
- Similar to other FMCGs in Vietnam, the laundry care market has entered a saturation phase with single-digit growth mainly driven by fabric softeners and price factors (related to both inflation and the trend of product premiumization)
- In terms of competition, domestic businesses are "stifled" by the large positions of two multinational corporations, Unilever and P&G. These businesses are forced to look for competitive strategies to avoid collisions with these giants such as positioning low prices towards the countryside, outsourcing for Unilerver itself such as LIX, NET, taking advantage of their retail system to create priority on its display such as MSN with the NET brand, Chante'… but has not been able to expand its market share significantly over the years
- With great challenges from the industry context and room to expand a small market share (less than 5%), both LIX and NET are no longer attractive investments when the current P/E valuation (9.7x for LIX and 9.4x for NET) is higher than the 10-year industry average of both enterprises (7.1x for LIX and 7.0x for NET)
- The point of note lies in the dividend distribution strategy, the dividend rate of the Company (over 6.0%/year) is tending to be higher than the deposit interest rate (5.0%/year) in the last 8 years. Investors who follow the dividend investment school need to monitor the consistency of this ratio in the following years to consider investing and accumulating dividends every year
The global monetary policy shift: Shaping growth in 2025
06-12-2024
: VDS
: Macroeconomics
: Nguyen Vu Toan Vo
Tags:
- Strong movements in global monetary policy in 2024
- Drivers behind central banks continuing their rate-cutting cycles in 2025
- Interest rate outlook for several global central banks in 2025
Seaports – The Cai Mep Ha area is a promising ground for logistics companies
05-12-2024
: GMD
: Seaports
:
Tags: Seaports GMD
- The People's Committee of Ba Ria - Vung Tau Province has proposed the development of a Free Trade Zone (FTZ) in Cai Mep Ha for 2021–2023, with a vision to 2050.
- Vietnam is a destination for global manufacturers due to low labor costs and political stability. The FTZ’s development could help Cai Mep Ha become a global cargo transshipment hub.
- Listed companies owning deep water ports in Cai Mep - Thi Vai, such as GMD (Gemalink) and SGP (CMIT – SSIT), will benefit from this trend.
- China, Singapore, and Malaysia ports, which handle the highest cargo volumes in the world, serve as examples of the successful FTZ development.
Ammended Electricity Law – Accelerating investments in offshore wind and LNG projects from 2025
04-12-2024
: REE, PC1, PVS
: Power
: Thang
Tags:
- 2025 will be a year of positive policy changes for the electricity sector, with a focus on increasing privatization and accelerating approvals of key power projects to ensure electricity supply from 2026 onwards.
- Under the new Electricity Law, the companies to benefit from these changes are (1) the electricity construction sector, as the demand for investment in transmission lines of 220kV and below is expected to remain high, and (2) those generation companies with plan to develop renewable energy and offshore wind power projects. Accordingly, we believe the stocks under our coverage such as PC1 (Target price: VND 26,600/share; USD 1.1), REE (Target price: VND 76,600/share; USD 3.0), and PVS (Target price: VND 38,700/share; USD 1.5) to be the main beneficiaries of these policy changes.
The gold business is expected to remain under strict regulatory control
03-12-2024
: PNJ
: Retailing
: Quyen Nguyen
Tags:
- In mid-November 2024, responses from State Bank of Vietnam (SBV) Governor Nguyen Thi Hong and Deputy Prime Minister Ho Duc Phoc at the Q&A session at the 8th National Assembly Meeting highlighted several regulatory directions for the near future. These include enhancing transparency in gold bar transactions, preventing goldization the economy, maintaining tight oversight of gold business activities, and notably, supporting jewelry manufacturing.
- The October 2024 PNJ’s business results indicate the continued impact of gold supply shortages on the company's gross margin. Meanwhile, the increase in the revenue share from the jewelry retail segment, which yields higher profit margins, and the normalization of the SG&A expenses/revenue ratio drove the net margin up to 7.0%. As a result, net profit for October reached VND 218 bn (USD 9mn), +11% YoY.
- For 10M2024, PNJ’s revenue reached VND 32,371 bn (USD 1,285mn), +23% YoY. Net profit reached VND 1,600 bn (USD 63mn), +4% YoY due to a higher revenue share from the 24K gold segment in 1H2024.
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