FY21 INVESTMENT OPPORTUNITIES
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FY21 INVESTMENT OPPORTUNITIES MIRAE ASSET VIETNAM RESEARCH January 2021 This material is produced by Mirae Asset Securities Vietnam and cannot be used as an advertisement for investment recommendation and cannot be distributed to investors. The information contained in this material was obtained from reliable materials and information, but we cannot guarantee its accuracy or stability. Therefore, in any case, this data cannot be used as proof of legal liability for the investment results of customers.
CONTENT Vietnam economy: FY20 review & FY21 prospects Vietnam market: FY20 review & FY21 prospects FY21 investment opportunities
VIETNAM ECONOMY: FY20 REVIEW
GDP growth Vietnam’s economic indicators in 2020
Indicators Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
After bottoming out in 2Q20, GDP growth in 3Q20 and Q420 Index of Industrial production
confirmed a V-shaped recovery for Vietnam’s economy (monthly, % YoY) -5.5 23.7 5.4 -10.5 -3.1 7.0 1.1 -0.6 3.8 5.4 9.2 9.5
PMI (point) 50.6 49.0 41.9 32.7 42.7 51.1 47.6 45.7 52.2 51.8 49.9 51.7
(1Q20: +3.68%; 2Q20: +0.39%; 3Q20: +2.69%; 4Q20: Average CPI (% YoY) 1.23 5.91 5.56 4.90 4.39 4.19 4.07 3.96 3.85 3.71 3.51 3.23
+4.48%), demonstrated the resilience of Vietnam's Retail sales growth (accumulated, % YoY) 10.2 8.3 4.7 -4.3 -3.9 -0.8 -0.4 -0.02 0.7 1.3 2.0 2.6
economy, and promises a stronger recovery in 2021. International traveler growth (% YoY) 32.8 -21.8 -68.1 -98.2 -98.3 -99.3 -98.9 -98.9 -99.1 -99.1 -99.0 -99.0
FDI disbursement (accumulated, US$mn) 4,834 5,642 6,600 9,854 10,900 12,161 14,178 14,600 15,500 17,400 19,900 21,061
FDI registration (accumulated, US$mn) 1,600 2,450 3,900 5,150 6,700 8,650 10,100 11,400 13,800 15,800 17,200 19,980
In 2020, GDP came in at 2.91%, the lowest growth in 10
Export growth (accumulated, % YoY) -17.0 8.2 7.4 2.1 -0.9 0.2 1.5 2.4 4.2 5.0 5.4 6.5
years; however, Vietnam still maintained GDP growth that Import growth (accumulated, % YoY) -12.5 3.0 3.6 -0.5 -4.8 -3.0 -3.2 -2.4 -0.9 0.2 1.6 3.6
was among the highest of any country in the world, amid Trade balance (accumulated, US$bn) -0.3 1.8 3.7 2.8 3.5 5.5 8.4 13.5 17.0 19.5 20.1 19.1
COVID-19’s negative impact on most economic activities. Credit growth (% YTD) 0.10 0.17 1.31 1.41 2.00 3.65 4.05 4.82 6.08 NA NA 10.14
VND/US$ 23,223 23,240 23,637 23,426 23,282 23,196 23,167 23,166 23,184 23,178 23,133 23,127
VN-Index return (% MoM) -2.5 -5.8 -24.9 16.1 12.4 -4.6 -3.2 10.4 2.7 2.2 8.4 10.0
FY20 economic highlights
Industrial production recovered rapidly in 4Q20.
Yearly GDP growth by sector Exports, imports, and trade balance
Inflation remained stable. Average 2020 CPI increased by
(YoY) Agriculture, forestry, and fishing Manufacturing and Construction
3.23% YoY, below the 2020 inflation target of 4%. In 2021, (US$ mn) (US$ mn)
Services Overal GDP growth Trade balance (L) Exports (R) Imports (R)
inflation is expected to be around 4%. 6,000 30,000
10%
5,000
Trade surplus recorded highest level in five years. In 25,000
8% 4,000
2020, exports were estimated at US$281.5bn (+6.5% YoY), 20,000
3,000
with expansion increasing since June 2020. Imports were 6% 2,000 15,000
estimated at US$262.4bn (+3.6% YoY). In 2020, the total 1,000
4% 10,000
trade surplus was estimated at US$19.1bn, the highest level 0
of trade surplus in the last five years. The trade surplus with 5,000
-1,000
2%
the US continued to grow rapidly, while the trade deficit of -2,000 0
Dec-18
Aug-19
Dec-19
Aug-20
Dec-20
Apr-19
Oct-19
Apr-20
Oct-20
Jun-20
Feb-19
Jun-19
Feb-20
major Asian partners, such as China and Korea remained 0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
high.
Source: GSO, SBV, Bloomberg, Mirae Asset VietnamVIETNAM ECONOMY: FY20 REVIEW
FY20 economic highlights FDI attraction and disbursement (2014−2020) State budget disbursement accelerated in 2020
Registered FDI (L) FDI disbursement (L) Plan (L) Disbursement (L)
(VNDtr)
Total FDI attraction remained at high level. In 2020, total Registered FDI growth (R) FDI disbursement growth (R) (%)
(US$mn) Disbursement growth (L) % Disbursement/Plan (R)
newly- and additionally-registered capital recorded US$21bn (% YoY)
30,000 50 600 90.0
(-6.6% YoY). Notably, additionally-registered FDI grew by
80.0
40 500
10.6% YoY to reach US$6.4bn in 2020, reflecting ongoing 25,000
70.0
30
supply chain restructuring, with Vietnam continuing to 20,000 400 60.0
20
benefit from this restructuring. Realized FDI in 2020 was 50.0
15,000 10 300
estimated at US$20bn (-2% YoY). FDI disbursement 40.0
0 200 30.0
showed its resilience compared with pre-September levels. 10,000
-10 20.0
5,000 100
Public investment in 2020 at highest rate in last 10 -20 10.0
0 -30 0 0.0
years. Investment and development spending surged 2017 2018 2019 2020
2014 2015 2016 2017 2018 2019 2020
44.3% YoY in 2020, reflecting the acceleration of fiscal
loosening policies to support growth. In particular, total
investment capital disbursement from the state budget in
Retail sales growth (% YoY) Accumulated retail sales growth (% YoY)
2020 reached VND466.6tr (+34.5% YoY), the highest
(% YoY) 1Q20 2Q20 3Q20 4Q20 (% YoY)
growth rate in the last 10 years. Retail sale growth, excluding the price factor Retail sale growth
20 12.5 15
3.2 4.4 8.0 5.9 8.3
Domestic consumption showed V-shaped recovery. In 0.2 0.0
0 10
2020, total retail sales of consumer goods and services -2.50.0
-5.5 -8.8-6.2
-20 -9.6 5
increased by 2.6% YoY. If excluding the price factor, they -13.8
-27.5 -24.8
decreased by 1.2% YoY. Retail sales of goods were -40 0
estimated at VND3,997tr (+6.8% YoY). Retail sales -60 -5
-59.2
recorded a rapid recovery after the COVID-19 pandemic -68.5 -10
-80
was brought under control in May. Accommodation and -83.5
-100 -15
Dec-19
May-20
Apr-20
Aug-20
Sep-20
Nov-19
Oct-20
Nov-20
Dec-20
Feb-20
Mar-20
Jan-20
Jun-20
Jul-20
Catering Services plummeted 59.5% YoY, due to the Total Retail sales Accommodation Traveling Other Services
& Catering Services
negative impact of the long-lasting closure of international Services
tourism.
