Vietnam 2023 Strategy Note - Pounce Selectively - 20230127

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Executive summary
2023 will be a key year to test the strength of Vietnam’s economic fundamentals. We believe that Vietnam could deliver an encouraging economic
performance of 6.2% for 2023, which is impressive given that the world is in the midst of a significant slowdown trend. Having space, the
government has expanded fiscal policy and the private sector is attracting FDI. Monetary policy should remain prudent, but likely less aggressive
than during 2022. Slowing global demand remains a major near-term risk to our in-house outlook, but a more serious tail risk would be
liquidity/default risks and policy risks.
2023 Market Outlook: Pounce Selectively
• After a blowout 2022, the Vietnamese stock market has shifted into gear and leapt into 2023, with both positives and negative
variables influencing the market: A distinct positive is that we see market valuation has already priced in many risks, including revaluation
risk from the rising interest rate cycle, as well as a weaker growth outlook for 2023. Market P/E for 2023F was 9.2x as of December 30,
2022, which is a 35% discount to the median market P/E of 14.16x during 2009-2022. Another important plus for 2023 is that we expect
the VND will exhibit more elements of stability this year. On the other hand, a liquidity crunch might still exist through the year, as issuers
might be pressed by a tight corporate bond payment schedule. Additionally, though interest rates will likely peak, rates will only reduce by
a mild pace. Such a pace would be likely to prolong the less-than-desirable situation in the property market. Expectations run high regarding
an effective Decree 65 revision to help revive the corporate bond market, but it could take some time to have the desired effect.
• Our base case is for the market to have an upside of 15% for the VNIndex by year-end, slightly higher than the earnings growth
estimate of 13.8% for 2023 (VN Index target of 1160 by year end). Please note that our VNIndex year-end target might be lower than the
rallies that might occur intrayear. Given a lot of macroeconomic challenges on the agenda to be fixed, we expect the equity market will be
better than 2022, but is still too soon for a strong bull market to come back in the short term. Our key assumptions for the market can be
distilled to 3 main dynamics: (i) Regarding the corporate bond market, default risks still exist - especially for smaller issuers. (ii) Big players
in the corporate bond market might be still safe. Follows ‘too big to fail’ theme, but still needs to be watched closely. (iii) The crackdown
on corruption is still going on, but will not result in a large impact in the market like in 2022.
• There will be 3 revolving themes for the stock market through the year: (i) Public investment; (ii) Chinese reopening; (iii) Flow from
foreign investors. Public investment has been a steady yet somewhat slow-acting catalyst for the stock market over the years, and this
year there is no exception as disbursement has been slow and much of the $15 billion earmarked for the stimulus package to be spent
between the 2022-2023 period remains underspent. The Ministry of Finance announced that the 2023 state budget and investment
development plan is expected at VND 726 tn ($30.5 billion vs. $27.2 billion USD for the revised 2022 plan). The Chinese reopening theme
is expected to play out in full. Chinese tourists accounted for 32% of international inbound air traffic to Vietnam during 2019, while China
was the largest tourist destination for Vietnamese. We expect a gradual recovery in arrivals from China to Vietnam from 2Q 2023, prior to
peaking during the 2023 summer holiday season. International arrivals in 2024 could ultimately surpass 2019 levels, which would mark a
full recovery for the Vietnamese aviation industry.
• However, we still expect strong volatility for the market given a low degree of expected trading liquidity (we expect that the market’s
ADTV will decline -25% YoY during 2023). Overall market liquidity will be low, therefore the market could easily change direction when
there is significant flow action, such as from foreign investors. Foreign investors started strong net buying since the 2nd week of November,
and have been a key driver for market performance since then. However, it might be still early to conclude that the Vietnamese stock market
can bottom out even before the global recession starts having an impact on Vietnam (and before all the macro challenges can fade out).
Short rebounds during the year may be based on the expectation that there could be a soft-landing scenario for both external and internal
challenges, while market valuation is attractive for the long-term horizon.
• As such, we believe there are good opportunities to BUY for the long term horizon during the time when market is negatively impacted by
short-term liquidity crunches.

Key catalysts to watch in 1H2023
• High inflation (expected to peak in 1Q23) to have negative impact on consumption.
• Tight corporate bond payment schedules for issuers (some bond payment schedules for various issuers was rolled over to 1Q23 from
4Q22); pending wrongdoing cases relating to corporate bonds to be resolved
• Fed rate hike in Feb, Mar, and May will keep interest rates at high levels
• Revision to Decree 65 on corporate bonds to be approved in 1Q per our assumption
• Vinfast IPO after Lunar New Year
• Weak corporate earnings, with some sectors trading around their earnings growth trough
• Weak property market
• China reopening, but more likely to impact the Vietnamese tourism sector from the end of 2Q (summer holiday).
In the second half of 2023, there are a lot of questions in order to decide market direction: If consumption is to weaken, how weak would it be?
Will the global recession end soon? Is there any strong downside risk for interest rates? Will there be progress in anti-corruption efforts? Will
we see real, tangible implementation of the revised Decree 65?
In a bull case, though macro data looks somewhat weak, the market might be able to look past that and instead position for 2024 recovery.
However, we should not ignore the lagging impact of weak corporate earnings or weaker FDI, which might only start to show from 2H23.
Sector Industry 2023 Outlook Top Picks On Watch

