1Q23 Earnings review – A weak start for 2023

• 1Q23 market aggregate earnings slumped by 18.1% yoy, improved from that of -31.9% yoy growth in 4Q22.
• Among companies under our coverage that have reported 1Q23 results, we see more disappointments than positive surprises as 46% missed our estimates.

1Q23 market earnings growth was surprisingly disappointed
Based on our estimates, 1Q23 aggregate earnings of listed companies on three bourses (HOSE, HNX, UPCOM) decreased by 18.1% yoy, lower than that in 4Q22 (-31.9% yoy). Among 60 companies under our coverage that have reported their 1Q23 results, 44% were in line with our expectations while 10% beat our forecasts and 46% missed our estimates.

Another disappointed quarter for Steel makers, Chemicals and Brokerage
Listed steel makers’ 1Q23 NP dropped 93.3% yoy, significantly improved from 2 previous negative earnings quarters thanks to (1) recovery of steel selling price and (2) reversal of provision for devaluation of inventory. Chemicals producers extended the downward trajectory with 4Q22/1Q23 NP fell 22.5/71.9% yoy due to the deep slump of phosphorus and fertilizers prices. Brokerage firms witnessed another sharp shrink in earnings of 96.6% yoy in 1Q23’s earning as market liquidity contracted by 63.1% yoy in 1Q23. Together, Steel makes, Chemicals producers and Brokerage firms took away 13.5% of market’s 1Q23 NP growth.

Travel & Leisure and Property companies were top growth drivers in 1Q23
During the tough time, Property developers still posted 28.3% yoy in 1Q23’s NP growth, mostly thanks to the contribution of VHM (+162.5% yoy) as a result of recording large bulk sale transactions. However, if excluded VHM, Property developers’ earnings declined 40.4% yoy in 1Q23. Notably, Travel & Leisure sector was back on track, recorded positive earnings of over VND200bn for the first time since the Covid-19. This result was largely contributed by the fact that HVN, which posted a loss of VND103.6bn in 1Q23 (vs a loss of VND2,613bn in 1Q22). Together, Real estate and Travel & Leisure sectors contributed 4.9% to market’s 1Q23 NP growth.

Gross margin to improve, leverage ratio to edge up
1Q23’s market gross margin (non-bank) slightly inched up 0.1% pts qoq for the first time since 3Q21 with the biggest improvement coming from Travel & Leisure (+21.9% pts), Industrial Metals (+7.0% pts), Construction & Materials (+4.6% pts). Market (excl. bank) ‘s leverage ratio inched up for the first time since 1Q22 due to aggregate short-term debt edged up by 2.3% while total equity slumped by 2.0%. The market average cost of debt decreased from 6.0% to 5.9% as a result of lowering lending rates during the 1Q23.

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