Source: GSO, Mirae Asset Vietnam ResearchVIETNAM ECONOMY: FY20 REVIEW
FY20 economic highlights
Drop in international visitors since COVID-19 outbreak Unemployment declined gradually
International tourism frozen since COVID-19 outbreak.
('000 arrivals) (% YoY) (%)
Growth YoY (R) International visitors (L)
The number of international visitors to Vietnam in 2020 2,200 50.0 2.8
reached 3.8mn (-78.7% YoY). As Vietnam has not reopened 2,000 2.7
30.0
1,800 2.6
borders for tourism since 2Q20, the number of international 1,600 10.0
2.5
visitors is mainly experts and foreign technical workers 1,400
(10.0) 2.4
1,200
working on projects in Vietnam. 1,000 (30.0) 2.3
800 2.2
(50.0)
Labor market gradually flourished. Unemployment 600 2.1
400 (70.0) 2
declined gradually in 2H20, from 2.73% in 2Q20 to 2.5% in
200
(90.0) 1.9
3Q20 and 2.37% in 4Q20. The reduced unemployment rate 0
-200 (110.0) 1.8
contributed to a more solid recovery of domestic demand.
Sep-19
Dec-18
May-19
Aug-19
Nov-19
Dec-19
May-20
Aug-20
Sep-20
Nov-20
Dec-20
Apr-19
Oct-19
Apr-20
Oct-20
Jan-19
Feb-19
Mar-19
Jun-19
Jan-20
Feb-20
Mar-20
Jun-20
Jul-19
Jul-20
Sharp monetary easing policy implemented. In 2020, the
State Bank of Vietnam (SBV) continuously cut policy rates.
As of December 21, 2020, credit growth reached +10.14%
Credit growth VND/US$ exchange rate
YTD (compared with +12.14% in 2019), up 11.62% YoY;
(% YTD) (VND)
Official rate (SBV) Unofficial rate Commercial banks
2020 2019 2018 2017
total M2 increased by 12.56% YTD. Accordingly, the liquidity 24,050
20
of the banking system remained plentiful, due to lower credit 18 23,850
growth, compared with that of recent years, and growth in 16
23,650
the money supply, creating more pressure to reduce interest 14
rates in the market. SBV set a credit growth target of about 12 23,450
12% in 2021. 10
23,250
8
VND/US$ exchange rate remained stable. The VND is 6 23,050
likely to continue to appreciate within a range of around 4
22,850
0.5% against the US dollar in 2021, due to Vietnam’s solid 2
economic fundamentals and increasing pressure after the 0 22,650
1Q 2Q 3Q 4Q Dec 18 Apr 19 Aug 19 Dec 19 Apr 20 Aug 20 Dec 20
US put Vietnam on the list of currency manipulation
countries. Source: GSO, Mirae Asset Vietnam ResearchVIETNAM ECONOMY: FY21 PROSPECTS
Vietnam’s economy is expected to consolidate a V-shaped Indicator 2014 2015 2016 2017 2018 2019 2020E 2021F
recovery in 2021, with a forecast growth rate of 6.9%, thanks to: Real GDP growth (%, YoY) 6.0 6.7 6.2 6.8 7.1 7.0 2.9 6.9
Export growth (%, YoY) 13.8 8.1 9.0 21.1 13.2 8.4 6.5 8.0
Export growth, thanks to membership in many FTAs
Import growth (%, YoY) 12 12.1 5.6 20.8 11.1 6.8 3.6 9.5
Vietnam is a preferred destination for a wave of supply Trade balance (US$ bn) 2.0 -3.2 2.6 2.7 6.8 11.1 19.1 16.7
chain restructuring FDI disbursement (US$ bn) 12.4 14.5 15.8 17.5 19.1 20.4 20.0 21.6
Retail growth, excluding inflation (%, YoY) 6.2 8.5 8.3 9.3 9.4 9.2 -1.2 6.0
Domestic consumption to maintain the recovery momentum
Average CPI (%) 4.1 0.6 2.7 3.5 3.5 2.8 3.2 4.0
Foreign exchange reserve (US$ bn) 34.5 30.5 40 52 58 70 98 105
Economic support policies continue to be maintained
Credit growth (%, YoY) 14.2 17.3 18.7 18.2 13.9 14.0 11.0 12.5
The main challenges for economic growth include: Exchange rate VND/US$ 21,388 22,485 22,761 22,698 23,175 23,314 23,267 23,151
Change in VND/US$ (%) 1.4 5.1 1.2 -0.3 2.1 0.5 -0.2 -0.5
If COVID-19 continues to spread on a global scale, it will
Public debt (%/GDP) 58 61 63.7 61.4 58.4 58.3 59.0 58.5
slow down Vietnam's economic recovery, due to the very
high openness of the economy and deeper participation in
the global supply chain. Vietnam’s FY21 GDP forecasts Vietnam’s exports by country in 2020
(% YoY)
The agricultural sector still suffers from the consequences of 9 8.1 8.1 8.2
US
climate changes and disease. 8
6.5 6.5 6.8
7 21.6% China
6 6.1 27.1%
Travel and Aviation services still struggle, and it will take a 6
EU
5
few years for them to get back to pre-pandemic levels. 6.6%
4 ASEAN
3 6.8%
The fiscal space is shrinking, due to the sharp increase in 17.2%
Japan
2
investment spending and decline in budget revenue. This 1 8.2% South Korea
has led to a rapidly increasing budget deficit and a higher 0 12.4%
Others
public debt/GDP ratio.
Source: GSO, Mirae Asset Vietnam ResearchVIETNAM MARKET: FY20 REVIEW
VN-Index increased beyond expectations, surpassing 1,100
Vietnam’s key indices Valuation
points.
Indices Last price Market cap Price performance (%) Indices P/E (x) P/B (x) ROE (%)
After plunging 24.9% MoM in March, with a massive sell-off
(Pts.) (VND tr) 1M 3M 6M 1Y 17.6 2.3 13.0
wave due to the effects of COVID-19 pandemic, the VN- VNINDEX
Index hit a 3-year low of 662.5 points (-31.1% YTD). VN-INDEX 1,103.9 4,230.0 9.4 20.8 30.9 14.9
14.8 2.4 16.2
VN30 Index
However, the Index established a strong recovery of 66.6% VN30 Index 1,070.8 2,942.3 9.7 23.4 36.1 21.8
15.6 1.4 8.8
to surpass 1,100 points, recording a growth rate of 14.9% in VN70 Index
VN70 Index 1,265.7 396.7 15.7 26.0 44.7 36.3
2020. 16.4 1.4 8.4
HNX INDEX 203.1 216.8 36.4 52.1 81.9 98.1 HNX INDEX
Main support drivers: 1) Vietnam successfully controlled the 12.9 1.1 8.3
HNX30 Index 323.4 87.4 20.7 28.8 50.3 80.4 HNX30 Index
pandemic and economic activities assumed a new normal
Upcom Index 13.1 1.2 9.1
74.5 1,999.4 9.8 19.3 32.8 31.6 Upcom Index
state; 2) the economy bottomed out in 2Q20 and has since
been recovering; 3) Vietnam benefits from global supply VNFINLEAD 1,336.4 1,059.8 13.3 30.0 49.1 40.0 10.6 1.6 15.4
VNFINLEAD
chain restructuring, with high FDI inflows, despite the impact
of COVID-19; 4) expectations for market rise after draft
legislation that allows short-selling and intraday-selling; 5) Net FII in Vietnam’s stock market in 2020 (US$mn) Vietnam market vs. Asian markets
an unprecedented liquidity boom is ongoing, with trading (%) 2018 Returns 2019 Returns 2020 Returns
1,887 40
volume continuously setting record highs, overwhelming 30.8
30 23.3
foreign net-selling, followed by strong monetary-fiscal 1,163 22.3 22.8
18.2
easing policies. 20 14.9 13.9 15.6 16.0 14.4
7.7 9.1 7.7
10 4.7 5.9
1.7 2.4
Steel, Banking/Finance, and Utilities led the market 156 134 155 100 182 1.0
1 0
breakthrough.
