VTP – Out of the woods – Update

• In 1Q21, VTP’s net profit rose 41.3% qoq and 12.0% yoy to VND109bn after bottoming out in 4Q20.
• We expect FY21-22F net profit to grow 15.4%-16.2% yoy thanks to the decent growth of delivery volume and the improvement of delivery GM.
• Reiterate ADD but lower TP by 18.8% to VND106,200 following a downward revision of FY21-22F EPS by 19.1-20.3%.

Growth decelerated in FY20 due to lower ASP to maintain market share
In 2020, Vietnam’s delivery market has seen strong expansions of businesses in which various strategies to gain the market shares have been deployed and pulled down the delivery prices. In the context of fierce competition, VTP had to reduce its ASP in delivery services by 13.1% yoy to maintain the market share, leading to the 2.0% pts yoy contracting in delivery services GM. This is the main reason that causes VTP’s NP growth decelerated to 0.8% yoy in FY20.

VTP to embark on decent growth after bottoming out in FY20
Our expectations based on: (1) VTP’s delivery volume may grow at the industry growth rate of 11.8-11.9% in FY21-22F due to its solid market share and leading position in Vietnam’s delivery market, (2) VTP’s delivery ASP will remain stable in FY21-22F as the cash-burning-to-grow model is not favoring now and VTP’s delivery charges currently only include the common delivery fees which is basically equal to the whole industry and hard to further reduce after removing almost the delivery surcharges in the new policy, and (3) VTP’s delivery services GM will be improved as the technology advances are deployed nationwide. 1Q21 results recovery initially proved the positive impact of technology advances in which delivery GM expanded 4.19% pts qoq, helping 1Q21 NP to rise 41.3% qoq and 12.0% yoy. We expect VTP’s net profit to grow 15.4-16.2% in FY21-22F FY21-22F growth is driven by (1) 11.8-11.9% yoy growth in FY21-22F delivery revenue, (2) delivery GM may slightly improve to 10.5%/10.6% in FY21/FY22F thanks to the nationwide deployment of technology advances, and (3) SG&A will continue to be optimized on the utilizing telecom points of sale. Downside risks and re-rating catalystsDownside risks are: (1) a prolonged global pandemic leading to border closures in countries, which will reduce the volume of outbound parcels to be delivered, and (2) lower-than-expected ASP as longer-than-expected fierce competition. Potential re-rating catalyst: (1) higher-than-expected delivery volume and prices, and (2) new information on HSX listing plan and dividend payment plan.

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