VTP – Earnings outlook remains positive – Update

• In 2Q21, VTP’s net profit (NP) increased modestly 3.1% yoy to VND106bn. 1H21 NP grew 7.3% yoy, fulfilling 48.5% of our full-year forecast.
• We maintain FY21F EPS while revise up FY22/23F EPS forecasts by 16.1%/13.4% to reflect brighter outlook on VTP’s delivery segment.
• Reiterate Add with higher DCF-based target price (TP) of VND95,300.

2Q21 delivery services maintained stable growth
In 2Q21, VTP’s revenue increased 19.7% yoy on the back of (1) commercial sales increased 23.9% yoy, and (2) delivery services increased 12.4% yoy thanks to the estimated 13.0% yoy increase in delivery volume. However, 2Q21 gross profit only increased 1.1% yoy due to shrinking commercial sales GM. Changes in sale policy of Viettel Telecom led to the 66.8% yoy decrease in commercial sales gross profit while delivery services gross profit increased 17.7% yoy thanks to impacts from increasing economies of scales. As 2Q21 G&A expenses declined 10.8% yoy thanks to technology improvements, 2Q21 NP increased 3.1% yoy to VND106bn. 1H21 NP grew 7.3% yoy, fulfilling 48.5% of our full-year forecast, in-line with our expectation.

Challenges in short-term, longer-term resilience intact
Due to strict social distancing since 3Q21, many last-mile delivery companies have to scale down business, such as Giao Hang Tiet Kiem, Grab, Be or other techbike applications. During the hard time, VTP has seized this opportunity to deploy the digital post office model since Feb-21, which has enhanced convenience for consumers while also help VTP save costs. VTP also promoted Voso.vn to capture the online-demand shopping during social distancing period. We expect the delivery market value to rise at a CAGR of 11.4% over FY21-23F, fuelled by strong growth of ecommerce. Consequently, VPT’s delivery revenue is forecasted to grow 12.5%/22.9%/10.4% yoy over FY21-23F.

Reiterate Add with higher DCF-based TP of VND95,300
We revise up our DCF-based TP by 11.9% following a 16.1%/13.4% FY22-23F EPS upgrade as we believe VTP’s competitors are facing difficulties and VTP can seize this opportunity to expand its market share based on its comprehensive ecosystem from e-commerce platform to nationwide last-mile delivery infrastructure. Downside risks include: (1) a prolonged global pandemic or external crisis leading to border closures in countries, which will reduce the volume of outbound parcels to be delivered, (2) lower-than-expected ASP due to fierce competition. Potential re-rating catalysts include: (1) higher-than-expected delivery volume and prices, (2) progress on HSX listing plan.

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