Seafood industry – The booming period has passed
07-12-2022
: VHC, ANV, FMC
: Fishery
: Loan Nguyen
Tags: Industry update Industry outlook
- Sudden growth in 2022 puts pressure on 2023 seafood export growth. Seafood exports have started to slow down from 2H2022. Raw material prices remain high while selling prices decreased, putting pressure on the gross margin of companies.
- China's opening could play a role to support Vietnam's seafood exports.
- Valuations seem attractive- a good opportunity for gradually accumulating stocks which have solid fundamentals.
IDC – Restructure to boost growth
06-12-2022
: IDC
: Industrial Land RE
: Le Tu Quoc Hung
Tags: Industrial Park Earnings update
- In 3Q2022, total revenue reached VND 2,053 billion or USD 84 million (+128% YoY) and NPAT was VND 422 billion or USD 17 million (+150% YoY). In 9M2022, IDC’s revenue increased by +27% YoY to VND 7,034 billion or USD 287 million and its PBT jumped by 325% YoY to VND 2,948 billion or USD 120 million thanks to the surges of IP leasing, energy, toll fee collection businesses.
- IDC is in a restructuring progress, which is now focusing on just four pillars including industrial parks, residential real estate, energy, and industrial services, while other non-related businesses will be gradually divested.
- We believe in a positive short- and long-term outlook for IDICO (HNX: IDC) because of the following reasons: IP leasing segment will be supported by (1) numerous signed contracts and MOUs balance of 2022 are expected to be booked in 2023, (2) unearned revenue balance is expected to be recognized gradually in the next quarters, and (3) large available GFA secure supply at least for 4-5 year. In addition, (4) the resumption of Dak Mi 3, (5) the plan to develop rooftop solar power systems, as well as (6) the ambitious development plan of ~110 hectares of RBFs by 2026 are boosting source for energy business and industrial park services segment.
Steel industry - Few Recovery Opportunities in 2023
05-12-2022
: HPG, NKG, SMC, HSG
: Materials
: Tam Pham
Tags: Sector outlook NKG HPG HSG SMC
- Increasing difficulties in export markets, domestic demand will play a leading role in revenue growth in 2023. Construction steel and steel pipes, which have a higher proportion of domestic consumption, may grow faster than GDP, while coated steel will recover slowly from mid-2023 due to monetary policy tightening globally. Accordingly, we expect the prospect of recovery more positively in construction steel companies, including HPG, Formosa, Pomina...
- Gross profit margin will recover slowly due to weak consumption. Prices of coking coal, iron ore and scrap will fluctuate in the narrow amplitude around the end-2022 level due to the low demand for raw materials of upstream mills globally. Selling prices will rise gradually from Q3 in both domestic and export markets.
- VND depreciation and interest rate hiking are going to pressure financial expenses. VND will still depreciate vs. USD and borrowing interest rate will increase at least until mid-2023, following the Fed's rate hikes, creating a burden on financial expenses for businesses that have struggled with gloomy business prospects. Businesses are and will limit the impact of the issues of exchange rate and interest rate increase via tightening borrowing needs and managing working capital more closely.
TRA – Restructuring activities show positive results
02-12-2022
: TRA
: Pharmaceuticals, Biotechnology
: Quan Cao
Tags: Pharmaceuticals TRA
- In 9M2022, the parent company's net revenue and NPAT reached VND 1,818 billion (+14% YoY) and VND 231 billion (+29% YoY), respectively, completing 78% and 81% of the full-year plan. Revenue and NPAT for the whole year 2022 are expected to reach VND 2,450 billion (+13% YoY) and VND 320 billion (+32% YoY), respectively, exceeding the plan by 5% and 12%.
Domestic tire demand is expected to rebound from Q4 2022
01-12-2022
: DRC, SCR, CSM
: Automobiles
: An Nguyen
Tags: DRC SCR CSM Rubber tires Sector outlook
- Although there is a risk that the weak macroeconomic backdrop will reduce purchasing power of Vietnam consumers, it will not fully translate into lower sales of automotive part producers in 2023, given that truck production was cut from Q3 2021 to Q2 2022. We expect truck makers to rebuild their inventories in 2023, thus pushing up tire demand.
