GMD – Price rally on buoyant growth outlook – Update

• In 2Q21, GMD’s net profit (NP) rose 38.4% yoy to VND142bn. 1H21 NP grew 32.8% yoy, fulfilling 53.0% of our full-year forecast.
• We revise up FY21/22/23F EPS forecasts by 9.8%/13.3%/11.1%. to reflect brighter outlook on GMD’s port system.
• We raise SOTP-based target price to VND52,700 but downgrade to Hold as the upside is limited.

Better-than-expected 2Q21 results
2Q21 net revenue increased 23.8% yoy to VND752bn thanks to strong container volume (+30.0% yoy) following increasing sea freight demand. Gross profit margin inched up 0.13% pts yoy regarding the mix of (1) 1.81% pts yoy decrease in port services GM due to incurring costs related to Covid-19 prevention, and (2) 7.66% pts yoy increase in logistics services GM thanks to in sea freight rates spike. Associates’ profit hiked 269.3% yoy as Gemalink was close to breakeven point. Consequently, 2Q21 net profit increased 38.4% yoy to VND142bn, bringing 1H21 NP to grow 32.8% yoy, fulfilling 53.0% of our full-year forecast.

Growth momentum remains intact in FY21-23F
We expect GMD’s revenue to increase 16.6%/12.3%/5.5% in FY21/22/23F as (1) in Hai Phong port cluster, we expect GMD’s container volume throughput via ports here to increase 18%/3%/13% yoy in FY21/22/23F with growth engine coming from Nam Dinh Vu phase 2 launching in FY23F, (2) in central region, GMD’s Dung Quat port cargo volume may increase 30.0% in FY21F as China’s import demand of commodities increases sharply but this port would hardly grow from FY22F as limited capacity, and (3) in HCM port cluster, we expect GMD container volume throughput via ports here to increase 40% in FY21F thanks to the relocation of Truong Tho port cluster, but would also hardly grow from FY22F as limited capacity. With largely contribution from Gemalink, which might operate at 80-119% of its phase 1 designed capacity in FY21-23F, we expect GMD’s net profit may surge 61.2%/68.2%/24.5% yoy in the period.

Downgrade to Hold with higher SOTP-based TP of VND52,700
We revise up our SOTP-based TP by 17.4% to VND52,700 following a 9.8% – 13.3% FY21-23 EPS upgrade. However, recent share price rally has already factored the strong outlook. Thus, we downgrade to Hold as the upside is limited. Upside risks to our forecasts including (1) higher-than-expected container volume and fee, (2) assets divestments at higher-than-expected prices, and (3) seaport fee increase proposal is approved by the government. Downside risks are uncertainties from the pandemic or geopolitical concerns hindering the growth of global trade, including Vietnam.

Please follow this link for the full report