-3.4 -2.5
-10 -5.1
-5.9 -6.0
-8.6 -8.3 -9.3 -8.6
(345) -10.8 -12.1
Foreign investors saw strong net-selling throughout 2020. -20 -12.8 -13.6
-17.3
Foreign investors boosted their net selling to record level of (876)
-30 -24.6
~US$876mn. If excluding VHM, net-buying of ~US$798mn
via put through transactions, net-selling value was
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
~US$1.67bn. On the contrary, domestic individuals were
strong net buyers, absorbing the supply of foreign investors. Source: Bllomberg, Mirae Asset Vietnam ResearchVIETNAM MARKET: FY21 PROSPECTS
The valuation of the VN-Index will establish a higher level VN-Index P/E P/E and ROE: Vietnam versus regional markets
(x) P/E -2SD -1SD AVG +1SD +2SD
Current P/E of VN-Index by the end of 2020 was 17.6x, 10%
23 14
higher than the 5-year average P/E (16.0x). Valuations are Vietnam
no longer cheap, but still much lower than the 22x in early- 21 12
India
2018, when the VN-Index reached its historical high of 1,200 19
10
ROE (%)
Taiwan
points. Vietnam stocks are still low compared with those of 17
8 China Malaysia
other Asian countries, and more attractive in relation to
15 Philippines
economic growth prospects, corporate profits, and ROE in 6 Hong Kong
13 Thailand
2021, which are forecast to outperform other markets. Japan
4 Indonesia
11
S. Korea
We project the target P/E of 2021 to move within 17x–20x 2
9
interval. The aforementioned expected P/E valuation zone Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41
P/E (x)
has remained in the movement zone for the last three years.
We believe that the risk of an asset bubble will not occur in
2021, even though the market has been going through a
Estimated profit growth of industry groups Corporate profit growth and GDP growth
period of exceeding expectations.
Market cap share Profit growth (%) (%
Industry (%
YoY) Corporate profits growth (L) GDP growth (R )
Corporate profits to rebound strongly in 2021, following (%) 1H20 2020F 2021F YoY)
30.0 8.0
economic recovery VN-Index 100.0 -15.5 -3 19
25.0 7.0
Bank 29.2 13.6 6 22
2021 earnings are forecast to rebound strongly, by 19% Real Estate 24.1 -17.5 3 19 20.0
6.0
(due to a low base in 2020), as economic activity returns to F&B 13.6 -13.7 -15 12 15.0
normal and a more pronounced shift in outside demand Utilities 6.2 -31.9 -3 16 5.0
10.0
occurs. Materials 5.6 33.2 29 17
4.0
Transportation* 3.9 N/A -10 20 5.0
Real Estate/Construction and Logistics basically play a 3.0
Capital goods 3.7 -16.5 -12 21 -
leading role, while Banking maintains the momentum of
Energy * 2.1 N/A -32 30
(5.0) 2.0
cumulative profit growth. The business results of enterprises 2012 2013 2014 2015 2016 2017 2018 2019 2020F 2021F
Others 11.5 -4.4 -5 10
in the Export and Retail sectors have seen positive
developments in terms of external and domestic demand. Source: Bllomberg, Mirae Asset Vietnam Research; * Transportation and Energy suffered a net loss in 1H20VIETNAM MARKET: FY21 PROSPECTS
Opportunity to rewrite history VN-Index target matrix in 2021
Target P/E(x)
The index uptrend is expected to continue in 2021, with 17.0 17.5 18.0 18.5 19.0 19.5 20.0 20.5 21.0 21.5 22.0
the upper target VN-Index of 1,355–1,425 points, an 7.0% 1,090 1,122 1,154 1,186 1,218 1,250 1,282 1,314 1,346 1,378 1,410
increase of ~30% YoY. Key assumptions: Enterprise 9.0% 1,110 1,143 1,175 1,208 1,241 1,273 1,306 1,339 1,371 1,404 1,437
income growth is estimated at 19% YoY, with the upper 11.0% 1,131 1,164 1,197 1,230 1,264 1,297 1,330 1,363 1,397 1,430 1,463
target P/E of 19–20x, assuming the economic recovery 13.0% 1,151 1,185 1,219 1,252 1,286 1,320 1,354 1,388 1,422 1,456 1,489
Estimated
continues. EPS growth 15.0% 1,171 1,206 1,240 1,275 1,309 1,343 1,378 1,412 1,447 1,481 1,516
in 2021
17.0% 1,192 1,227 1,262 1,297 1,332 1,367 1,402 1,437 1,472 1,507 1,542
On the other hand, the VN-Index may not reach the
19.0% 1,212 1,248 1,283 1,319 1,355 1,390 1,426 1,462 1,497 1,533 1,568
aforementioned expectations if the pandemic recurs in
21.0% 1,232 1,269 1,305 1,341 1,377 1,414 1,450 1,486 1,522 1,559 1,595
Vietnam, hindering the recovery of the economy and
23.0% 1,253 1,290 1,326 1,363 1,400 1,437 1,474 1,511 1,547 1,584 1,621
business operations. Regardless, it is unlikely that the VN- 25.0% 1,273 1,311 1,348 1,385 1,423 1,460 1,498 1,535 1,573 1,610 1,648
Index will fall below the 1,100-point mark reached by end-
2020.