- Domestic logistic activities will rise in Q4 2022 due to 1) holiday season; 2) better road infrastructure; and 3) expected re-opening of China’s economy. Earnings sources of tire producers come from replacement and OEMs demand which positively correlated with logistic demand.
- To cope with expected increasing tire demand, Vietnam local-based rubber tire producers plan to expand their production capacity in 2023. DRC is going to complete the phase 3 of Radial tire plant within the 2023-24 period. CSM has a plan to upgrade the TBR tire plant. SRC plans to invest in expanding the production capacity of tubeless motorcycle tires.
Real Estate Market – Supply-demand asymmetry and increased interest rate pressure will bring difficulties to suburban projects and resort tourism in 2023
30-11-2022
: KDH
: Real Estate
: Anh Tran
Tags: Real estate
- The demand for housing in Hanoi & Ho Chi Minh City is currently excessive and it is forecasted that the demand will continue to increase in the coming years measured by the following factors: (1) the annual population growth rate, (2) the increasing scarce land fund and (3) the infrastructure connecting Ha Noi and HCM with suburban areas has not yet been synchronously implemented. On this basis, we appreciate the short, medium, and long-term prospects of enterprises owning large land funds in Hanoi and Ho Chi Minh. In which some listed companies such as VHM, KDH, HDG.
- However, in the favorable context, credit growth is expanded and interest rates remain low in the period 2018-2021 and investment demand increases significantly during the COVID-19, project development activities in the suburbs of Hanoi & Ho Chi Minh and other areas with potential for tourism development recorded an explode, in terms of demand, these projects have not focused on the segment of customers who have an actual desire to buy houses for accommodation.
- Following many difficulties in 2022, we believe that the monetary policy in 2023 will still be quite challenging for real estate development activities for investment/speculation. On the other hand, we believe that housing projects concentrated in areas with high population density and meeting real demand will still have good liquidity. However, the number of these projects is not many and not many businesses in our analysis portfolio have this supply available. Therefore, we expect investors to have more better sales policies (including discounts on sale prices) in projects are about to be opened for sale to stimulate demand.
ELC – Intelligent Transport System Segment To Contribute More Meaningfully
29-11-2022
: ELC
: Technologies
: Tung Do
Tags: ELC
- ELC recorded 3Q2022 revenue of VND250 billion (+19% YoY) while 9M-2022 revenue reached VND 626 billion (+23% YoY), led by Intelligent Transport System (ITS) segment (+73% YoY, accounting for 40% of total revenue) and Telecom segment (+29% YoY, accounting for 29% of total revenue).
- Due to the robust growth of ITS and Telecom segments, 9M-2022 gross margin improved by 120 bps YoY to 17.8%.
- However, 9M-2022 NPAT-MI declined by 26% YoY due to the surge in selling and administration expenses +39% YoY and higher minority interest expenses compared to the same period last year.
- ELC is trading at a TTM P/E of 11.3x (vs a 5Y average of 21.4x) and P/B of 0.7x (vs a 5Y average of 0.4x). We are pending a fuller review on ELC and will update recommendation and TP for the stock in the next report.
Update on monetary market in Nov 2022
28-11-2022
: VDS
: Macroeconomics
: Ha My
Tags: Monetary market
- 2022’s M2 growth is less than half of the average growth rate in the period 2013-21.
- Liquidity pressure eased somewhat in November 2022.
- The interest rate race is getting hotter toward the end of the year.
FMC – Short-term headwinds before entering a new growth phase
25-11-2022
: FMC
: Fishery
: Loan Nguyen
Tags:
- Accumulated 10M-2022, FMC recorded a revenue of USD 201 Mn (+13% YoY). However, revenue in September and October started witnessing a deceleration compared to the previous months, driven by weak demand of importing countries amid inflationary pressure. However, we expect Q4/2022 NPAT-MI to only derease 13% YoY on the high base of Q4/2021, at VND 91 Bn (or USD 3.8 Mn), partly contributed by a large FX gain which is attributable to USD appreciation.
- 2022 revenue and NPAT-MI are projected to be VND 6,059 Bn (or USD 253 Mn, +17% YoY) and VND 323 Bn (or USD 13.5 Mn, +21% YoY), respectively. In FY2023, we project that revenue and NPAT-MI to reach VND 6,249 Bn (or USD 260 Mn, +3% YoY) and VND 356 Bn (or USD 15 Mn, +10% YoY) respectively.