Consumer Discretionary Textile & garment Negative
Retail Neutral PNJ
Automobile Neutral
Consumer Staples Fisheries Negative
F&B Neutral VNM, DBC SAB
Energy Oil & gas Neutral PVD, PLX GAS
Real Estate Real Estate (Residential Developer) Negative
Real Estate (IP Developer) Positive IDC, KBC BCM
Financials Banking Neutral VCB, STB, BID, ACB
Insurance Positive BVH
Brokerage Neutral
Health Care Health Care Neutral TRA, DBD
Industrials Seaports & Logistics Negative GMD
Aviation Positive ACV, AST
Construction Negative CTD
Information Technology IT/Telecom Positive FPT, CTR
Materials Steel Neutral HPG, HSG
Cement Neutral HT1
Fertilizers Negative
Construction stone Positive DHA
Utilities Electricity Neutral POW, QTP PC1, NT2
Water Neutral TDM

Table of Contents
2023 VIETNAM MACRO OUTLOOK: TESTING BEFORE BLESSING ................................................................................................................5
2023 Global macro trends: Pivotal year ...............................................................................................................................................5
2023 Vietnam Outlook: A year to test the fundamental strength ...........................................................................................................7
2023 key growth drivers: Wild card from Chinese demand revival .......................................................................................................8
2023 pullback factors: Growth comes hand in hand with challenges ahead… ...................................................................................10
Appendix 1: 2022 Macro Recap: Reshaping economic fundamentals .................................................................................................14
Appendix 2: Corporate Bond Market: Liquidity bottleneck clear-up? ..................................................................................................16
2023 MARKET OUTLOOK: POUNCE SELECTIVELY .....................................................................................................................................20
2022 – The worst year for the VNIndex since the global financial crisis in 2008. ...............................................................................20
2023 Market Outlook: Pounce Selectively ..........................................................................................................................................24
SECTOR OUTLOOK .....................................................................................................................................................................................26
Textile & garment: Expecting headwinds, as sales volume projected to decline ................................................................................26
Retail: Navigating the trough ..............................................................................................................................................................30
Automobile: Back on track with the pandemic in the rearview mirror .................................................................................................37
Fisheries: 2023E EPS decline given high base ...................................................................................................................................41
Food & Beverage: Margin improvement to be the only silver lining in the high inflation cloud ..........................................................45
Oil & Gas: Oil price can stabilize from 2022 peak, but is likely to remain high ...................................................................................55
Banking: More questions than answers ..............................................................................................................................................62
Insurance: High interest rates to offer silver lining for insurers .........................................................................................................75
Brokerage: A turnaround theme in late 2023 ......................................................................................................................................83
Residential Developers: Struggles persist ..........................................................................................................................................89
Industrial Park Real Estate: Limited supply, positive outlook in 1H23 ................................................................................................99
Healthcare: Normalized earnings growth .........................................................................................................................................109
Seaports & Logistics: Bracing for headwinds in a downcycle ...........................................................................................................114
Aviation: Fast forwarding to full recovery .........................................................................................................................................122
Residential Construction: Operating cashflow improvement to be a focus .......................................................................................129
Technology & Telecom: Solid growth to be in store ..........................................................................................................................135
Steel: Profit margin can improve thanks to price stabilization, but uncertainty remains on the demand side ...................................147
Cement: Brighter earnings outlook ...................................................................................................................................................154
Fertilizers: High net cash position to cushion the share price drops .................................................................................................159
Construction stone: Increased demand from infrastructure projects ................................................................................................163
Electricity: Thermal power heat ........................................................................................................................................................168
Water: Active M&A dynamic amongst water companies ..................................................................................................................179
CONTACT INFORMATION .........................................................................................................................................................................186

