We reiterate our MARKET PERFORM rating for HSG. We lower our target price by 11%. Weak Q3 FY17 margins caused the share price to fall 14% after reaching our previous target price in July. Q3 FY17 revenue grew 57% vs Q3 FY16 to VND7.2 trillion (USD319 million) on the back of robust galvanized steel sheet volume growth of 58% vs Q3 FY16.
We reiterate a MARKET PERFORM (M-PF) rating for KDH with -3.0% total return including a 3.5% dividend yield. Gains from selling stakes in its associates partly offset lower margin handovers and drove 16% growth of H1 2017 NPAT-MI to reach VND233 billion (USD10.2 million). We expect more deliveries in H2 2017 to fuel 33% 2017F NPAT-MI growth to VND495 billion (USD22 million).
We are positive on PPC’s business rebound and current state of Yen-dominated debt repayment. However, large CAPEX in 2018 could restrain cash flow and dividend capacity temporarily. FX exposure reduces as yen-dominated loan is on track to be cleared in 2018 - 2019. Reported EPS and core EPS could reach VND2,958 (+75% Y-o-Y) and VND2,526 (+22.8% Y-o-Y), respectively, on higher contracted volume, better selling prices and reversal in Quang Ninh Power Plant.
We downgrade DQC to UNDERPERFORM with -10% total stock return. DQC looks unattractive as it faces downbeat earnings prospects, but is cushioned by solid one-year dividend yield. We cut our TP by 21% due to DQC’s severe margin contraction caused by ASP cuts. DQC is being drawn into a pricing battle that risks commoditizing the lighting industry in Vietnam.
We cut our target price 12.4% and downgrade PVS from BUY to MARKET PERFORM (M-PF) as we apply a 15% discount to our target price amid the rising risk at Red Emperor field. We expect 2017F EPS growth to be -24.9% YoY, up from our previous forecast of -33.5% YoY, mainly driven by better-than-expected performance of Seismic Survey & ROV (SS&ROV) and Mechanics & Construction (M&C) segments.
We initiate on KDC with a SELL recommendation. Our target price of VND32,200 implies a total stock return of -21% inclusive of a 4% dividend yield. Reported EPS to plummet in 2017 and 2018 in the absence of one-off income from asset divestments/revaluation and goodwill amortization from recent M&A. If we exclude goodwill amortization and deduct real estate assets at BV from market cap, KDC is still trading at expensive recurring PER of 47x in 2017F and 34x in 2018F.
We reiterate our BUY rating with a total return of 26%. Three-year PEG looks attractive at 0.8. H1 2017 PBT +14% YoY mainly driven by Software Outsourcing (+24%) and Telecom (+19%), whose margins broadened due to the absence of last-mile costs in HCMC and Hanoi. We project 19% FY17 PBT growth for Software Outsourcing thanks to strong Japanese revenue. New US contracts, albeit small in value early on, will also start contributing in H2 2017.
• We expect Telecom Services PBT to jump 19% in F
We reiterate a MARKET PERFORM (M-PF) rating on NVL as we lower our target price by 8% on an updated net cash balance and a revaluation of the Water Bay and Harbor City projects. We lower 2017F contract sales value by 16% to VND20.7 trillion (USD907 million, flat vs 2016) as NVL delayed launch times for the Water Bay and Harbor City projects.
We maintain our OUTPERFORM (O-PF) rating for TCM with 14.9% total return amid expected improving revenue contribution from higher-margin garment and fabric segments. We forecast 83.1% 2017 NPAT-MI growth to reach VND209.3 billion (USD9.2 million) mainly due to higher gross margin expectations. Excluding a one-off sale of 10 ha of industrial park (IP) land at Xuyen A IP in Q2, NPAT-MI would increase by 60.3% vs 2016.
We reiterate our MARKET PERFORM rating for VNM with 7.1% total return. TTM PER of 24x is above the regional peer-adjusted PER, but justified given VNM’s superior fundamentals. H1 2017 NPAT +18% vs H1 2016 thanks to upbeat domestic sales growth of 17% bolstered by market share acquisition. However, exports -18% vs H1 2016 due to internal conflict in Iraq. We project 17% domestic revenue growth for FY17.