Vietnamese CEP market – promising potential but intense competition

• According to the Ministry of Information and Communications (MIC), Vietnam’s courier, express and parcel (CEP) delivery  industry generated VND 71,140 bn (USD 2,825 mn) in revenue in 2024, with an average annual growth rate of 19.7% from 2017 to 2024. By 2032, the industry is projected to grow at an average annual rate of 5.8%, reaching VND 111,686 bn (USD 4,432 mn), according to Claight Corporation (Expert Market Research). Key growth drivers include rapid urbanization, rising income levels and living standards, post-Covid shifts in shopping behavior, the booming e-commerce sector, and progress in major transportation projects (measured by total investment value).
• However, the delivery market also faces several challenges, including limited logistics infrastructure, intense competition, and the dominance of cash-on-delivery (COD) payment method (over 80% of transactions) which complicates cost reduction efforts, making it difficult to manage and reconcile transactions, and add to the difficulty of managing deliveries.
• Three core factors determine the success and operational efficiency of a delivery company:
  1. Parcel volume and coverage: measured by the total number of orders delivered and the average service radius.
  2. Logistics optimization: optimizing delivery routes to maximize parcel volume per trip, measured by cost per shipment.
  3. Service quality and customer satisfaction: sssessed through on-time delivery rates, successful delivery rates, Customer Satisfaction Score (CSAT), Net Promoter Score (NPS), and churn rate.
• Vietnam currently has over 700 postal and delivery companies (including both traditional and tech-driven firms). The top 6 players—SPX Express, GHTK, VNPost, VTP, J&T Express, and GHN—account for more than 70% of the market share in 2023, despite representing only about 1% of total industry players. The top four domestic delivery firms (VTP, VNPost, GHTK, and GHN) controlled 46% of the market in the same year. As foreign e-commerce platforms continue to expand into delivery industry, the market share of international delivery companies is rising.
• In the medium to long term, we expect that well-performing State-owned enterprise (VTP) and foreign firms—with their superior infrastructure and financial strength—will continue to gain market share by excelling in the most critical success factor: scaling up order volume.

TRADE UPDATE FEB 2025: RECIPROCAL TARIFF ON VIETNAM EXPORTS TO THE US

RECIPROCAL TARIFF ON VIETNAM EXPORTS TO THE US?

• The decline in trade growth in the first month of the year was due to the impact of the Lunar New Year holiday.
• The Government's trade growth target for 2025 is 12%, equivalent to Rong Viet's forecast.
• Some key export items still recorded positive growth in January 2025. Meanwhile, the overall import scale decreased, but the demand for imported raw materials for the production of electronics, machinery and equipment still increased. This implies that export orders in the first quarter of the year continued to grow.
• The proportion of imported goods from China increased sharply in January 2025, implying a shift of goods and supply chains to Vietnam in the short term, while also increasing the risk of becoming a target of US tariffs.
• 3 possible scenarios for the roadmap for reciprocal tariffs.
• Vietnam is in the low-risk group in terms of tariff relations with the US and the possibility that the Trump administration will consider considering VAT as a trade barrier for imports from the US.
• However, Vietnam's risks will be high in terms of its trade deficit with the US (~$123 billion (2024), ranking 4th after China, the EU and Mexico) or the fact that Vietnam is still under scrutiny for currency manipulation and has not been recognized by the US as a market economy.

Understanding Tungsten Definition and Tungsten Price Trends in 2025

• China is the world's largest producer and importer of tungsten ore today, but also the world's largest consumer of midstream tungsten. Therefore, issues surrounding the flow of Tungsten production-trade in China can greatly affect the price movement of upstream/midstream/downstream Tungsten
• On February 4th, 2025, China announced export controls targeting five metals used in defense, clean energy and other industries just minutes after an additional 10% tariff on Chinese goods imposed by U.S. President Donald Trump took effect. Of the five metals that have the presence of Tungsten, China in particular has restricted the production of eight types of products made from Tungsten
• Tungsten has not been commercially mined in the U.S. since 2015. The country is completely dependent on imports of midstream Tungsten (APT, tungsten oxide, etc.), mainly from China to produce Tungsten applied products instead of importing Tungsten ore concentrate (primary) for refining
• We aim for a scenario where the price of Tungsten products will increase in price in the short term. Masan Resources (UpCOM: MSR) may be the beneficiary of the above information but moderately due to the liquidation of its investment in H.C. Starck – specializing in refining midstream/downstream tungsten products (such as tungsten carbide powder) – products that directly benefit from the US-China trade war

KDH – Business results in the 1Q2025 continue to come from the handover of The Privia project

• KDH's Q4/2024 business results recorded a positive signal when starting to hand over The Privia project, with revenue and net profit after tax of the parent company (NPAT-MI) reaching VND 2,063 billion and VND 398 billion, respectively. We estimate that the remaining products of this project will be recorded in 1H2025, with an estimated handover revenue of ~1,500 billion VND.
• KDH's inventory recorded the first quarter of decline after 8 consecutive quarters of increase, but still recorded at a high level, reaching more than VND 22,180 billion (-1%% QoQ, +18% YoY), concentrated in the following projects: Tan Tao, Binh Trung – Binh Trung Dong, Doan Nguyen – Binh Trung Dong.
• KDH are currently trading at a 26% discount to RNAV. Based on the stability of business results and the ability to develop projects in the near future, we believe that the discount will narrow when the market brings the stock price back to its fair value.