2023 VIETNAM MACRO OUTLOOK: TESTING BEFORE BLESSING
2023 Global macro trends: Pivotal year
As the world enters 2023, three questions are raised repeatedly:
1) Whether the world can pull off a soft landing?;
2) How much can monetary policy take the edge off inflation?; and
3) When will central banks pivot toward rate cutting?.
Soft landing or mild recession?
We cannot deny the fact that the global economy will face more downside risks during 2023, with a potential recession in both the EU and the
US. Elevated interest rates (at least until the Fed turns tack on its no-rate-cuts commitment/bluff for 2023), higher real interest rates, persistently
high inflation, and weaker household income are all expected to take a toll on growth. However, there might be a wider gulf in terms of
performance for individual major economies.
While the EU growth outlook intimates a modest recession during 1H 2023, being challenged by several shocks the US outlook is brighter. The
Fed’s tightening thus far has created some weakness in sectors which are typically most sensitive to monetary policy, namely the residential
real estate market and manufacturing. That said, recently released data was still strong, and US labor markets remained resilient with consumer
demand remaining strong - despite the increase in interest rates to fight inflation. While avoiding a near-term recession, our baseline assumes
that the US slips into a mild recession late 2023 as household cash buffers fade. China will be the exception, as it grows via a percentage-based
cyclical bounce off of a low base. Much of the lift should come from the service sector, spurred by the cessation of Covid-related restrictions.
For Asia (except China), a deceleration is expected as a higher interest rate environment hurts consumption and investment. Still, ASEAN is still
expected to grow significantly above the global trendline.
Global GDP forecast by region (% YoY) US PCE movement by Category (% YoY)
7.0% 16%
6.0% 14%
12%
5.0%
10%
4.0% 8%
3.0% 6%
4%
2.0%
2%
1.0% 0%
Sep-17
Sep-18
Sep-19
Sep-20
Sep-21
Sep-22
Jan-17
May-17
May-18
May-19
May-20
May-21
May-22
Jan-18
Jan-19
Jan-20
Jan-21
Jan-22
-2%
0.0%
APAC Asia ex. Japan Japan US EU -4%
2021 2022F 2023F 2024F Durable goods Non durable goods Services
Source: Bloomberg, as of Dec 2022 Source: CEIC

The pace of falling inflation
Another item watch for next year is how this sharp inflation begins declining, with initial signals seen in the form of easing in supply-chain
pressures and cooling commodity prices. The road will be bumpy with surprises along the way. Case in point: inflation in services (which covers
a much larger portion of the US economy) continues to rise and is now above 5%.
S&P Goldman Sachs Spot Commodity Index (point, Jan 2022=100)
140
120
100
80
60
40
20
0
Jul-19
Jul-20
Jul-21
Jul-22
May-19
Sep-19
Nov-19
Sep-20
May-20
Nov-20
May-21
Sep-21
Nov-21
May-22
Sep-22
Nov-22
Jan-19
Mar-19
Jan-20
Mar-20
Jan-21
Mar-21
Jan-22
Mar-22
Source: CEIC, SSIR
Despite the gospel of no Fed rate cuts in 2023, a pivot from central banks?
Interest rates are pricing in a very different outcome for next year. Current short-term rate pricing suggests that the Fed will raise rates between
50-75 bps during the first half of the year and then begin a relatively aggressive easing cycle during 2H23, cutting 200 bps from peak levels and
stretching into 2024. There would likely be a recession at some point to get the type of weakening in the labor market necessary to stave
inflationary pressure. We believe that this will eventually cause the Fed to ease. Of course, while the Fed has stated that interest rates are likely
to remain firm for 2023, the markets suggests otherwise.
Fed Funds Rate projection (%)
6.0000
5.0000
4.0000
3.0000
2.0000
1.0000
0.0000
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Jun-21
Jun-22
Jun-23
Jun-24
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Dec-23
Dec-24
Source: SSI Research

2023 Vietnam Outlook: A year to test the fundamental strength
Stellar economic performance during 2022 exhibited Vietnam’s determination to overcome Covid-related challenges, with the help of strong
domestic demand and a diversified manufacturing base. However, a strong rebound is unlikely sustainable, and overall growth momentum is
likely to taper during 2023, with headwinds building both from domestic and external factors. Our base case for 2023 GDP growth is between
6.0%-6.2%, a bit lower than the government’s target of 6.5%. The policy mix for the year should be an expansionary fiscal policy (as the
stimulus package – Program for Recovery and Development – is implemented during 2023) and a prudent and flexible monetary policy.
2023 Key macro indicators forecast
2019 2020 2021 2022 2023F

GDP growth (%- 2010p) 7.02 2.91 2.58 8.02 6.0-6.2
CPI (average, % YoY) 2.79 3.23 1.84 3.15 4.3
CPI (period-end, % YoY) 5.23 0.19 1.89 4.55 3.4
Exports (USD bn) 264.19 281.5 336.25 371.3 375
Imports (USD bn) 253.07 262.4 332.25 358.9 365
Trade Balance (USD bn) 11.1 19.1 4.0 12.4 10
Exchange rate (USD/VND) 23,230 23,215 22,930 23,780 23,500
Current Account Balance (USD bn) 12 14 -3.8 0 1
Foreign reserves (USD bn) 79 94.4 107 84.00 85
Credit growth (% YTD) 13.7 12 12.97 14.50 14.0
Deposit rate (VND -%) 6.9 5.8 5.5 6.50 8.0
2023 Vietnam macro scenarios
• Best case: The global economy executes a soft landing, the Ukraine-Russia conflict ends during 2023, and China completely abolishes its
Zero-Covid policy. Locally, Vietnam extends its fiscal stimulus well into 2023, with public investment improving vs. 2022.
• Base case: The global economy experiences a hard landing (not a particularly prolonged recession). While there could be a reduction in
overall geopolitical hostilities, the Russia-Ukraine war continues in one form or another. Lockdowns in China fade. Vietnam does not end
up spending earmarked funds of its stimulus package, and instead only completes 80-90% of plan.
• Worst case: Global economy experiences a hard landing, and a more prolonged recession. A significant deterioration in geopolitics. More
time will be needed for global issues to be resolved. Locally, the anti-corruption campaign continues. While the intention of the campaign
is certainly with the best of intention, it has inadvertently delayed the implementation of supportive policies, resulting in lower-than-potential
growth.
Best case Base case Worst case