Main drivers: 1) The COVID-19 pandemic is effectively Number of new individual accounts and trading value average Credit growth and M2 supply
controlled domestically, along with the successful New account Trading value average
(# of new Total outstanding loans (% YoY) Total Means of payment (% YoY)
(VND bn)
accounts)
development of effective vaccines, promoting a V-shaped 18%
70,000 12,000
recovery; 2) monetary easing policies will be maintained and
60,000 16%
cash flows from new investors will keep market liquidity at a 10,000
50,000
record high level, helping stock prices rebound; 3) easing
14%
40,000 8,000
public investment policies and an ongoing wave of global
supply chain restructuring will play an important role in 30,000 6,000 12%
investment and consumption; 4) Vietnam’s stock market is 20,000
4,000 10%
increasingly looking like a potential candidate for emerging 10,000
market status in the near future, along with increased net- 0 2,000 8%
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
buying by foreign investors, on strengthened domestic
fundamentals; 5) state divestment will accelerate, thanks to
favorable market conditions. Source: Bloomberg, Mirae Asset Vietnam ResearchFY21 OUTLOOK – INVESTMENT OPPORTUNITIES
Stock Ratings
Industry
Investment theme Industry (TP:VND/
Ratings
Upside)
Buy Trading Buy Hold
BCM IDC KBC
FDI flow Industrial Real Estate Overweight 70,800 53,500 37,500
37% 14% 10%
VHM NLG
Residential Real
Domestic recovery Overweight 112,000 33,900
Estate
10% 1%
GTN VNM SAB MWG PNJ
Domestic recovery Retail/Consumer Overweight 38,700 124,100 214,000 134,200 83,200
33% 9% 7% 5% 1%
HT1 HSG NKG HPG
Government’s Steel/Sheet
Overweight 21,200 25,500 16,400 42,500
infrastructure spending Metal/Cement
12% 1% 1% -4%
SJD PPC NT2
Defensible Utilities Overweight 19,200 26,700 24,200
9% 6% -3%
PVS PLX GAS
Oil&Gas Neutral 25,100 60,200 95,000
16% 7% 4%
DGC VIC FMC FCN STK
Others 63,800 119,500 39,000 13,600 21,600
21% 7% 4% 1% -4%
Source: Mirae Asset VN Research (Market price updated on Jan 15, 2021)INDUSTRIAL REAL ESTATE – GREAT OPPORTUNITIES
Industry prospective Vietnam’s FDI performance
Vietnam’s open economy boosts its attractiveness for FDI. FDI Registed FDI disburbed
Vietnam is considered to be one of the most open economies
in the world. Vietnam has trading relationships with more than 70
200 countries around the world through its membership in
trade organizations such as the WTO and CPTPP, as well as 60
being a signatory to 12 free trade agreements (FTAs). After 50
joining the WTO in 2006, Vietnam's annual FDI more than
tripled, going from US$12bn to US$38bn in 2019. 40
Vietnam a destination for capital flows, thanks to 30
successful control of COVID-19 pandemic. Vietnam has
20
received recognition for its effective containment of the Covid-
19 pandemic, thereby escaping economic downturn. Vietnam 10
became the only country in ASEAN, and one of the few
countries in the world, to achieve positive growth. With GDP -
growth forecast at 2.4% in 2020, Vietnam ranks first in 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Nov - 20
Southeast Asia. This factor has helped Vietnam continue to
maintain FDI, at more than US$26.4bn for the first 11 months
of 2020, exceeding that of FY18.
Industrial park developers race to increase land funds. BW Annual GDP growth
Industrial Development Joint Stock Company (a joint venture
between Becamex IDC and Warburg Pincus LLC-USA) has 2019 2020E 2021E
increased its total industrial land area from 209 ha to 500 ha 10
across 10 provinces.
8
The largest private corporation in Vietnam, Vingroup, has 6
invested more than US$400mn to develop two industrial parks 4
(200 ha) in Nam Trang Cat and 319 ha in Thuy Nguyen (Dinh
Vu EZ). KBC plans to add 238 ha to its land bank in the Nam 2
Son Hap Linh Industrial Park (Bac Ninh) by the end of 2021. 0
TIZCO Joint Stock Company and Vietnam Joint Stock Việt Nam Malaysia Thái Lan Indonesia Philippin Singapore Trung Quốc
-2
Industrial Park Management Sang Tao (VNIPM) will contribute
capital to the Viet Phat Industrial Park in Long An, with a total -4
area of 1,800 ha. -6
-8
-10
Soucre: GSO, Mirae Asset VN ResearchINDUSTRIAL REAL ESTATE – GREAT OPPORTUNITIES
Watch list
Ready Expansion in EPS P/B Current price TP
P/E (x) Upside (%) Our call Our view
for lease 2021 (VND) (x) (VND) (VND)
(ha) (ha) FY20F FY20F FY20F Jan 15, 2021
We recommend Buy for BCM with the target price of VND70,800/share.
BCM is the owner of the largest IP land bank in Vietnam, with the total size of projects managed
by the company around 15,000 ha, including joint ventures VSIP (BCM owns 49%) and BW (BCM
owns 30%).
BCM 710 1,575 2,512 21.1 2.7 51,700 70,800 37% Buy
The total industrial land available for lease of BCM currently reaches about 710 ha, mainly located
in Binh Duong province, the hot spot in attracting FDI. Based on the proportion of capital
contribution of the current projects, the potential land bank of BCM in 2021 is about 1,575 ha.
In addition, BCM owns nearly 1,000 ha of urban land for the Binh Duong New City project.
We recommend Trading Buy for KBC with the target price of VND37,500/share.
KBC should see a recovery in 2021, when the first stage of the Nam Son Hap Linh project is
deployed, with an area of 100 ha. Accordingly, KBC will hand over a land fund of 60 ha for
KBC 395 238 1,225 13.3 0.87 34,400 37,500 10% Trading Buy Taiwanese investors (MOU already signed). Thus, we expect KBC to earn revenue of
VND3,200bn (+77% YoY) and NPAT of VND1,089bn (89% YoY) in 2021.
We focus on KBC's capabilities in implementing the Trang Cat (Hai Phong) project in 2021, when
the area will become more active, with the participation of Vinhome (VHM)
We recommend Trading Buy for IDC with the target price of VND53,500/share.
The company currently has 495 ha of available land for lease in industrial zones: Phu My II,
expanded Phu My (BRVT) and Que Vo II (Bac Ninh) - the areas for FDI attraction in 2020.
In 2021, the company may increase its commercial land bank up to 398 ha from the Huu Thanh -
IDC 495 398 1,843 18 2.7 47,000 53,500 14% Trading Buy Long An industrial park project.
The Ministry of Construction divests capital to stimulate businesses in the long term: On
November 27, 2020, the Ministry of Construction (MOC) completed the divestment process of
36% of IDC's capital, earning VND2,909bn. We believe that privatization will help the company
manage its assets more effectively.
Source: Company data, Mirae Asset Vietnam ResearchRESIDENTIAL REAL ESTATE – A NEW CYCLE BEGINS
Residential real estate outlook in 2021: A new cycle begins Average lending interest rates Floor area per capita & population density
Interest rates to remain low in 2021: We expect low interest TCB ACB MBB floor area (m2)/Capita People/km2
rates to play a major role for both companies (cost reduction) VCB BID CTG
and home buyers (interest reduction) in 2021, especially HDB VPB Bình quân
considering the disruptions in both supply and demand caused
40 700
by the Covid-19 pandemic. 19.0%
35 600
Legislation to ease bottlenecks: The government has 17.0%
30 500
released Decree 25/2020 which elaborates on several Articles 15.0% 25
in Law on Bidding for investor selection, addressing issues 19 400
13.0% 20
partly. We expect this new legal document to contribute to the
11.0% 290 300
easing of the bottlenecks in the market that have arisen over 15
the past few years. 9.0% 200
10
7.0% 100
The real estate market has set a new price level: Despite 5
the significant impact from Covid-19, we note that selling 5.0% - -
prices in primary markets in Hanoi and Ho Chi Minh City have 4Q19 1Q20 2Q20 3Q20 Japan Taiwan Korea China Thailand Malaysia Vietnam
hardly been affected. We believe that the real estate market in
Vietnam has completed one cycle and begun a new one,
setting a new, long-term price level that will support business
operations and sales in the coming years.
Primary market selling prices in Hanoi Primary market selling prices in HCMC
Stock picks for 2021
High-end Mid-end Low-end Luxury High-end Mid-end Low-end
Overweight: VHM, NLG, KDH, DIG 7,000
3,000
USD/m2
USD/m2
For investment opportunities in 2021, we focus on industry- 6,000
2,500
leading companies with solid financial foundations, extensive
land resources and strategic locations. VHM, NLG, KDH, and 5,000
DIG are companies that meet the criteria we established. 2,000
4,000
Neutral: NVL 1,500
3,000
We maintain our neutral recommendation for NVL, due to 1,000
2,000
some unresolved issues. We will wait for the Board of
Directors to successfully resolve the problems before revising 500
1,000
our recommendation.
