Strategy Note /

Vietnam Strategy: July – Short-term opportunities arise amid earnings season

  • In Q2 and Q3 although we assess most sectors as neutral-to-positive, the overall trend is divergent between industries

  • Cash flow will continue to circulate between industry groups, instead of creating a strong uptrend for the market

  • We recommend taking profit/reducing weight on stocks in the Fishery sector (VHC, ANV); other picks include FPT and PNJ

Lam Nguyen
Lam Nguyen

Banking, Market Strat

Tung Do
Tung Do

Logistics, Aviation

Rong Viet
12 July 2022
Published byRong Viet

Industries (and their sub-sectors) with good Q2 2022 profit growth prospects such as Consumer Goods (Fishery, F&B), Consumer Services (Retail), IT, Utilities (Electricity, Water), Materials (Chemical), Industry (Logistics) continued to witness improved liquidity and were relatively safe havens in June. This reaffirms our expectation of a deep divergence of money flow in the market. 

Although the positive price trend of stocks in the above-mentioned sectors may continue until Q2 earnings are released, we also see rising profit-taking pressure. Therefore, investors who are holding these stocks should consider the timing to take profit in stocks that (1) have had a strong rally but are not supported further by certain profit prospects for the next couple of quarters and (2) have a significantly higher valuation than the historical average in consideration with ROE. 

Accordingly, we recommend taking profit/reducing weight on previously recommended stocks in the Fishery sector (VHC, ANV), which have gained positively over the last few months, as we expect the sector’s earnings to peak in Q2 2022, followed by a slowdown in demand in H2 2022 due to concerns over purchasing power in their trading partners. Also, taking profit in FPT and PNJ in July should be considered given their relatively high valuation. 

On the other hand, we think that the focus should then rotate to stocks that have shown signs of short-term bottom, couple with fundamental factors such as (1) positive Q2 results but not yet priced in, and (2) deep valuation discount vs historical average. 

Banks: CTG (TP: VND34,000), VCB (TP: 96,900), BID (TP: 37,400)

State-owned banks are expected to have better results than the industry's average. We forecast a 40% yoy growth and 14% qoq decline given a low comparison base. The main driver will be the yoy recovery in asset quality and thereby, bringing about the improvement in credit costs. State-owned banks have fully set aside provisions for restructured loans, according to Circular 03, so there will be less pressure to increase credit costs. However, on the total operating income side, we believe that state-owned banks will continue to suffer from zero-fee activities, which account for a relatively large proportion of net fee income. State-owned banks also maintained quoted deposit interest rates in comparison to private banks (except for BID, which increased interest rates over 12M maturities once in 2022). 

Therefore, we estimate that the costs of funds of the SOBs will not be volatile as deposit growth is quite low compared to credit growth. NIM is also expected to be a bright spot compared to the 2021 base. 

Industrials: ACV (TP: VND 100,400)

The strong recovery in passenger volume will drive revenue and profit growth. Domestic and international arrivals are expected to reach 22.8 million (+109 yoy) and 1.8 million (+1394% yoy), respectively, in Q2 2022.

We have detailed macro, sector and stock analysis in the full 22-page report.