GDP growth 7%++ 6.0-6.2% 4.5-5.0%
CPI (average) 4.5% 4.3% 5++%
Policy Rate (refinancing rate, % p.a) 5.5% 6.0% 6.5%
USDVND (YTD) -1.5%++ -0.2% – 0% 3%++

2023 key growth drivers: Wild card from Chinese demand revival
Public investment set to be a key growth driver for 2023
Vietnam enters 2023 with ample space to energize domestic demand, with public debt estimated at around 45% of GDP for 2023 (well below
the Vietnamese government’s cap of 60%). Much of the USD 15 bn stimulus package to be spent between the 2022-2023 period remains
underspent. As such, the Ministry of Finance announced that the 2023 state budget and investment development plan is expected at VND 726
tn (USD 30.5 bn vs. USD 27.2 bn for the revised 2022 plan).
As we believe that public infrastructure investment is set to be a key driver of growth for 2023, land clearance for public investment projects
should be the priority when for disbursement, especially for projects associated with the 2022-2023 stimulus package. Further, in order to speed
up the pace of disbursement, the Vietnamese government is poised to issue an early completion bonus to contractors, which could improve
productivity.
The key risk to performance is the otherwise well-intended anti-corruption campaign, which has inadvertently led to less public spending. Indeed,
the State Treasury has recently announced their government bond issuance plan for 2023, which is similar to the 2022 first plan, of VND 400 tn
(USD 17 bn). However, this is far lower than we expected, given the forecasted increase in state budget. Although this plan could ultimately be
revised as it is predicated om public investment progress, the cautious approach to the plan signals a bit less optimism for fiscal support.
Vietnam public debt (% of GDP) Public investment disbursement (VND tn)
Public Debt: % of GDP 700
600
60
500
55 400
50 300
200
45
100
40 -
Source: MoF, SSI Research Source: MoF, SSI Research
Key projects 2023 Total capital (VND tn) Expected completion time
North-South expressway sub-projects (2017-2020 phase)
Mai Son – Highway 45 12.11
Highway 45 – Nghi Son 5.61
Nghi Son – Dien Chau 7.29
2023
Vinh Hao – Phan Thiet 10.85
Phan Thiet – Dau Giay 12.57
My Thuan 2 Bridge 3.38
My Thuan - Can Tho expressway 4.82 2023
Hau River Fairway (Phase 2) 2.6 2023
Cho Gao canal waterway (Phase 2) 1.3 2023
North-South expressway sub-projects (2021-2025 phase)
Bai Vot - Ham Nghi 7.4
Ham Nghi - Vung Ang 10.2
Vung Ang - Bung 11.8
Bung - Van Ninh 10.5 2025
Van Ninh - Cam Lo 10.6
Quang Ngai - Hoai Nhon 20.9
Hoai Nhon - Quy Nhon 12.5
Key projects 2023 Total capital (VND tn) Expected completion time
Quy Nhon - Chi Thanh 12.3
Chi Thanh - Van Phong 10.6
Van Phong - Nha Trang 12.9
Can Tho - Hau Giang 9.8
Hau Giang - Ca Mau 17.5
Ring Road 4 (Hanoi) 85.8 2027
Ring Road 3 (HCMC) 75.4 2027
Chau Doc – Can Tho – Soc Trang (Phase 1) 45.1 2025-2026
Khanh Hoa – Buon Ma Thuat (Phase 1) 21.9 2025-2026
Bien Hoa – Vung Tau (Phase 1) 17.8 2025
Dau Giay - Lien Khuong expressway (Phase 1) ~ 42 2025
Cho Moi - Bac Kan 2.7 2025
Hoa Lien - Tuy Loan 2.15 2025
Dak Nong - Binh Phuoc 19.8 2025
Nam Dinh - Ninh Binh - Thai Binh - Hai Phong N/A N/A
Lang Son - Cao Bang 20.9 2025-
Hoa Binh - Moc Chau 22 2024
Ha Giang - Tuyen Quang 5.5 2025
Cai Mep - Thi Vai fairway upgrade 1.4 2025
Source: Government websites, SSI Research
The revival of Chinese demand in terms of exports and tourism inflows
China has finally opened its doors to the outside world after three years of a zero-COVID policy. This will almost certainly spur the revival of
Chinese tourism and imports vis a vis Vietnam, which should offset some of the negative impact of weaker global demand. However, we expect
that a full reopening will take more time to materialize and be reflected in the real economy (our base case is in Q3), as the first wave of Chinese
travelers during 2023 likely will be in the form of independent travelers (not tour groups as normally occurred pre-Covid).
In fact, in 2019, the net capital outflows of outbound tourism from China aggregated USD 254 bn for 155 mn Chinese (data source: UN), and
the China Outbound Tourism Research Institute estimates 18 mn Chinese tourists travel internationally during the first half of the year, followed
by 40 mn during the second of 2022. Interestingly, Vietnam ranked third for Chinese visitors during 2019 (nearly 6 mn arrivals). If we assume
the same for 2023, we estimate that the reopening will bring a potential annual Chinese tourist spend of USD 2.8 bn to Vietnam, which
would be a boon for hospitality-related income.
In terms of trade, Vietnam could benefit further from China’s reopening due to improved infrastructure near the Vietnam-China border.
Specifically, exports of goods, such as agricultural and agro-manufacturing products, are expected to increase after being severely challenged
by the prolonged Zero-Covid policy. The remainder (electronics, footwear, wood, and cotton) could expand at the current pace of growth. China’s
reopening could also the relocation of China’s manufacturing base to Vietnam, which should come with larger FDI for Vietnam.
Tourist arrivals and receipts (millions of person, %) Vietnam imports to China by key products (% total China’s imports)
20 12% 60%
10% 50%
15
8%
40%
10 6%
30%
4%
5 20%
2%
0 0% 10%
2018 2019 2020 2021 2022F 2023F
0%
2017 2018 2019 2020 2021
Tourist arrivals (left)
China arrivals (left) Electronics Cotton Rubber Footwear
Tourism Receipts % of Nominal GDP (right) Steel Wood Fruits Fishery
Source: CEIC, GSO, SSI Research Source: ITC, SSI Research