- -
1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20 3Q20 1Q18 3Q18 1Q19 3Q19 1Q20 3Q20
Source: UNCHS, World Bank, Mirae Asset VN ResearchRESIDENTIAL REAL ESTATE – A NEW CYCLE BEGINS
Watch list
Revenue Net profit EPS P/B Current price TP
P/E (x) Upside (%) Our call Our view
(VNDbn) (VNDbn) (VND) (x) (VND) (VND)
FY20F FY20F FY20F FY20F FY20F Jan 15, 2021
We recommend Trading Buy and target price of VND112,000 for Vinhomes JSC (VHM). With a
target P/E of 13.3x in 2020 and 11.5x in 2021, we believe that VHM is trading below its fair value,
based on the growth potential of the company, with its market leading position, high profit margin,
and sustainable cash flow.
Trading
VHM 67,373 28,207 8,421 11.4 4.4 101,600 112,000 10% By end-September 2020, the total value of unrecorded contracts reached VND81,300bn
Buy
(relatively unchanged since 2019). Following the company’s guidance, we forecast net profit of
VND28,207bn (+16.5% YoY) in 2020 and VND32,634bn (+15.7% YoY) in 2021.
Room for future growth from large backlog: VHM will start selling the Wonder Park project at
the beginning of 2021.
We recommend Hold for NLG with a target price of VND33,900, based on the combination of the
NAV and comparable valuation methods. We are confident in NLG's mid- & long-term growth
NLG 1,542 895 3,660 7.4 0.9 33,600 33,900 1% Hold
potential once the real estate market starts to recover, with its properties in Long An, Can Tho, Hai
Phong, and Dong Nai provinces
Source: Company data, Mirae Asset Vietnam ResearchRETAIL INDUSTRY – VALUATION REFLECTS FUNDAMENTALS
Step by step recovery Consumer confidence index (2Q20) CONSUMER EXPENDITURE ( US$BN)
140
283
Vietnamese consumer confidence index is high, ranking
second globally in 2Q20, thanks to the effective containment of
120
the pandemic. For FY20, we expect household spending to
grow by more than 7% YoY, lower than the 7.9% figure of
198
100
185
FY19. For the period of 2021–2025, household spending is
172
159
expected to grow at 7.4% on average, according to Fitch
147
80
137
128
Solutions.
118
60
Due to the impact of COVID-19, sales of essential goods are
expected to outperform those of non-essential goods. We 40
expect essential spending to grow at 6.4–6.6% in FY20 and 20
9.5% in FY21.
0
In the short term, food and beverages (excluding alcohol and 2013 2014 2015 2016 2017 2018 2019 2020F 2025F
tobacco) will be the fastest growing segment, in our view.
E-commerce and modern FMCG retail expected to thrive;
market consolidation begins
Essential vs. non-essential spending (VNDtr) C O N S U M P T I O N B Y C AT E G O R Y
Based on technological evolution and internet usage worldwide, (VNDTR)
online shopping should brace for long-term, double-digit Essential Non-Essential
growth. Among the top six Southeast Asian countries, the F&B Apparel Household goods Beauty
Ess. Growth Non-Ess. Growth
growth rate of Vietnam’s e-commerce ranked second only to
Indonesia, in terms of GMV (gross market value). 2,500
902
12%
816
Modern retail chains have largely supplanted traditional retail 2,000
738
693
channels, as they offer convenience, fresh products, one-stop-
633
shopping, trustworthiness, and price transparency. As Vietnam 10%
571
1,500
has experienced rapid urbanization and growth in its middle
class, the preferences of Vietnamese shopping have also 8%
301
1,000
270
materially changed.
241
234
212
189
158
144
137
131
126
114
107
500 6%
97
89
87
81
73
0 4%
2017 2018 2019 2020F 2021F 2022F 2017 2018 2019 2020F 2021F 2022F
Source: Google, Temasek, Mirae Asset VN ResearchVIETNAM DAIRY – INTACT GROWTH MOMENTUM
Vietnam’s fresh milk market expanding despite COVID-19 Dairy consumption per capita Dairy consumption value in Vietnam
Vietnam a promising market for dairy products, due to a young 2019 YTD 11T2020
90 30
Kg/Person/Year
population and low base of dairy consumption per capita
80 25
% Vs a year earlier
In 2020, dairy consumption by value in Vietnam increased by healthy 70 20
margins, despite the negative impact of the COVID-19 pandemic on
60 15
the global economy, as well as that of Vietnam.
50
10
According to the Kantar World Panel report , milk consumption value in 40
11M20 increased by 10% YoY in Vietnam’s four biggest cities and rose 5
30
15% YoY in other urban areas, exceeding 2019 growth levels of 8% 0
20
Dairy
Packaged food
Dairy
Packaged food
Home care
Home care
Personal care
Beverage
Beverage
Personal care
YoY and 15% YoY, respectively. In 2021, we expect dairy consumption
in Vietnam to continue to enjoy healthy growth, as the ongoing effects 10
of the COVID-19 pandemic are likely to promote a continued rise in 0
dairy consumption by consumers. Vietnam Thailand Singapore European
Shortage of supply of high-quality fresh milk and organic fresh milk
4 cities Rural
Demand for dairy products produced directly from fresh milk in Vietnam
is expected to increase at a CAGR of 9–10% in the 2020–2025 period,
based on higher personal income and health awareness. This trend
has been more pronounced in urban areas. Vietnam dairy’s market share 9M20 performance
However, domestic production of commercial-quality fresh milk has 100-30% 30-10% 10-5% 5-2% 2-1% 1-0% Profit YoY
supplied 30–35% of the input demand of local dairy producers, driven
10,000
by Vietnam’s low levels of agricultural technology, as well as sub-
optimal environmental conditions for raising dairy cows. Hence, 403%
Vietnam falls well short of global standards for the production of fresh 2020 21 8,000
milk, as well as organic standard fresh milk. All dairy producers in
Vietnam recognize that gaining control of domestic fresh milk sources 6,000
is essential to achieve competitiveness in the dairy market, both
present and future. 4,000
2016 17
Competition is increasing 69%
2,000
After the EVFTA, more dairy products from Europe will be imported to 7%
-16%
Vietnam. 0
More and more businesses divide the dairy market with 0-1% market share VNM QNS IDP Moc Chau Milk
There is an availability of a greater level of capital, enabling small
business owners to grow through M&A to improve market share,
size, ... Source: VNM, Mirae Asset VN ResearchCONSUMER/ RETAIL
Watch list
EPS P/E Current price TP
ROE Upside (%) Our call Our view
(VND) (x) (VND) (VND)
FY20F FY20F FY21F FY20F FY21F Jan 15, 2021
We recommend Buy for GTN and target price of VND38,700.
GTN controls roughly 10% of the high-quality fresh milk sources in Vietnam, through its
subsidiary, Moc Chau Milk (MCM).
GTN 7.8% 653 816 41 33 29,050 38,700 33% Buy GTN’s revenue and earnings are expected to enjoy strong growth in the 2020–25 period, thanks
to support from VNM. In the 2021/22 period, GTN is undertaking three projects projected to
increase its 180ml drinking milk output capacity by 23% and fresh milk input by 20%, compared
with 2020 levels. We expect GTN’s revenue to grow by 11.5% YoY and net profit to rise by 25%
YoY, to VND204bn, in 2021.
