Trade data remained supportive in May

• Stronger external demand for most Vietnamese products.
• All export markets recorded strong rebound.
• Imports were buoyant due to rising domestic demand and high commodity prices.
• Vietnam recorded the largest trade deficit since 2009.

CTG – Short-term tailwinds and potential earnings surprise

• In 1Q2021, CTG achieved superior growth as the bank recorded a sharp fall in CIR, credit and interest costs. PBT growth was +171% YoY mainly due to provision expenses dropped -69% YoY.
• Despite the moderate expected credit growth, CTG is projected to achieve VND 6,265 bn PBT (USD 272 mn, +40% YoY) in the second quarter. This is attributed to a continuously widened NIM on a low comparison base and the movement of bad debt to upper loan groups lowering pressure on credit costs.
• We raise the projected 2021 PBT to VND 24,802 bn (USD 1.1 bn, +45% YoY). As the average multiple valuation rose dramatically and the bank is likely to barely reach the previously expected range of provision expenses in 2021, we raise our target price to VND 51,700/share and our recommendation to NEUTRAL. This translates to an upside of +2% from the closing price of June 16 2021.

PVT – Cautious guidance as usual for 2021 despite 1Q2021 impressive earnings

• 2021 AGM will be held on 15 June. The 2021 guidance is set at VND6,000bn for revenue and VND404bn for NPAT. PVT will also spend VND7,621bn for CAPEX and no cash dividend payment in 2021.
• PVT recorded a positive result in the first three months with revenue of VND1,717bn (+8,8% YoY) and NPATMI of VND136bn (+102,1% YoY).
• In 1Q2021, PVT has fulfilled 28,6% and 33,6% of its revenue and profit target, respectively.
• We believe that the company can easily reach the target with the expected revenue and NPATMI of VND7,563 (+2.4% YoY) and VND845bn (+26.2% YoY), respectively. We recommend ACCUMULATE with a target price of VND 23,300.

HPG – Hot-rolled coil segment to perform well in 3Q

The hot-rolled coil (HRC) segment is playing a central role in HPG’s business as the company is benefiting from increasing HRC prices and the robust demand from coated steel exporters. For 3Q2021, we expect this segment’s gross margin can remain stable at a high level as in 2Q. HRC price’s outlook is better than our expectations as prices for HRC delivered in July are more than USD 1,000 /ton. Meanwhile, the construction steel segment’s gross margin can decrease in 3Q compared to 2Q due to the weak demand. Hence, we forecast the company’s NPAT will be roughly VND 10,200 billion in 2Q, and VND 8,900 billion in 3Q. We revise up our 2021 NPAT forecast by 17% from VND 29,000 billion to VND 34,000 billion. Based on EPS forward in 2021 of VND 7,140, HPG is trading at a PE ratio of 7.2x. As Quang Ngai province has approved the investment policy of Dung Quat 2 Steel Complex, we are reviewing the valuation to assess this project’s impact in the long term. We will update the new target price in our Result Update Report, which is planned to publish this month.

Banking sector – Update on the banking system’s liquidity and credit growth

• The recent rally of interbank interest rates does reflect a less abundant liquidity. We expect the tension to be relieved in the third quarter when the USD forward contracts expire and the growth momentum of deposit is normalized.
• The private commercial banks are experiencing robust growth in credit, reaching their initial limits in the second quarter. Meanwhile, credit growth of several state-owned banks has lagged. LDR constraint might be a cause.
• Based on the expectations of the pandemic’s impact and timing of the quota lift approval, we forecast that large private banks will achieve robust credit growth in 2Q2021, led by TCB.

Vietnam equities outperform so far in 2021

Vietnamese equities are up to a good 2021, outperforming Asia so far year-to-date (Figure 1).The VN Index is up 20%, better than most Asian markets. Only Taiwan comes close to that, up 16%.

One a one-year basis India is still the best performing market (+60%) followed by Korea and Vietnam.

HDG – Expect for sale launch at Charm Villas and three power plants to come online in Q3 2021

• Real estate: Ha Do Charm Villa recorded positive pre-sale performance with 95% take-up rate (165/174 units) after two pre-sale events in Dec 2020 and Jan 2021. HDG will launch the next sale event in Q3 2021 (may be adjusted based on the Covid-19 situation). In 2021, this project is expected to contribute from VND 1,500 Bn – VND 1,900 Bn revenue for HDG.
• Power: In 5M 2021, three hydro power plants (Za Hung, Nam Pong and Nhan Hac) provided 119 Mn kWh (+70% YoY) with estimated revenue of VND 285 Bn (+58% YoY). For solar energy segment, HDG supplied 77 kWh with estimated revenue of VND 169 Bn (completed 56% of FY2021). In Q3 2021, three power plants include Song Tranh 4, Dak Mi 2 and 7A to come online and are expected to generate VND 374 Bn revenue in 2021.
• 2021 guideline: In 2021, HDG targets to reach net revenue of VND 4,863 Bn (-3% YoY) and flat NPAT of VND 1,254 Bn (+0% YoY). For the revenue contribution, Real estate and Energy will occupy 55% and 25%, respectively. As of Q1 2021, HDG completed 28% target on revenue and 32% of profit target. We are reviewing our target price for HDG.

PGV – AGM Update

• In 2021, PGV’s parent company planned to provide 29,654 Mn kWh (-5% YoY) and its revenue and NPAT to be VND Bn 39,791 (or USD 1.7 Bn, +2% YoY) and VND Bn 1,311 (or USD 57 Mn, -23% YoY), respectively.
• The company approved to pay a dividend of 10% for 2020 (5% face value by cash per share, remaining by stock). This ratio for 2021 is planned to be 7%.
• PGV is going to move from UPCoM to HSX in 2021 and EVN will divest in the period from 2022 – 2025.

During 2020, PGV provided 33,254 Mn kWh, accounting for 14% of total national electricity volume. Coal thermal plants generated 45.3% due to low mobilized volume from gas-fired in 2020. Gas-fired thermal plants ranked second with 42.5%, and the remaining was hydropower with 12.1%. Solar power just was negligible. Revenue and NPAT were VND 40,367 Bn (or USD 1,755 Mn) and VND 2.670 Bn (or USD 116 Mn), respectively.

DPR – Land compensation money may help increase future income

DPR's 1Q2021 results were positive thanks to the improvement of the rubber segment. However, the revenue of the rubber segment in 2021 will be likely to decrease compared to the 2020 revenue because the company plans to reduce its rubber purchase from other companies. In case the company can legally book the land compensation money of VND 317 billion this year, it will improve the results in 2021. Accordingly, the revenue of parent company and the consolidated PAT are expected to be VND 1,075 billion and VND 411 billion, respectively. In the long term, we have a positive view on the growth of DPR due to (1) the abundant IP land bank (797 hectares) is sufficient to lease in the next 16-22 years; (2) the compensation money from the handover of 2,000 hectares of land.