Tourist flows and exposure to China (2019)
Tourism revenue (% Nominal GDP) Arrivals from China (% total arrivals)

Thailand 11.3% 28.6%
Hongkong 10.4% 79.1%
Vietnam 9.8% 29.6%
Malaysia 5.7% 11.4%
Singapore 5.4% 19.4%
Taiwan 2.3% 28.1%
Indonesia 1.6% 13.5%
Source: CEIC, SSI Research
2023 pullback factors: Growth comes hand in hand with challenges ahead…
Despite strong expansion during 2022, the economy is still not close to pre-Covid growth levels (6.5% per year) despite the economic drubbing
during the 2020-2021 period (average GDP growth per year for the 2020-2022 period is estimated at 4.5% per year). We expect that the
economy will continue to follow an impressive path vs. the current global economic benchmark but could not return to pre-Covid levels yet.
Path of real GDP growth (2018Q4=100, SA)
140
Actual GDP growth Pre-Covid level path of growth
135
130 New path of growth
125
120
115
110
105
100
95
90
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019 2020 2021 2022 2023
Source: GSO, SSI Research
Broadened price pressure in 2023
One of the notable risks regarding macro stability during 2023 for Vietnam is inflation. Pricing pressures had been heavily skewed toward energy
during 1H22, but recent inflation reports suggest a broadening of pricing pressure for a wide range of categories in core goods and services.
Goods prices accelerated reflecting higher import prices, in response to the depreciation of the VND. Services inflation also appeared to accelerate
more recently, as noted by the jump in shelter prices. As these costs are the stickier elements of the inflation index, we expect that upward
momentum will remain through at least 1Q 2023. Under the low-base inflation in 1H2022, the 2023 inflation theme for Vietnam should intensify
during the first half, and then gradually decelerate during the second half. We expect a base-case average inflation of around 4.3% for 2023,
whereas average CPI for 1H23 and 2H23 should approx. 5.1% and 3.6%, respectively.
The Vietnamese government has established a good track record of keeping inflation at bay (possibly due to Vietnam having price controls on
various essential goods and services). However, after three years of a delay in government-administrated prices (electricity, wages, tuition fees,
and medical treatment), we could see an upward price adjustment in these categories during early 2023.
Food & foodstuff inflation is likely another key inflation driver for 2023, due to some Covid-19 fiscal support which was phased out (VAT back
to 10% for 2023, and the increase in the environment protection tax for fuel prices). Further, we do see some risk relating to domestic pork
prices (which accounts for 4% of the CPI basket and was well managed as noted by last year’s CPI). We expect pork prices in Vietnam to

synchronize with Chinese prices more closely (domestic pork prices have a long historical correlation to average prices in China, with the
exception being the Covid period).
Inflation scenarios vary amongst government bodies. For the price control steering committee, there are two scenarios of 4.55% and 4.98%,
with the latter assuming rising oil prices. For GSO scenarios, it’s between 4.4%-4.8% (oil prices stable in all scenarios), and for the central bank,
it’s between 3.8%-4.8% YoY (i.e 4.3%, give or take +-0.5%).
Assumption Impact on CPI (percentage point)