We recommend Hold for VNM with target price of VND124,100. In 2020, VNM is one of the few
VNM 35.6% 5,769 6,302 21.5 19.7 113,900 124,100 9% Hold enterprises in Vietnam recording positive growth, thanks both to the essential nature of its products
and the consolidation of revenue from Moc Chau Milk.
We recommend Hold with a target price of VND214,000 for Saigon Beer-Alcohol-Beverage
Corporation (SAB). The target price is based on the P/E approach with peers’ median P/E of 27.5x.
SAB 24.3% 7,061 7,791 28.8 27.5 200,500 214,000 7% Hold Beer consumption in Vietnam has recovered almost to pre-pandemic level in 4Q20, thanks to a
return to normal domestic social and economic activities, with the COVID-19 pandemic having been
brought under control in Vietnam. We expect beer consumption in 2021 to reach 95% of pre-
pandemic levels.
We raise our target price for Mobile World Investment Corporation (MWG) to VND134,200 (from
VND118,550), equivalent to a forward P/E of 13.6x - the 5-year trading average multiple. However,
MWG 29.23% 9,108 10,093 13.24 11.95 127,800 134,200 5% Hold
we downgrade our recommendation to Hold (from Buy), as the share price has increased by 56.7%
since our updated report in March 2020 (versus +49.4% for the VN Index in the same period).
Even though COVID-19 has harmed markets of non-essential goods severely in 2020, PNJ still
managed to report a slight revenue decline in 9M20 (-0.1% YoY), we are optimistic in Vietnam
purchasing willingness and demand for jewelry products in 2021.
PNJ 20.8% 4,861 5,637 14.9 12.9 82,500 83,200 1% Hold
We expect to see moderate recovery of 9% YoY in 2021 revenue as (1) spending willingness of
young people toward outlook items, (2) demand for PNJ’s offerings as an accessory yet saving
assets, and (3) moderate recovery of global economy.STEEL INDUSTRY – VALUATIONS REFLECT INDUSTRY GROWTH
Industry overview of 2020 %
Actual stock price growth and expected return at peak of Covid tranmission (April 2020) of Vietnam's steel
industry stocks in 2020 compared with those of other countries
The steel industry in 2020 deserved to increase its proportion
in investment portfolio. We believe after restructuring process, Price performance ytd The market's expected return at the peak of Covid pandemic
earning of all stocks in coverage of steel industry improved
60
naturally. They also benefited from hot rolled coil (HRC) price
increases since 3Q19. In addition, the trend of increasing 50
public investment from China and Vietnamese also ignite a
huge demand of steel. Besides, Vietnam’s Ministry of Trade 40
imposed anti-dumping duties for galvanized sheet products 30
from China, Hong Kong, and Korea to lower the pressure for
domestic producers. Consequently, import steel volume in 20
10M20 decreased to 11.3mn tons (-7% YoY). 10
China boosts public investment by US$530bn: In March 2020, 0
China announced plans to boost public investment in its steel Vietnam Malaysia Russia Taiwan Thailand Indonesia Australia South Korea China
-10
industry with US$530bn (+150% versus 2019), mobilized from
local government bonds. This represents a significant increase -20
in the rate of disbursement, in terms of total capital mobilized
from bonds, for infrastructure and industrial zones, at 29% and
5% respectively, compared with a disbursement rate of only
1% and 0.3%, respectively, in 2018.
Comparison between steel industy stocks and VN-Index performance
For The stock prices of market-leaders HPG, HSG, and NKG
have increased by 188%, 397%, and 234%, respectively, from VNINDEX Index (RHS) HSG VN Equity (LHS) HPG VN Equity (LHS) NKG VN Equity (LHS)
the market bottom in April 2020 (compared with a 62% 42,000 1,090
increase in the VN-Index in the same period). We believe the
35,000 1,020
steel industry will enjoy a significant rise in profitability in 2020.
950
VND/share
28,000
Opportunities in 2021
880
21,000
In 2021, the steel industry should maintain its positive position, 810
based on the following: 1) HRC price is expected to remain 14,000
740
high, due to trade tensions between China and Australia,
putting pressure on the supply of iron ore; 2) global production 7,000 670
output is expected to recover from 2021; 3) domestic steel 0 600
production will improve alongside the recovery of the real
estate industry; and 4) an expected decline in interest rates
should result in decreased debt/equity ratios.
Source: Bloomberg, Mirae Asset VN ResearchSTEEL INDUSTRY – VALUATIONS REFLECT INDUSTRY GROWTH
Opportunities in 2021
Expected capacity of China and Global steel Expected growth in Vietnam production capacity
Iron ore and HRC prices surged to historic peaks: With
negative growth in 2020 and a series of policies designed to China (LHS) Global (LHS) Construction steel Steel pipe
stimulate demand for infrastructure in 2021, we forecast global Mn mt %YoY China (RHS) %YoY Global (RHS) Galvanized steel HRC & CRC
steel production to reach 1,958mn tons (+5% YoY). Moreover,
due to trade tensions between China and Australia, we believe 2,500 12.0% 50.0%
that concerns over shortages of supply will help keep iron ore
prices high in 1H21. 2,000 9.0% 40.0%
Vietnam steel industry’s sales volume expected to 1,500 6.0% 30.0%
increase by 15.7% in 2021, three times higher than forecast
global volume growth: In particular, we estimate that output of 1,000 3.0% 20.0%
Dung Quat project will add 2.2mn tons tototal output of
Vietnam steel industry, while the Pomina Phu My plant will 500 0.0% 10.0%
increase construction steel output by 1.1mn tons.
- -3.0% 0.0%
In 2021, we believe that the real estate industry will gradually 2018 2019 2020f 2021f 2022f 2017 2018 2019 2020f 2021f 2022f
recover alongside the recovery of the world economy, which
-10.0%
would benefit Vietnam’s steel industry. Output in 2021 is
expected to reach 28.67mn tons (+15.7% YoY).
Valuation
HRC and iron price performance (US$/ton) Coke and iron ore price performance (US$/ton)
Vietnam's steel industry is trading at a P/E of 9.8x and
EV/EBITDA of 6.1x, equivalent to the average of the Asian Pig Iron HRC Shanghai Coking Coal Iron Ore
steel industry (P/E: 10x; EV/EBITDA: 5.3x). However, in 2021
we forecast the sales volume of Vietnam's steel industry to 800 350
grow by 15.7% (versus 5% globally), with 2021 P/E at 8.1x and 700 300
EV/EBITDA at 4.2x, equivalent to 20% of the minimum
expected profit for Vietnam steel industry. 600 250
Risks 500 200
Risk of volatility in iron ore prices: The steel and galvanized 400 150
steel industry are in a vulnerable position, as raw material
300 100
costs account for 65–75% of production cost.
200 50
Risks from export market: The steel industry currently
exports a large portion of its production to China, the EU, and 100 0
the US (19.56% of total sales). There is a huge risk that tariff 2/1/15 2/11/15 2/9/16 2/7/17 2/5/18 2/3/19 2/1/20 2/11/20 2/1/15 2/11/15 2/9/16 2/7/17 2/5/18 2/3/19 2/1/20 2/11/20
policies will change amid trade wars between China and other
Source: Bloomberg, Mirae Asset VN Research
countries.CEMENT INDUSTRY – TIME TO BUY
Opportunity knocks in 2021 Projected consumption in domestic market Projected export quantity of cement and clinker
Mn tons
In 2021, Vietnam’s cement industry should maintain its positive Domestic consumption %YoY Clinker (LHS) Cement (LHS)
position, based on the following: 1) The recovery of the real MN tons %YoY clinker (RHS) %YoY cement (RHS)
estate sector; 2) increasing public investment; 3) declines in 75 15% 30 150%
interest rates and debt/equity ratio.