- Using a combination of FCFF (40%) and P/E (60%), We arrive at a fair value of 45,000 VND/share, plus a cash dividend of 2,000 VND/share expected for 2022. This is equivalent to an expected return of 48%, based on the closing price on November 25th, 2022. We recommend to BUY this stock in long-term horizon.
PC1 – Lay down the foundation for growth in 2023
24-11-2022
: PC1
: Power
: Thao Nguyen
Tags: PC1
- In 3Q2022, PC1 posted revenue and NPATMI of VND 3.006 bn (or USD 123.3 mn) and VND 66 bn (or USD 2.7 mn), -4% YoY and -54% YoY, respectively. For 9M2022, PC1 earned VND 262 bn (or USD 10.7 mn) in terms of net profit, -10% YoY. Per our estimation, revenue /NPATMI in 2022 will be VND 8,162 bn/201 bn (or USD 333/ 8.2 mn), -17%/-71% YoY, implying a loss in 4Q2022.
- Heavy FX loss in 2022 will lay the foundation for growth in 2023. Notably, most of the financial expenses in 2022 are unrealized losses while the power revenue stream is based on USD, hence part of those expenses will be compensated in coming years. Earnings in 2023 are forecasted to more than double that in 2022.
- Currently, PC1 is trading at 0.9x and 10.8x in terms of P/B and P/E, respectively, which is lower than that of 5-year average. Despite the risk of the interest rate hike and VND depreciation in 2023, we foresee the magnitude is lower than that in 2022. We revise down our target price for PC1 to VND 26.000 to reflect (1) the interest rate hike and (2) lower earnings in FY22 and FY23. In comparison to the closing price as of Nov 24th, 2022, this stock offers an upside of 63%, hence, investors can BUY and hold for the long run.
LHG – Expect to see earnings boost in 2025
23-11-2022
: LHG
: Industrial Land RE
: Hung Le
Tags: LHG
- In 3Q2022, the total revenue reached VND 178 billion or USD 7.4 million (+242% YoY) and NPAT was VND 82 billion or USD 3.4 million (+310%YoY). The robust growth was due to low base effect of 3Q2021. In 9M2022, LHG’s revenue declined 27% YoY to VND 525bn (~USD21.8 million) and its NPAT plunged 37% YoY to VND172bn (~USD 7.1 million)
- From LHG’s EGM, we learned that the company (1) may not meet its 2022 revenue plan; (2) considers choosing AFC or A&C to audit its 2022 FS; and (3) LHG will see earnings boost in 2025 as new projects including Long Hau 3 phase 2, An Dinh and Long Hau 3 urban project can be commercialized.
- We continue to maintain a positive long-term outlook for LHG as (1) ready-to-lease area (~30 ha) at Long Hau 3 phase 1 is enough to secure LHG’s earnings performance until 2025, (2) short-term benefit from the deep depreciate of the Dong given its quoting price in USD, (3) ~10 hectares leasing facilities bring stable income source for LHG.
- We revise down our target price to VND 36,000/share due to (1) factoring liquidity risk by taking a discount by 20% of NAV as LHG being limited trading time; (2) eliminating the last 20 hectares that had yet been cleared in Long Hau 3 phase 1; and (3) temporarily eliminating An Dinh and LH 3.2 until the investment policies get approvals. Adding an annual cash dividend of VND 1,700 per share, the total expected return will be +98.4% (compared to the closing price of 11/22/2022).
Textile & Garment sector’s export market demand outlook in 1H2023: Headwinds are still blowing
22-11-2022
: STK
: Textile & Garment
: Hoai Trinh
Tags: Sector outlook
- We are turning more cautious on the order outlook for Vietnamese OEMs due to inflation-led consumption weakness in the export markets in 1H2023.
- Retail sales of clothing and footwear in Vietnam’s main importing market have shown signs of declining since Oct 2022. In the three months to Oct 2022, clothing was amongst the worst categories of non-food retail sales in the UK. In our view, it is tough for Vietnamese OEMs clients to increase sales growth in what looks like a slowing market.
- While the export market’s demand has slowed down, retail inventories have gone up, accumulating headwinds for Vietnam’s textile & garment order outlook.
07-12-2022
122 