Fuel Price -10% -0.4
Pork prices 10% +0.4
Electricity 8% +0.8
Wage increase 21% +0.5
2023 CPI (Average) 4.3%
Headline and Core CPI Forecast (% YoY)
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Jul-22
Oct-22
Jul-23
Oct-23
Jul-18
Oct-18
Jul-19
Oct-19
Jul-20
Oct-20
Jul-21
Oct-21
Apr-23
Apr-18
Apr-19
Apr-20
Apr-21
Apr-22
Jan-23
Jan-18
Jan-19
Jan-20
Jan-21
Jan-22
-1.00
-2.00
CPI YoY Core CPI YoY
Liquidity risks: Significant build-up of debts but a soft landing expected
The Van Thinh Phat case in early Oct (and later systematic liquidity crunch), combined with aggressive tighter global financial conditions has
revealed weaknesses in the Vietnamese financial system. The significant build-up of debt over the years, not just in the form of domestic bank
loans but corporate bonds and offshore loans pose significant liquidity risks for Vietnam during 2023 and 2024. To examine how much of a
chance that this dilemma could turn to a full-blown economic crisis, we look to previous crises in Vietnam back to the 2010-2011 period. There
are some similarities between the 2010-2011 and 2022-2023 periods, including a sharp tightening in monetary policy after a period of significant
leverage.

Corporate bonds outstanding (% of GDP) External debt (USD bn, % of GDP)
Outstanding % GDP 160.0 50

VND % 140.0
40
1,800 20.00 120.0
1,600 18.00 100.0 30
16.00 80.0
1,400 20
14.00 60.0
1,200 40.0
12.00 10
1,000 20.0
10.00
800 0.0 0
8.00
600 6.00
400 4.00
200 2.00 Government external debt Private external debt
- -
2017 2018 2019 2020 2021 2022 External debt % GDP
Source: HNX, SSI Research Source: MoF, SSIR
However, we do find that there are some positive factors which suggest a soft landing for the banking and real estate sectors during 2023:
First, Vietnam’s current banking financial health is much better than it had been in the past. After the 2011 crisis, the central bank had pushed
the sector to be Basel II compliant. Two-thirds of banks have already met the 11% to 12% capital adequacy ratio level, a recommendation which
becomes a requirement by 2025. The reported NPL ratio exhibits a decline to 1.7% from 5% at the height of 2012, whereas more problematic
NPLs are estimated at over 7%. While high, this is far lower than 2012 levels.
Second, Vietnamese macro stability is well managed and has improved in terms of inflation, exchange rates, and interest rates. Inflation in
Vietnam during 2022 was well under control, and SBV rate hikes during the year were in line with global moves and reduced pressure on the
VND.
Third, additional policy support is introduced. One of the major regulations which could impact our entire outlook is the approval of draft revision
Decree 65. Given the political will to support macro stability, it is likely that regulators will work toward a more orderly restructuring and a soft
landing of the corporate bond market, despite our belief that additional policy support is needed over the near-term.
Now vs. Then - 2022-23 vs. 2010-2011
2010-2011 2022-2023
- Public debt crisis in EU - Energy crisis in EU, sparked by the Russia-Ukraine war
External context - Fed signals rate rises - Aggressive Fed rate hikes
- High inflation with surge in commodity prices - High inflation, with surge in commody prices
- Low interest rate environment (2008-2009 stimulus package) - Low interest rate environment (Covid-related support policies) led to
led to high credit growth (~34% per year) vs. real GDP growth high credit growth (~13% per year) vs. real GDP growth and
Domestic context and contributed to the real estate bubble. contributed to increasing leverage by property companies.
- Bank run at ACB and Dong A Bank, and spillover into the - Bank run at SCB led to it being placed under special control by the
domestic financial system government. Insolvency avoided.
- Arrests for misconduct related to bank-backed companies
Regulatory
- Cross ownership between banks led to the mergers within - Arrests for misconduct in the corporate bond market
crackdown
banking system
Policy rate
15% as of Dec 2010 6% as of Dec 2022
(refinancing)
Credit Growth 31.8% as of Dec 2010 14.5% as of Dec 2022
Depreciated VND (-7.3% YTD in 2011); weak market sentiment in FX
USDVND market Depreciated VND (-3.4% YTD in 2022); weak market sentiment in FX market
Inflation (% YoY) 18.1% 4.5%

Reported NPLs 3.07% (as of 2011) and 4.93% as of Sept 2012 1.76% (as of Sept 2022)
Problematic NPLs 17.2%, as of Sept 2012 Over 7%, as of Sept 2022

