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Navigating Vietnam 2022 – Re-ignite the growth engines

Strategy Note 09/12/2021    449

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  • After a pullback in 3Q21, we see the economy is entering a ‘new normal’,supported by high vaccination roll out and eventual reopening.
  • We expect the VN-index to reach 1700-1750 pts in 2022; based on 16x-16.5x FY22F P/E and 23% yoy earnings growth.
  • Our top stock picks are VNM, VHM, MWG, VCB, GAS, POW, ACV and DGC.

Re-ignite all growth engines
After a pullback in 3Q21, we see the economy is entering a ‘new normal’,
supported by high vaccination roll out and eventual reopening. We expect 2022F GDP to grow 7.5% yoy, propelled by four growth engines: manufacturing and exports to resume expansion, resilient FDI amid global supply chain diversification; and domestic consumption to rebound following upcoming fiscal supports. We see picking up inflation, driven by both demand-pull and cost-push, pressure, is the major risk to economy. Other macro risks include the China slowdown might hinder the export growth and Covid-19 resurgence.
FY22-23F earnings growth to bode well for the market expansion
Aggregate earnings growth decelerated to 15.8% yoy in 3Q21 but was still robustly 53.4% yoy in 9M21. The results have surprised us as the economy was hit hard by stringent movement control in 3Q21. We estimate market EPS to surge 39% yoy in FY21F and sustain the strong average growth of 20% yoy over FY22-23F. Key drivers for market earnings growth will come from the solid performance of property developers, oil & gas and the bounceback of retailers and food producers.
We identify four investment themes in 2022F
First, we expect a divergence among commodity prices which oil & gas and chemical producers will still ride on the uptrend. Second, infrastructure development, empowered by accelerating public investment will buoy energy, property and industrial parks. Third, the rising of digital consumers in endemic will bode well for companies with large exposure to digital economy. Last, rebounding domestic consumption, will propel the retail, F&B and tourism to recover faster than others.
New hope, new height
We expect the VN-index to reach 1700-1750 pts in 2022; based on 16x-16.5x FY22F P/E and 23% yoy earnings growth. We believe the VN-index could extend the uptrend further which empowered by economy recovery and the growing interest of local individual investors. Downside risks to the market include the higher-than-expected inflation might trigger premature policy tightening. Upside catalyst includes the earlier-than-expected MSCI Emerging Market upgrade of Vietnam.

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