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Vietnam Daily Market Recap Dec 15 – HPG & PVT

Daily Market Recap 15/12/2020    289


Dear Valued Clients,

We would like to send you our Daily Market Recap for today

Market Commentary: The VN-INDEX dropped 0.8% on strong selling against Financials and Real Estates stocks

The VN-INDEX decreased 8.8pts to close at 1,055.3pts as profit taking activities targeted Financials and Real Estates sectors. After the opening bell, the VN-INDEX immediately fell into the red territory due to the strong selling of many large caps. Notably, VCB was the largest laggard, which declined 2.1% to close at VND97,800 and solely took 2.3pts off the index’s move, followed by smaller Financials stocks such as BID (-0.9%) and CTG (-1.1%). Market pillars from Real Estates and other sectors also lost ground, including VIC (-1.7%), VNM (-1.9%), VHM (-1.2%), SAB (-2.5%), GAS (-1.8%), and HPG (-1.7%). On the other hand, very few notable stocks managed to overcome the sell-off wave, including GVR (+4.0%), NVL (+1.7%), LGC (+6.9%), BCM (+1.6%), and GMD (+4.2%). At the end of the session, the VN-INDEX lost 0.8% to end at 1,055.3pts, while the HNX-INDEX rose 1.3% to close at 167.9pts.

Industrials (+0.4%) rose, while Utilities (-1.4%), Consumer Staples (-1.3%), and Financials (-1.2%) lost ground today. Top index movers included GVR (+4.0%), NVL (+1.7%), LGC (+6.9%), BCM (+1.6%), and GMD (+4.2%). Top index laggards consisted of VCB (-2.1%), VIC (-1.7%), VNM (-1.9%), VHM (-1.2%), and SAB (-2.5%).

Market News

Oil slips from nine-month high amid tighter virus restrictions

Oil dropped from a nine-month high on concerns that more pandemic lockdowns could slow a global rebound in fuel demand, even after data showed China’s economic recovery gathered pace last month. Futures lost 0.7% and Asian stocks fell on Tuesday. New York is heading toward a second full lockdown after a surge in infections, with London being placed under England’s toughest coronavirus rules from Wednesday. The tighter restrictions come as the U.S. starts delivering its first vaccine doses. In China, which has controlled the spread of Covid-19, industrial output rose 7% in November from a year earlier and retail sales expanded. The nation also processed a record amount of crude on a daily basis last month as fuel consumption recovered, providing a rare bright spot for imports. (Bloomberg)

Vietnam’s seafood exports to China face difficulties due to COVID-19 control measures

The Vietnam Association of Seafood Exporters and Producers (VASEP) has announced that China continues to closely control COVID-19 in imported aquatic products, which is likely to slow Vietnam’s exports to the country in the months to come. Chinese authorities have also warned that several batches of frozen Vietnamese shrimp were infected with white dot disease and failed to meet food safety criteria. Since mid-November, competent agencies at China’s border gates have sprayed disinfectant and traced the origin of all frozen aquatic products at most major ports in Shanghai, Wuhan, Tianjin, Qiangdao, and elsewhere. All products must be tested for COVID-19 soon after birth. VASEP General Secretary Truong Dinh Hoe said that despite the growing demand in China, many batches of seafood remain stuck at ports due to the rigorous inspections and prolonged customs clearance. The Ministry of Agriculture and Rural Development has asked seafood exporters to seriously follow the Government and Health Ministry’s COVID-19 prevention and control measures and the UN Food and Agriculture Organization (FAO) and World Health Organization (WHO)’s guidelines, as well as provide the necessary paperwork to Chinese authorities when requested. Deputy head of the National Agro-Forestry-Fisheries Quality Assurance Department (Nafiqad) Ngo Hong Phong said his department is actively working with Chinese import control agencies on certifications related to COVID-19 prevention and control. According to VASEP, China imported aquatic products from Vietnam worth US$1.3bn in the 11M20, up 3.4% yoy. The annual figure is estimated at US$1.48bn, up nearly 5%. Following a steep decline due to the pandemic, exports to China rebounded strongly in September, posting a 27% growth, followed by 16% in October and 19% in November. Many exporters are concerned, however, about maintaining export growth to China given the close import controls. (

Coverage Universes Updates

Hoa Phat Group (HPG) – Update – ADD (+23.8%)

Riding on prices upwinds

Long steel sales volume surged 34.8% yoy in Nov 20

Hoa Phat Group (HPG) reported construction steel sales volume at 344,000 tonnes (+14.2% yoy) in Nov 2020, in line with our expectation. Billet sales volume reached 170,000 tonnes in Nov 20, double from the 79,989 tonnes in the same period last year. Accumulated 11M20, HPG recorded impressive growth of 80.8% yoy in total construction steel and billet sales volume to 4.7m tonnes, equivalent to 93% of our full-year forecast.

