Navigating the post-pandemic economy

After more than two months of reopening, economic activities have gradually revived with the resumption of factories and the improvement of citizens’ commuting. Along with this, key behaviors proved to be last beyond the pandemic. Basically, the disruption triggered by COVID-19 created a perfect storm in which some shifts in consumer behaviors were matched by changes in business operations and government regulations. On the other hand, changes in consumer behaviors also lead to business transformations. To navigate the post-pandemic economy, we first investigate consumer and firm behaviors. Most importantly, digitalization is expected to be a key driver of economic recovery. Of which, firms will deploy more on digital and automation technologies while consumers have turned to digital channels for many aspects of their lives. Due to the pandemic, many MNEs thought about reorganizing their supply chains in a more flexible and agile way. Thanks to the improving Covid-19 situation and stable fundamentals, Vietnam could grab the opportunities of the reshaping, nearshoring, and regionalization of supply chains.

REE – Embark on new growth phase

• In 3Q2021, revenue was VND 1,093 bn (or USD 47.5 mn), -27% YoY and -33% QoQ because of severe social distancing. M&E services and trading experienced a decline of more than 70% YoY. The leasing segment fell by 19% YoY in revenue (Figure 1). Meanwhile, the energy sector doubled its revenue thanks to VSH’s consolidation. NPAT was VND 264 bn (or USD 11.5 mn), -24% YoY and -31% QoQ. Cumulatively, the company has fulfilled 69% its target NPAT in 2021.
• REE is going to enter to a new growth phase Power segment and Etown6 are going to fuel the company’s growth in the long run. Our target price is VND 84,300, implying a total return of 25% compared to the closing price on Dec 16^th, 2021. Hence, we recommend to BUY this stock.

NLG – Izumi project sale launching is main highlight in Q4 2021

• In 9M 2021, NLG recorded revenue and NPAT-MI of VND 787 Bn (-39% YoY) and VND 709 Bn (+241% YoY), respectively. Profit surged thanks to the revaluation gain from Southgate and Izumi projects. Meanwhile, the handover activities were slower-than-expected (Akari project) given the prolonged social distancing in HCMC.
• For Q4 2021, we expect Akari project to spur the earnings when NLG started to deliver units since November 2021 (around 1,200 units). Consequently, the projected revenue and NPAT-MI of NLG arrive at VND 5,209 Bn (+135%) and VND 1,091 Bn (+31% YoY), respectively.
• In 2022F, we expect that the handover of Southgate, Akari, Can Tho would support the top line while Izumi would be delivered from 2023 given the longer-than-expected launching (from Q3 to Q4 2021) caused by social distancing. Moreover, the stake transfer of 50% ownership in Dai Phuoc project would add VND 300 Bn profit into the bottom line. Overall, we estimate 2022F revenue to reach VND 5,063 bn (-3% YoY) and NPAT-MI of VND 1,062 bn (-3% YoY).

HDB – Lower-than-expected quota but positive surprise in asset quality

• After 11M2021, HDB reached approximately 13% credit growth. This is in line with the lower-than-expected granted credit quota. SBV is expected to approve for more credit growth in December 2021. We factor in a 20% credit growth for 2021, equivalent to another raise during the rest of the year.
• We revise down NIM estimates. Asset quality was slightly impacted in 3Q21. The NPL ratio rose and restructured loans decreased to the lowest level among our bank coverage. Combined with the guidance on provisioning policy, we revise down the forecasts on credit cost. 2021-2022 PBTs are adjusted upward to VND 8.0 trillion (USD 346 mn, +37% YoY) and VND 10.3 trillion (USD 448 mn, +29% YoY).
• We maintain our cautious view on the provisioning policy and its buffer. 2021-2022 book values per share are at VND 14,343 and VND 18,128 respectively. We expect HDB to regain growth momentum in the next few quarters thanks to a low base effect and easing pressure on credit cost margin. We increase the target price by 11% to VND 32,000/share. This translates to an upside of 6% from the closing price of December 14, 2021 and an ACCUMULATE recommendation.

VPB – Many catalysts for NIM improvement in coming quarters

• In Q3, mother bank performed resiliently while FE Credit struggled with a loss.
• Small business and low-income customers will recover more slowly than other groups, causing adjustments in our expectations for NIM and credit costs at both the parent bank and FE Credit. The revised forecast includes new factors that could help the mother bank improve its NIM margin in the coming quarters, including profit from partly divestment at FE Credit and the preferential syndicated loans received in October-end while the international bonds issued in 2019 with high interest rate will mature in 2022.
• 2021 consolidated PBT is expected to come at VND 17,181 bn (+32%), with FE Credit PBT VND 1,136 bn (-69%). In 2022, consolidated PBT is expected to come at VND 21,874 bn (+27%), with FE Credit PBT VND 2,518 bn (+121%). The revised book value per share figures are VND 15,846 for 2021 and VND 19,255 for 2022.
• The target price is adjusted from VND 37,200/share to VND 42,800/share. Based on the closing price as of December 12th, 2021, we recommend to BUY VPB with a total return of 21%.

VSC – Earnings Growth to Rely Mostly on Streamlining Costs

• In Oct 2021, VSC’s revenue was VND 156 Bn, up 13.8% YoY and PBT 45 Bn, growing by 42% YoY. 10M 2021 revenue and PBT respectively amounted to VND 1,541 Bn (+ 12.7% YoY) and VND 403 Bn (+ 48.6% YoY).
• We attribute the solid growth of PBT to streamlining operating costs through scaling down outsourcing activities, which, we believe, was better managed following the participation of new major shareholder group recently.
• We expect continued profit margin expansion to drive NPAT to reach VND 355 Bn (+47.6% YoY)/ VND 410 Bn (+17.5% YoY) in 2021F/22F. However, limited headroom in capacity of VIP Green and Green Port and the likelihood of incurring loss from VIMC Dinh Vu in the early phase of operation remain hindrances for earning growth with 3Y CAGR 2021F-24F projected to be at 6%.

