Equity Analysis /
Vietnam

VPBank: 2020 update – Raise TP, reiterate Buy

    Rong Viet
    20 February 2020
    Published byRong Viet

    VPB’s parent bank acted as a growth driver in 2019 with 38.2% yoy core earnings growth. FE Credit also maintained its recovery with decent credit expansion (+13.8% yoy), NIM improvement (from 28.4 to 31.3%), CIR improvement (from 32.1 to 31.3%), and reasonable provision expense growth (15% yoy). FE Credit has just attained SBV’s principle approval to transfer into a joint stock company. This is a step towards its IPO/placement plan, expected to complete within this year, which can act as a driver for the stock price in the near term.

    The stock has performed well with a 40% increase YTD to VND28,050/share (PB 2020f of 1.2x.), reaching our target price set out in our Strategy Report 2020. Considering the bank’s high growth potential, we raise VPB’s target price to VND34,000/share, equivalent to a 21% upside compared to the current market price. We thereby recommend Buy on the stock.

    For 2020, VPB plans to achieve an earnings growth target of 25-30% yoy, higher than the 2019 core growth (24%) due to the absence of VAMC provision. This is based on four drivers: (1) boosting core (strategic) lending products – retail, Commcredit, SME, (2) improving CASA and enhancing transaction banking, (3) diversifying non-NII contribution, and (4) enhancing partnerships. With heavy investment in technology, efficiency improvement from operational optimisation and cost control are expected to support this growth strategy.