Credit and M2 Growth (% YoY) Average deposit and lending rates (% p.a)
60.0 25.0
50.0 20.0
40.0 15.0
30.0
10.0
20.0
5.0
10.0
0.0
0.0
12/2006
01/2006
11/2007
10/2008
09/2009
08/2010
07/2011
06/2012
05/2013
04/2014
03/2015
02/2016
01/2017
12/2017
11/2018
10/2019
09/2020
08/2021
07/2022
2009
2017
2005
2006
2007
2008
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
Credit Growth M2 Growth Deposit Rate Lending Rate
Source: IMF, SSI Research Source: IMF, SSIR
Actual reported NPLs (% total outstanding loans)
6.0000
5.0000
4.0000
3.0000
2.0000
1.0000
0.0000
03/2017
04/2021
12/2011
07/2012
02/2013
09/2013
04/2014
11/2014
06/2015
01/2016
08/2016
10/2017
05/2018
12/2018
07/2019
02/2020
09/2020
11/2021
06/2022
Source: SBV, SSI Research
Policy risks: Anti-corruption campaign on watch
As anti-corruption remains an ongoing process, market participants in Vietnam should be more familiar with the shift in mindset from doing
things right from doing things fast. As such, we don’t expect additional volatility or abrupt policy changes. While it should take time to cure
various legal conflicts, we believe that much of the legal improvement (preparation/patches) has occurred during 2022.
In terms of legal updates, the deadline for the finalized version of Land Law revision should be submitted to the government (and later the National
Assembly Standing Committee to prepare for the next National Assembly meeting in May) is expected this March. In detail, key concepts are
comprehensive planning (with a little help from digitalization), transparency (granting or renting land mostly via public auction), and more
delegation to local authorities.
Another aspect is amendment of Decree 65 which pertains to corporate bond issuance, although the deadline of Resolution 01/NQ-CP/2023
was delayed to June 2023. For the Power Development Plan VIII there appears to be no timeline although it has been delayed for years already.
As such, it is likely that the deadline continues through 2023 or beyond.
In terms of monetary legal framework, we await: i) possible fine-tuning of the stimulus package (interest subsidy program); ii) detailed guidelines
of the Circular 16/2022, which expanded the scope of monetary instruments eligible for open market operations; iii) LDR calculation; and iv)
extend foreign ownership limits for credit institutions.
On the fiscal side, we expect that the government will provide a more streamlined legal approach for public investment and public private
partnership procedures.

Appendix 1: 2022 Macro Recap: Reshaping economic fundamentals
Vietnam’s 2022 GDP accelerated to 8.0% YoY from 2.6% for 2021, marking the strongest annual growth rate since 1997. Vietnam has the
highest GDP growth in all of Asia during 2022, due to Vietnam’s rapid reopening at the beginning of the year, steady inflows of FDI, a flexible
policy mix, and a shift in monetary policy. Vietnam reopened with a broad-based increase in both domestic demand (final consumption +7.2%
YoY) and exports (+4.9% YoY). Manufacturing (+8.1% YoY), hospitality (+40.61% YoY) and wholesale/retail sales (+10.15% YoY) provided
much of thr strength, driven primarily by the reopening and tourism recovery. FDI held up well (2022 disbursement: +13.5% YoY) as Vietnam
stands out as the go-to destination for diversifying supply chains away from China. New investment occurred in electronics assembly (such as
Apple’s new investment in MacBook and AirPods) or Lego’s biggest factory yet, and Samsung Electronics’ expansion in semiconductor
component production.
Inflation was also encouraging, as average headline CPI was 3.2% YoY - far below the government’s target of 4%, whereas YoY CPI at year-end
had surged to 4.5%. The official CPI print had increased more gradually than other countries, perhaps influenced by the ample domestic supply
of agriculture and livestock, and government price controls which kept energy prices low.
Vietnam real GDP growth, by industry (% YoY) Key CPI movement (% YoY)
Food Housing utilities Medical

Agriculture, forestry and fisheries Industry and Construction
6 Transport Education Others
25 Services 5
CPI
20 4
15 3
10 2
5 1
0 0
-1
-5
-2
-10
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 -3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2018 2019 2020 2021 2022
2018 2019 2020 2021 2022
Source: GSO Source: GSO
The evolving prioritization of Vietnamese monetary policy over the course of the year was also undeniable during 2022. The SBV began 2022
on a rigid path at the start of the year, but pivoted toward a more flexible monetary policy as the year unfolded. With the use of open market
operations, FX reserve sales, and rate hikes, the exchange rate had had only depreciated 3.5% YTD - lower than regional peer.
Interest rates accelerated over the course of the year, surpassing pre-Covid levels. Some rate benchmarks (such as interbank rates or deposit
rates at private commercial banks) reached 2011 crisis levels. However, the rate situation ended the year reasonably well with an attractive USD
spread and shielding the exchange rate.