Block B – O Mon mega project: Flexibility in Implementation before final investment decision

• In September 2024, the upstream portion of the Block B project officially commenced when PVS was awarded the full EPCI#1 contract and held a groundbreaking ceremony for the EPCI#2 contract.
• As of December 13, 2024, the progress of the EPCI#1 package reached 12.82%, while the EPCI#2 package achieved 24.39%. Design, procurement of materials, and fabrication work are ongoing as scheduled, with the project having recorded a milestone of 1 million safe hours by mid-December 2024. The efforts and flexibility of all stakeholders will undoubtedly contribute to the project's future success.

OCB – Q4/2024 PBT exceeded expectations due to solid credit growth and unexpected expansion of NIM

• Q4/24 PBT exceeded VND 1.4 trillion, showing solid growth based on the low base of the previous quarter and the same period in 2023 (+230% QoQ and +550% YoY) thanks to the following drivers: (1) NII: Credit growth surged in Q4, reaching 19.5% YTD (Q3/24: 13.5% YTD), and NIM (Q) expanded significantly by 60 bps QoQ to 4.0%; (2) NFI increased by 133% QoQ and 37% YoY; (3) Provision expenses decreased by -25% QoQ and -17% YoY.
• Full-year 2024 PBT reached VND 4 trillion, still down 3% YoY as OCB aggressively increased risk provisions and faced higher operating expenses, rising by 39% and 20% YoY, respectively. Additionally, investment securities trading activity, which had previously contributed significantly to OCB’s income, faced challenges in 2024 (-130% YoY) as government bond yields trended upward throughout the year.
• Compared to our previous 2024 forecast, strong credit growth of 19.5% (2024F: 18%) and a sharp rise in NIM to 3.5% (2024F: 3.1%) were the main factors driving PBT beyond expectations (+26% vs. 2024F). Moreover, corporate advisory fee income surged in Q4/24 (+133% QoQ and +37% YoY), which was an unexpected factor that led to stronger-than-expected NFI.
• Asset quality has not shown positive changes, with net NPL formation in Q4/24 remaining flat compared to the previous quarter (VND 1.1 trillion). The balance of debt with unresolved collateral remained nearly unchanged, and NPL ratio (including debt with unresolved collateral) stood at 4.0%, down 10 bps QoQ. The credit cost ratio in Q4/24 was 0.4%, decreasing from Q3/24 (0.6%) and still lower than the net NPL formation ratio, leading to a continued decline in the NPL coverage ratio to 38%.
• We estimate that OCB’s current market price (VND 11,400 as of February 11, 2024) corresponds to an adjusted P/B ratio (discounting for on-balance-sheet NPLs and unresolved collateralized debt) of 1.0x, implying that the current price has largely reflected OCB’s asset quality risks and limited downside risk. The 2025 forecast and target price for OCB are under review and will be updated in the upcoming report.

An Overview of Q4-2024 and 2024 Business Results of Listed Banks

• The 27 listed banks recorded a combined Q4-2024 pre-tax profit (PBT) of VND 81 trillion, marking 22% YoY growth, bringing the full-year 2024 PBT to VND 299 trillion, reflecting an 18% YoY increase.
• In Q4-2024, net interest income remained the primary driver of total operating income and pre-tax profit, with a key highlight being credit growth estimated at nearly 18%, the highest level since 2018. The net interest margin (NIM) for Q4-2024, despite a 20-bps decline YoY, improved slightly by 10 bps QoQ, supported by a 15 bps increase in asset yields, while funding costs remained stable compared to Q3-2024. We believe the QoQ NIM expansion was aided by the reversal of previously written-off interest income following a notable improvement in asset quality during the quarter.
• Other incomes posted strong growth, primarily driven by recoveries from written-off bad debts, which reached nearly VND 15 trillion, representing a 66% YoY increase. Additionally, credit costs remained stable compared to the same period last year, marking another notable aspect of Q4-2024 business performance.
• Asset quality showed significant improvement in Q4-2024, with lower NPL balances, a declining NPL ratio, and reduced net new NPL formation (before write-offs) compared to the previous quarter. Notably, net new NPL formation dropped to its lowest level since Q1-2022, before the surge in bad debts caused by macroeconomic headwinds and challenges in the real estate market. Although new NPL formation declined, banks maintained their credit cost ratios at the previous quarter’s levels, leading to a mild improvement in the NPL coverage ratio to 91% from 83% in Q3-2024.
• We estimate that the banking sector is currently trading at 1.5x P/B, compared to its five-year historical average of 1.7x. We view the sector's current valuation as relatively attractive, considering the ongoing asset quality improvement, the anticipated rebound in ROE amid stronger profit growth expectations for 2025, and the potential market reclassification catalyst for large-cap stocks.