DBD – Waiting for strong growth in 2023

• Revenue and PBT in 9M were VND 1,154 bn (USD 50.6 mn, -5.1% YoY) and VND 168 bn (USD 7.4 mn, +16% YoY), completing 79% and 93% of annual plans, respectively. DBD’s revenue increased by 99% in 3Q mainly as medical equipment sales grew strongly.
• All key product categories kept growing strongly in 9M2021. Specifically: the hemodialysis fluid revenue increased by 20% YoY to VND 98 bn (USD 4.3 mn), the anti-cancer medicine revenue increased by 46% YoY to VND 144 bn (USD 6.3 mn).
• The company can set “safety plans” for 2022 with a target revenue of VND 1,650 bn (+5.8% YoY), PBT of VND 215 bn (+ 7.5%-10.3% YoY).
• In the OTC channel,  DBD has been boosting its presence in a larger number of retailers. The number of retailers to increase from roughly 8,000 in 2020 to 13,717 in 10M2021.

Many advantages to support 2022 shrimp exports

• Vietnam’s shrimp export value grew 3% YoY in 11M-2021.
• We expect shrimp exports to the US and the EU markets to continue maintaining their growth momentum in 2022 due to (1) high demand for shrimp after economies reopening, (2) increasing consumer’s appetite for deeply processed shrimp products which is Vietnam’s competitive advantage, and (3) EVFTA will facilitate shrimp exports to the EU. 
• The Department of Commerce issued the final results of the 15th administrative review of the anti-dumping duty order on frozen warm-water shrimp from India by fixing an anti-dumping duty rate of 7.15%, higher than a 3.06% level by the 14th administrative review.
• Cooling-down freight costs will possibly bolster companies’ earnings to rebound in 2022.

FPT 10M 2021 Business Results Update: Profit growth normalized post lockdown

• FPT posted 10M 2021 business results, in which net sales and PBT grew by 19% YoY and 20% YoY, respectively, to VND 28,215 bn and VND 5,206 bn. These results have accomplished 82%/79% of our full-year revenue/PBT forecasts, whichwere rather in line with our expectation.
• In terms of revenue, the IT sector continued to lead growth, jumping by 25% YoY. The Telecom sector gathered pace following single-digit growth amid social distancing months, posting a 10% YoY growth in October alone and 11% in10M 2021. Education & Investments maintained healthy growth at 24%.
• 10M 2021 PBT growth of IT/Telecommunications/Education & Investments sectors reached 29% YoY/20% YoY/0% YoY.
• We maintain our 2021F/22F forecasts and target price for FPT of VND 108,800, reiterating ACCUMULATE recommendation.

KDH – Capturing the price surge in the HCMC

• In 9M 2021, KDH recorded revenue and NPAT-MI of VND 3,148 bn (-3% YoY) and VND 788 bn (+2% YoY), respectively, owing to the handover of Safira (234 units), Lovera Vista (1,048 units) and Verosa Park (29 units). Meanwhile, sales activity was strongly hit in Q3 2021 given the Covid-19 stringent lockdowns in HCMC from July to end of September. As a result, KDH only sold two units at Verosa Park.
• For Q4 2021, we expect revenue and profit to reach VND 334 Bn (-72% YoY) and VND 118 Bn (-69% YoY), respectively. The result decreased significantly when KDH had few units to deliver in Q4 2021 as they mostly handed over units of Lovera Vista in Q3 2021 (580 units) and Q2 2021 (468 units). Regarding sale activity, KDH will launch a soft sale event in the Armena project with few units. For FY 2021, we forecast that KDH will achieve revenue of VND 3,481 bn (-23% YoY) and NPAT-MI of VND 924 bn (-20% YoY).
• In 2022F, we expect strong NPAT-MI growth of 2022 at 72% YoY thanks to the recognition of Armena and Clarita projects, along with sooner-than-expected revenue of Le Minh Xuan (expanded). From our view, KDH is the main player benefitting from the price surge in the HCMC market amid the supply stagnant in this area. The target price will be updated in the Result report in December.

F&B sector - Key behavioral changes in household spending during lockdown periods

• Consumer confidence is still low versus normal level with 54% of households facing financial problems and more than 50% of households with income lower than 17 million VND (736 USD) witnessing rising financial difficulty.
• Consumers will continue to rationalize their spending by understanding the role of categories and ability to command pricing, leading to the shift of consumer behavior to value offer and focusing more on price factor and products on sale.
• FMCG demand to keep growing in the new normal to serve home eating, led by (1) the more importance of home life, (2) more F&B companies trying to shift products toward home eating and (3) food delivery to develop on a continuous increased adoption rate in Vietnam.

QTP – Favorable factors to enhance earnings in the medium term

• Volume in 3Q2021 is estimated to be 1.6 bn kWh, +34%YoY. This higher volume than last year is due to favorable hydrological condition in the North. The draught has come and the thermal group will achieve a high mobilization rate.
• In 3Q2021, revenue was VND 1,973 bn (or USD 86 mn), -20%QoQ and +13% YoY. NPAT was VND 86 bn (or USD 3.7 mn) while that in 3Q2020 was a loss. Earnings grew mostly thanks to a decline in depreciation expenses.
• Longer term, earnings are expected to grow thanks to a decline in expenses and high mobilization from thermal plants in later years. This time is considered to be a turning point between a harsh year in 2021 and a brighter outlook in later years.   
• The company pays attention to paying dividends. It will maintain its dividend payment policy at 10% per par as of 2020.