Revise up 4Q20F HRC revenue on higher volume and better ASP

HPG announced hot rolled coil (HRC) production volume of 170,000 tonnes in Oct-Nov 20, which is 15% higher than our expectation. Therefore, we increase our forecast of HRC production volume by 10.9% to 637,500 tonnes in FY20F. This comprises 286,875 tonnes to meet internal demand in FY20F and 350,625 tonnes for sale in FY20F. Meanwhile, we revise up our 4Q20F average HRC price assumption to US$555/tonne (+6.7% vs. previous forecast) to reflect the current rally in HRC price due to short-term supply deficit of HRC products worldwide.

We lift up GPM assumption by 0.9/1.0% pts for FY21F/FY22F

We raise our FY21/22F GPM assumption by 0.9%/1.0% pts thanks to: 1) a 7.4%/16.1% decline in coking coal price forecast, and 2) a 2.8%/1.9% increase in steel ASP, which offset an 8.2%/13.3% increase in iron ore price assumption. Thereby, we revise up FY21-22F net profit by 9.4%/8.1% to VND16,196bn/18,197bn (+27.9%/12.4% yoy).

Reiterate Add with a higher TP of VND47,300

We raise our TP to VND47,300 to reflect the FY21-22F EPS upgrade. Our valuation is based on an equal weighting of: 1) a forward P/E of 10.0x on FY21F EPS, and 2) a DCF valuation over a 10-year projection period. We use a new WACC of 12.2% for our DCF valuation (from 12.9% previously), on the back of a lower risk-free rate at 3% (from 4% earlier). Downside risk: slower-than-expected steel demand growth. Re-rating catalyst: lower-than-expected iron ore price.

Read the full report: HERE

PetroVietnam Transportation Corp (PVT) – Update – ADD (+16.2%)

Right time for new capex disbursement

FY20-22F EPS forecasts lifted by 6.7-12.2%

PVTrans (PVT) reported a 28.1% yoy decline in 9M20 net profit on the back of (1) lower yoy day rate at Dai Hung FSO as the vessel completed maintenance and transformation into FPSO in 9M20, (2) lower transportation charter rates amid weak oil prices and demand, and (3) gross margin contraction across all segments as Covid-19 restrictions led to additional expenses. 9M20 net profit accounted for 77.7% of our FY20F forecast, which we deem ahead of expectation given a strong seasonal 4Q. Therefore, we lift our FY20F EPS forecast by 12.2% yoy, assuming (1) a 7% higher revenue from transporting LPG, which helps increase GPM forecast by 0.3% pt as the LPG segment commands the highest GPM among all transportation segments, and (2) reduced capex in FY20F as PVT delayed most of its investment plan due to Covid-19, which leads to improved cashflow and interest income in the following years.

Low-price environment creates opportunities for fleet expansion

According to Bloomberg data, selling prices of vessels stayed on a downward trend YTD amid the weak demand for oil and gas products. The current price levels are near the trough in 2016-17, which we believe could reverse in FY21F as transportation demand recovers after Covid-19 becomes contained on a global scale. On 7 Dec 2020, PVT announced the acquisition of a relatively young chemical/oil tanker with a capacity of 13,149 DWT. This implies that PVT has restarted its fleet expansion plan to prepare for an expected market recovery in 2021F. We expect the 2020F capex plan of over VND7,400bn to be mainly disbursed in 2021-23F, which includes the purchase of a very large crude carrier (VLCC) in 2021F (~VND1,100bn) and a very large gas carrier (VLGC) in 2022F (~VND1,200bn).

Reiterate Add with a higher TP of VND15,200

We raise our TP to VND15,200 on the back of higher FY20-22F EPS forecasts and DCF valuation rolled to 2021. Our TP is based on an equal weighting of DCF and unchanged P/E of 7.7x in FY21-23F. We remain positive on PVTrans’s outlook, as we expect a resumption in fleet expansion plan and soft recovery in charter rates to result in a FY20-23F net profit CAGR of 5.3%. Potential re-rating catalysts: higher refined oil and coal transportation volumes in FY21F. Downside risks are declines in oil prices.

Read the full report: HERE

Notable Corporate Events

Seed Moc Chau Dairy Cattle Corporation JSC (MCM VN, OTC) – Stock listing: MCM will list 68.8m shares on UpCOM starting on 18 Dec after securing permission from the Hanoi Stock Exchange. The reference price on the first trading day is VND30,000/share at which the company’s market capitalisation will be more than VND2,000bn. (

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