Aviation – Global air cargo volume is forecast to slow down in 2025

• In 2024, Vietnam's total import and export value by air is estimated to reach USD 215 billion (+11% YoY), with a total volume of 1.1 million tons (+20% YoY). This growth is driven by the rapid expansion of cross-border e-commerce and maritime shipping restrictions during the peak season.
• In 2025, global air cargo volume is expected to grow by 3.6% YoY, supported by continued investment in technology, which boosts e-commerce, and increased aircraft purchases by airlines to meet transportation demands.
• However, the growth rate has slowed significantly compared to 2024 due to uncertain policies in President Donald Trump's second term. Key factors include a shift back to sea shipping as ocean freight rates drop following a January 2025 ceasefire in the Middle East and weakened global consumer demand if the Trump administration imposes tariffs on Canada, Mexico, and China. 

Early developments in the trade war under Trump 2.0

• U.S. trade advantages over Canada and Mexico & China's game adjustment
• Trade tensions and potential economic impacts on the U.S., Canada, Mexico, and China

Vietnamese e-commerce market is projected to experience robust growth

• E-commerce platforms function as intermediaries, facilitating stakeholder transactions and delivering products from manufacturers to end consumers.
• In 2024, Vietnamese e-commerce market is estimated to reach a Gross Merchandise Value (GMV) of USD 22 billion, ranking third among the six largest economies in Southeast Asia. Vietnam is also forecasted to record the second-highest average annual growth rate in GMV for 2024–2030, at 18.7%, trailing only the Philippines.
• Supporting factors for the growth of Vietnam e-commerce market:
  • Internet and smartphone adoption rates in Vietnam are high and continue to grow.
  • Vietnam's per capita income is projected to grow at a solid annual rate of 7.0% for 2024–2030.
  • The completion rate of major transportation projects, based on total investment value, is expected to rise.
  • The value of electronic payment transactions is projected to increase at a robust annual rate of 14.5% through 2030.
  • The Covid-19 pandemic changes consumer habits.
  • Supportive government policies.
• Challenges to the growth of vietnam's e-commerce market:
  • Underdeveloped transportation and digital infrastructure.
  • High competition in the industry.
  • Concerns about the safety and security of online transactions impact consumer’s demand for e-commerce services.
  • Shortage of high-quality human resources.
• We believe that e-commerce will gradually capture traditional commerce and retail market share. However, with their unique advantages, traditional commerce and retail still maintain a presence and continue to grow. Opportunities exist for businesses that can integrate and leverage the strengths of both models.

Understanding the definition of milk powder and predicting raw milk powder price trends for 2025

• Raw milk powder provides transportation benefits by rising the shelf life (advantage over fresh milk). In addition, powdered milk is often considered as a milk substitute (reconstituted milk) with a lower cost than fresh milk, but it is judged by consumers that the nutritional content decreases due to many stages of processing (especially heat treatment).
• We also note that investors observe changes in the following countries that will skew the supply-demand balance, greatly affecting the price of raw milk powder in the world: New Zealand, Europe, the US (supply), China, Southeast Asia (demand).
• The supply of milk powder on a long-term decline and the resilient demand for milk powder will cause the price of raw milk powder to be anchored at a high level, affecting the profit margins of listed dairy companies such as VNM and IDP in 2025.
• To further reinforce the above statement, we refer to Fonterra's business plans and milk price judgments – The company accounts for ~80% of New Zealand's milk production and ~20% of Australia's milk production (the two countries account for 60-80% of the world's milk powder exports). The company has raised the forecast average price for the 2024/25 season of Farm Milk Prices from $9.00/kgMS from the end of Q9-2024 to $9.50/kgMS at the end of Nov 2024 and $10.00/kgMS at the end of Dec 2024.

Investment Support Fund (ISF) – Orientation for the development of high-tech FDI projects

• Under the domination of the global minimum tax (GMT), Vietnam's competitive advantage in income tax for large foreign partners has declined. Decree 182 on the establishment of the ISF Investment Support Fund is an appropriate step to maintain and reinforce the existing strengths in the process of attracting FDI projects in Vietnam in the coming period.
• The Investment Support Fund (ISF) states that high-tech enterprises, manufacturing products, or using high-tech in production will be entitled to monetary support (VND) for human resource development, research and development (R&D) investment,  investment in fixed assets, investment in social infrastructure, and production of products if they meet the requirements on the minimum capital size, or annual revenue target and ensure the capital disbursement schedule as prescribed.
• We believe that this reflects the Government's long-term vision to position Vietnam as a high-tech manufacturing hub in the region, contributing to enhancing the global value chain of advanced industries, especially semiconductors and artificial intelligence.