The country credit growth soared to 1.1% ytd as of end of 1Q20 from 0.68% on 20 March amid sluggish economy, which would mainly result from banks’ stimulus packages and restructured loans on virus-impacted debtors. Nevertheless, VPB revealed to maintain positive growth trajectory compared to the same period last year as the COVID-19 pandemic had yet impacted the bank’s 1Q20 performance.
VHC_Company Brief [BUY +37%]_Net income to slid by 9.8% YoY in 2020
On 20 Apr, we joined an analyst meeting with Vinh Hoan’s management board to update about its business situation. Consistent with our view, Vinh Hoan recorded the decrease in revenue (-9% yoy) and net income (-51% yoy) in 1Q20 due to undermining pangasius demand in China amid COVID-19 outbreak and export price plunge. Meanwhile, in the high case of 2020 business guidance, management board expects better business results than 2019 as net revenue can increase 9.3% yoy and net income can decrease 9.8% yoy in 2020.
VHC_1Q20 Earnings Preview [BUY +42%]_Export volume jumps in the U.S.
We estimate Vinh Hoan will record revenue of VND1,537bn (-14.1% yoy) and net profit of VND137bn (-55.5% yoy), because of low export price and contracting gross margin compared to the high base of 1Q19. However, Vinh Hoan's gross margin may improve 1.3%p qoq thanks to (1) favourable farming expenses as Tan Hung farm came into operation and (2) stable outsourcing material price.
KDH – 1Q20 Preview [BUY +28.1%] Stellar performance
KDH market price has been plunged by -26.6% YTD, providing undemanding valuation. We believe the current price could flip when KDH releases its 1Q20F positive results with a 46.8% yoy net profit increase in the fourth week of April, together with a VND500bn share-buy-back plan announced on 26 Mar. Total return is 28.1% (incl. 2.5% dividend yield) in 1 year, thus we maintain BUY with KDH
MSN – Company Brief 1Q20 [BUY +41%] – Eyes turn to MEATDeli pork
Masan Group estimates Masan Meat Life’s revenue to grow 20% yoy in 2020, thanks to sales acceleration of MEATDeli pork, of which 1Q20 revenue is expected at USD10-15mn. VinCommerce’s EBITDA margin is estimated to have enhanced to -6% in 1Q20 and to maintain its improvement trend in next two quarters. Masan Consumer Holding expects convenience food to beat its previous estimate in 1Q20.
HPG – 1Q20 preview – COVID-19 impact is still negligible
We estimate 1Q20 revenue of Hoa Phat at VND16,882bn, up 12.8% YoY. Given the fact that iron ore is remaining at the high level of around USD91 per tonne, +10% YoY, and the additional VND600bn of D&A and interest, we estimate NPAT at VND1,546bn, -14.6% YoY
VNM – Company Note – COVID-19 to hit export to the U.S. in 2Q20
Export to the U.S. will face difficulty in 2Q20 because of school closures, but travel restriction in the U.S. will not interrupt Vinamilk’s milk supply to this market. Vinamilk has lowered its consolidated revenue growth rate target to 8% yoy this year from the previous figure of 10% as management board has prudent view of domestic market in the pandemic.
VNM – 4Q19 Earnings Review [HOLD +12.3%] Flat earning on contracting margin
In spite of export prospect, flat domestic market and higher WMP price keep us cautious about Vinamilk in 2020. Based on the fair PER of 19.5x, we evaluate VNM share at VND115k by the end of 2020. Including VND4,000 cash dividend, total 1-year expected return is 12.3%. HOLD.
HPG – Earnings Review 4Q19 [BUY+20.2%] Inevitable expansion
Before any stimulus from the Government, we expect to see short-term negative impacts on Vietnam steel industry. However, with its key advantages, we maintain our previous estimate for revenue and net profit of Hoa Phat at VND76,018bn and VND8,762bn, up 19.4% YoY and 12.9% YoY. As a result, we value HPG share at VND28,000 by the end of 2020 for the total return of 20.2% Therefore, we maintain our BUY recommendation
Fragile hope of recovery path under the worst outbreak
Amid a widespread COVID-19 delta attack in the Southeast Asia region, Vietnam is stepping into the worst outbreak in both its health and economic impacts. Although the government actively deployed various solutions to follow the twin target that effectively controls the pandemic and promotes socio-economic development, the negative impact of economic recovery is inevitable. We predict that the COVID-19 economic impacts on domestic consumption and production levels would be partly reflected in oncoming macroeconomic updates under strict lockdowns nationwide.
INFLATION: A transient or long-lasting shock?
Surging commodity prices and increasing inflation recently pose a considerable risk to global economic stability. However, the majority of global economists and monetary policymakers just saw this phenomenon as a transitory factor, and this trend would eventually reverse to a normal track in the medium- and long- term. Regarding Vietnam's situation, we saw a stable demand-supply balance in major commodities and well-controlled price conditions. The inflation shock in the near term, if it happens, would be expected to be transient and bear a little risk to the economic stability.
Outlook 2021 – Dynamic Vietnam: “Tiger will awaken”
We forecast that the VNIndex in 2021 can reach 1,300 points thanks to promising opportunities from high-value chain shifts and potential benefits from FTA agreements such as RCEP.. Moreover, statistical evidence support the bullish market next year.
Vietnam economy under Biden era
Biden’s ambitious plan may boost long-term economic growth, followed by an expansion in trade activities. As an essential trading partner, we expect U.S. stimulus policy to benefit the Vietnam economy in the long-run. However, Vietnam also faces uncertainties when the president-elect heavily focuses on strengthening domestic production and potentially change trade policy toward China.
November strategy: Time to sell?
High margin debt and the selling pressure of foreign investors cause the stock market to form a short-term peak. However, Vietnam economy recovers, along with the capital flow of ETFs that will support the stock market and continue its uptrend in the long term.