25 120%
60 10%
We forecast the total sales volume of the industry (including 90%
exports) in 2020, 2021, and 2022 to be 100mn tons (+1% YoY), 20
45 5%
104.5mn tons (+4.5 YoY), and 110.3mn tons (+5.5% YoY), 60%
15
respectively. We strongly believe that the efficiency of the 30%
30 0%
rotary kiln will bounce back to the historic peak seen in 2019,
10
at 96% in 2021F. 0%
15 -5%
5 -30%
Vietnam’s construction industry in 2020 reached
VND411,139bn, up by 6.6% (compared with 2020 GDP 0 -10% 0 -60%
growth of 2.12%). It is expected that investment in 2016 2017 2018 2019 2020f 2021f
infrastructure projects, like the North-South Highway and ring
roads in major cities, will contribute to construction sector
growth in the 2021–2025 period, when the sector’s value is
projected to be VND452,233bn (+10% YoY) in 2021F and
VND492,956bn (+9% YoY) in 2022F.
Projection of construction industry value and Correlation between cement demand and supply in
Clinker price unlikely to fall further. Thanks in part to growth rate specific regions
effective control of the COVID-19 pandemic through mass
Construction value (VNDbn - LHS) Cement demand Cement supply
vaccinations, we forecast the clinker price to bounce back to
GDP (% - RHS)
US$34–36/mt in 2Q21. '000bn
% growth of construction value (% - LHS) Southwest
Oversupply in North, but overdemand in South 600 12%
Southeast
500 10%
Due to plentiful limestone reserves in the Northern and Central South Central…
8%
Coastal provinces, the Northern region has the highest density, 400
Central Highlands
with 60 of Vietnam’s 87 cement factories, leading to 6%
300 North Central
oversupply there. 4%
200 Red River Delta
2%
Excluding clinker exports, the Southern region is likely to
experience a shortage of at least 14.9mn tons, accounting for 100 0% Northeast
55% of Southern demand. Thus, we highly regard the - -2% Northwest Mn tons
company that own limestone quarries, such as Ha Tien 1 and
TAFiCO, as they control the source of raw materials and have 0 10 20 30
above-average gross profit margins.
Source: VNCA, Mirae Asset VN ResearchSTEEL/ SHEET METAL/ CEMENT
Watch list
EPS P/E Current price TP
ROE Upside (%) Our call Our view
(VND) (x) (VND) (VND)
FY20F FY20F FY21F FY20F FY21F Jan 15, 2021
We recommend Trading Buy and target price of VND21,200 for HT1.
With the recovering prospect of clinker price from 2Q21, we expect that selling price will improve
by 5% YoY in 2021, to VND1.16mn per ton. HT1’s revenue and net profit in 2021 are expected to
increase by 14% YoY and 20% YoY, respectively.
Reducing long-term debt and surpassing 2015 historic peak of NPAT: In FY21, HT1 will pay down
HT1 12.5% 1,848 2,226 9.6 8.5 18,850 21,200 12% Trading Buy VND550bn of remaining long-term debt, thereby decrease the net debt to equity ratio to 30%
(compared to 42% in FY20), of which 98% is short-term debt. We believe that, in FY21, HT1’s net
profit will exceed its FY15 historic peak.
Dividend yield will be stable at 9.5% per year from FY22. During the FY17-19 period, HT1
maintained a high dividend/NPAT ratio of over 65%. For FY21 and FY22, we believe that HT1 will
increase its dividend to VND1,500 per share and VND2,000 per share, equivalent to dividend
yield/target price of 7.1% and 9.5%.
We raise our target price for Hoa Sen Group (HSG) by 15% to VND25,500 with FY20/21 forward P/E
at 7.6x. The share price has increased by 33% since our November 2020 update report (versus
HSG 17.5% 2,589 3,374 6.1 7.6 25,300 25,500 1% Hold
+21% for the VN Index in the same period). Therefore, we downgrade our recommendation for HSG
to Hold (from Buy).
We downgrade our recommendation for NKG to Hold (from Trading Buy). The share price has risen
by 110% since our July 2020 report (versus +24% for the VN Index over the same period).
NKG 7.6% 1,390 2,084 11.7 7.8 16,200 16,400 1% Hold If NKG transfer all of its 32.6ha industrial land in the My Xuan B Industrial Park in 2021, we forecast
after-tax profit from land transfers at VND395bn, equivalent to a valuation of VND2,200/share. This
brings us a target price of VND18,700.
We recommend a Hold rating for HPG and target price of VND42,500. We estimate the Dung Quat
project’s EBITDA in 9M20 to be 22.7% (versus 25.8% for the Kinh Mon factory), reaching the break-
even point. Once blast furnace No. 4 comes into operation, we forecast that sales volume of HRC in
HPG 17.8% 3,939 4,330 10.7 9.8 44,500 42,500 -4% Hold 2021 will be 2.2mn mt (+260% YoY). Moreover, we expect the real estate market to recover in 2021,
after three years of stagnation, while the increase in public investment will help HPG to convert billet
to construction steel. In total, we increase our forecast of total construction billet and steel output to
be 5mn mt in 2021F (versus our previous forecast of 4.1mn mt).VIETNAM POWER – POWER SHIFT TO BEGIN
Awaiting Power Development Plan VIII Vietnam’s annual electricity consumption Vietnam’s installed power capacity
The Vietnam Ministry of Industry and Trade (MOIT) is 3% Coal-fired power Gas-fired power Hydropower
expected to propose a final draft of the Power Development 900 Wind power Solar power Others
Plan (PDP) VIII for the FY20–FY30 period to the Prime 5%
Minister at the beginning of FY21. According to the draft of 800
350
November 2020, Vietnam’s electricity consumption will 700
maintain a CAGR of 8.3% over the next ten years (10M20: 300
600 7%
~+3.12% YoY; FY09–FY19: CAGR of 11%). 69
250
500
GWh
Total installed capacity will expand 2.3 times to 137 GW in CAGR of 9% 200 42
400 72
GW
FY30 to meet power demand, compared with that of FY20. Of
150 30 47
the total additional capacity of 77 GW for the period of FY21– 300
32
FY30, 38% will be renewable energy (23% from wind power, 19
200 100 18
15% from solar). The second-largest contributor will be gas- 72
12 45 56
fired thermal power generators, accounting for 26% of the 100 50 29
16 53
additional capacity, with coal-fired power generators making up 29 37 43 47
- - 20
21% of the total increase.
FY20 FY25 FY30 FY40 FY45 FY20 FY25 FY30 FY35 FY40 FY50
As a result, the proportion of renewable energy in the overall
power mix is slated to jump from 13% in FY20 to 27% in FY30.
In particular, the share of wind power will surge from 1% in ELECTRICITY PRODUCTION COST OF LNG THERMAL POWER
Price of exported US liquefied natural gas
FY20 to 13% in FY30. The proportion of gas-fired power will Others
increase from 15% to 21%, in contrast, that of coal-fired power 18 5%
will decrease from 34% to 27% for the same period. Thus, we O&M cost
believe that the development of the power industry going 16 14%
US$/thousand cubic feet
forward will focus on gas-fired and wind-power generation. 14
Interest
LNG projects in the pipeline 12 expense
2%
Currently, there are 11,900 MW of LNG thermal power projects 10
Depreciation
in the Master Plan and 39,350 MW of the ones is under pre- cost
8
feasibility study or proposed to supplement into the PDP. In 10%
addition, 9,040 MW thermal power projects are looking for 6
approval to switch from coal to LNG.
4 LNG cost
For the development plan to be realized, two major issues will 69%
2
need to be facilitated, including: 1) the pass-through
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
Jul-20
Jan-12
Jan-10
Jan-11
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
mechanism; and 2) whether LNG-fired power plants will be
inside or outside the competitive generation market (CGM).
Source: Vietnam Initiative for Energy Transition, Mirae Asset VN ResearchVIETNAM POWER – POWER SHIFT TO BEGIN
Unlocking Vietnam's wind potential COMPONENTS OF LCOE FOR NEW ONSHORE WIND
POWER ENTERING SERVICE
From May 2020, the number of proposed wind power projects
Capital cost Fixed O&M Transmission cost
in the Revised PDP VII increased after the MOIT suggested an 58
extension of the FIT scheme until December 2023, instead of 57 57 57
November 2021, for wind power projects (as stated in
Document No. 2491/BCT-ĐL).
FY22 28 7 3
At present, total operating wind power capacity is quite modest,
US$/MWh
at 439 MW. However, about 11,000 MW of wind power
projects have been included in the PDP. Most of them are
onshore wind power, with an average project scale of 50–100
MW. In addition, another 14 offshore wind power projects, with 40
total capacity of about 28,000 MW (average project scale of 38
FY20 40 14 3
2,000 MW), are under consideration. This shows the current 36
attraction of the wind power segment.
FY21 hydropower: Fruitful year ahead
FY18 FY19 FY20 FY21 FY22 FY25 FY40 US$/MWH
We expect Vietnam to enjoy a two-year period of a favorable
hydrological cycle from rainy season in 3Q20. At end-June,
2020, for the first time this year, the water levels of some main Average performance of listed hydropower generation in FY20
rivers in Central and South regions showed positive signs of
recovery, with growth of 15% YoY. Water levels continued to % YoY in revenue % YoY in net profit
increase in 2H20, rising by 3.3 times QoQ in early-December,
228%
2020. Vietnam’s hydropower production volume increased by
147%
113% QoQ and YoY in 3Q20. This has in turn been driving up
the hydropower group’s business performance.
The listed hydropower generation highlighted a strong rebound
23%
in revenue (+23% YoY on average) and net profit (+147% YoY
91% -11%
on average) in 3Q20. We expect to see improvements in -26%
hydropower outcomes in FY21. 57%
-10%
3% 10%
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
-22% -177%
-47%
-63%
1Q20 2Q20 3Q20
Source: EIA, Mirae Asset VN ResearchVIETNAM POWER – POWER SHIFT TO BEGIN
Watch list
EV/EBITDA Current price TP Upside
P/E (x) P/B (x) Dividend yield Debt/Equity ROE Our call Our view
(x) (VND) (VND) (%)
FY20F FY21F FY22F FY20F FY20F FY20F FY20F FY20F Jan 15, 2021
We recommend a Hold rating and target price of VND19,200 for Candon Hydropower
JSC (SJD), applying the dividend discount model (DDM) method and P/B approach.
SJD 11 8 8 1.3 6.6 12% 51% 13% 17,650 19,200 9% Hold
SJD is currently trading at FY20F and FY21F P/B of 1.3x, 13% lower than its peers’
average of 1.5x (see Table 2) and 17% lower than its average historical P/B from FY18.
We recommend a Hold rating and target price of VND26,700 for Pha Lai Thermal
Power JSC (PPC), applying the DDM method (Re: 10%; g: 0%).
PPC 10 9 9 1.2 8.3 9% 21% 13% 25,150 26,700 6% Hold We assume PPC will maintain a payout ratio of about 88% on average, resulting in
forecast cash dividend per share of VND2,000 in FY20 (9% of dividend yield),
VND2,400 in FY21 and FY22 (10% of dividend yield), and VND2,700 from FY23
onwards (12% of dividend yield).
We recommend a Hold rating and target price of VND24,200 for PetroVietnam Power
Nhon Trach 2 JSC (NT2), applying the dividend discount model (DDM) method (Re:
NT2 10 10 9 1.6 6.2 10% 60% 17% 25,000 24,200 -3% Hold
10%; g: 0%). We believe NT2 is ideal for risk-averse investors, given its low downside
risk and expected annual dividend yield of 10% on average.
Source: Company data, Mirae Asset Vietnam ResearchOTHERS
Watch list
Revenue Net profit EPS P/B Current price TP
P/E (x) Upside (%) Our call Our view
(VNDbn) (VNDbn) (VND) (x) (VND) (VND)
FY20F FY20F FY20F FY20F FY20F Jan 15, 2021
We recommend Trading Buy for PVS with a target price of VND25,100.
Recovery of M&C segment
The Mechanical & Construction (M&C) segment recorded a recovery in revenue and gross profit
margin in 2020, after a sharp decline in 4Q19. We expect the Thi Vai LNG project to support
PVS’ revenue in 2021. Furthermore, in the 2021–2022 period, PVS is likely to participate in major
projects, such as the Ca Voi Xanh, Nhon Trach gas-fired power plants 3 & 4, with an estimated
backlog of more than US$3bn.
PVS 18,500 778 1,627 12.6 0.7 21,600 25,100 16% Trading Buy
Additional contribution of floating storage service from FSO Sao Vang–Đai Nguyet in 2021
FPSO Lam Son floating storage has signed a long-term contract (on March 16, 2020) until June
2021, with an estimated value of US$122.87mn, and a rental fee of over US$80,000/day, higher
than the previously calculated US$50,000/day.
From 2021, the company plans to put into operation the FSO Golden Star floating storage
project, with a lease contract from the Sao Vang-Dai Nguyet mine and expected oil storage
capacity of 650,000 barrels.
We recommend Buy for DGC and a target price of VND63,800.
DGC is one of the few enterprises in the world that can produce yellow phosphorus and
phosphoric acid products, as well as synthetic fertilizers, Monoammonium Phosphate (MAP) and
Diammonium Phosphate (DAP), that meet export standards.
DGC 6,189 902 5,699 9.2 1.3 52,800 63,800 21% Buy We believe that, among the chemical fertilizer companies listed on Vietnam's stock market, DGC
has the best prospects for the period of 2020–2023, thanks to its technological advantages. In
addition, it has several projects to expand its production to the higher-margin downstream
phosphorus value chain, which are expected to enter operation from 2020 to 2022.
In 2021, we expect DGC’s revenue to increase by 14.5% YoY to VND7,087bn and NPAT to
continue its strong growth, rising by 24% to VND1,122bn.
Source: Company data, Mirae Asset Vietnam ResearchStock Ratings Industry Ratings Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening Sell : Relative performance of -10% Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Mirae Asset Daewoo Co., Ltd., we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions. Analyst Certification The research analysts who prepared this report (the “Analysts”) are subject to Vietnamese securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this report. Mirae Asset Securities (Vietnam) LLC (MAS) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of MAS, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or MAS except as otherwise stated herein. Disclaimers This report is published by Mirae Asset Securities (Vietnam) LLC (MAS), a broker-dealer registered in the Socialist Republic of Vietnam and a member of the Vietnam Stock Exchanges. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and MAS makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Vietnamese language. In case of an English translation of a report prepared in the Vietnamese language, the original Vietnamese language report may have been made available to investors in advance of this report. 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