12 mo. VCB individual deposit rate and USDVND Vietnam credit outstanding (% of GDP)
26,000 16 140.00
25,000 14
120.00
24,000 12
23,000 10 100.00
22,000 8
80.00
21,000 6
20,000 4 60.00
19,000 2 40.00
18,000 0
20.00
Oct-12
Jun-13
Oct-14
Jun-15
Oct-16
Jun-17
Oct-18
Jun-19
Oct-20
Jun-21
Oct-22
Feb-12
Feb-14
Feb-16
Feb-18
Feb-20
Feb-22
0.00
2019
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2020
2021
2022
USDVND 12M VCB rates
Source: CEIC, VCB Source: SBV, IMF, SSIR
Rapid economic growth in Vietnam during 2022 came about despite aggressive global tightening of financial conditions, making Vietnam’s Asia
leading GDP growth even more impressive. Across the world, tighter monetary conditions revealed economic weaknesses which led to the need
to recalibrate economic structure and perhaps avoid other problems within the property market. Rapid economic growth was in line with the
jump in credit growth (from 80% of GDP at 2010 to over 125% of GDP at 2022), despite the SBV’s strict monitoring of bank safety rules over
the past few years. Credit flowed again into the real estate sector, along with the explosive growth of the corporate bond market.
The boom in corporate bond issuance by real estate firms was due to tighter lending standards by the SBV, requiring banks to restrict lending
to the real estate sector. As such, the government has come to the realization that unfettered expansion of this segment is unsustainable over
the long-term. Actions have included penalties for wrongdoing in the real estate and corporate bond markets, and anti-corruption campaigns in
various sectors. Despite the headwinds (corporate bond market bottleneck, etc.), however, Vietnam still managed to grow 8% during 2022.

Appendix 2: Corporate Bond Market: Liquidity bottleneck clear-up?
The Vietnamese corporate bond market during 2022 had experienced a liquidity crunch, triggered by regulatory crackdown of the market. Due
to explosive growth in the corporate bond market during 2018-2021, the government had previously signaled it wished to tighten regulations
back at the end of 2021. While reducing potential shenanigans, the regulation also tightened the funding market. As a result, concerns over
distressed corporate debt have lingered, especially with the soon-to-be expired bonds. Though the liquidity bottleneck remains unresolved, we
believe that the odds of a soft landing for the corporate bond market remain strong, though some tickers could be bruised during the process.
Recent development in the corporate bond market: Arrests on misconduct activities
The corporate bond market has increased substantially over years to reach 18% of GDP at 2021, from a mere 4% during 2017. However,
outstanding bonds declined during 2022 to only 15% of GDP due to: rising interest rates, legal framework changes, and a regulatory crackdown
over misconduct. This led to fewer new instances of issuance, and an acceleration of buybacks. By sector, real estate sector led with 44% of
outstanding bonds. The booming corporate bond issuance for real estate came from the tighter lending standards by the SBV, who had asked
banks to restrict lending to real estate.
Corporate bonds outstanding and bank credit (USD bn)
600
500
400
300
200
100
-
2017 2018 2019 2020 2021 2022
Bank credit Corporate bond
Source: HNX, SBV, SSIR
Government data suggests that the primary market, banks and securities companies have remained with the largest investors in the primary
corporate bond market during 2021 (37.9% and 34.5%, respectively). Professional retail investors only accounted for 5.4% of corporate bond
investors. In the secondary market, credit institutions held 45.8% of total bonds at 2021. Individual investors (those might not designate as
professional investors) held 30.6%. The distribution structure implies that the majority of bonds are purchased by securities companies on the
primary market, and redistributed to credit institutions, individual investors, and other institutions. Further, excluding bank bonds (due to the fact
that not many retail investors could hold these type bonds), retail participants could reach over 60% in the secondary market, not to mention
that investors from open bond funds (estimated NAV of nine local funds at VND 28.6 tn, at Sep 2022) are also retail investors.
Since late 2021, Vietnamese authorities have become more concerned with corporate bond issuers misusing funds, as well as these issuers’
ability to repay debt obligations for the coming years. Moreover, higher risks have shifted toward retail given the secondary market distribution
arrangements. As a result, the investigation of bond issuance misconduct and arrests began late 1Q 2022, which targeted Tan Hoang Minh
Group and later accelerated into a much larger case, Van Thinh Phat (VTP), in early October.

Corporate bond outstanding by sector as of Dec 2022 (%) Secondary corporate bond holders in 1H22
Real estate
Banks
Retail investors
Other financial institutions
Banks
Manufacturing
Brokers
Energy
Bond funds
Others
Other institutions
Service
Construction
Source: HNX, SSI Research Source: MoF, SSI Research
What’s going on after Van Thinh Phat?
The Van Thinh Phat arrest rattled the entire capital market, not only due to its size within the property sector but also due to their deep/complex
ecosystem (as their affiliates also accelerated bond issuance in recent years). Market confidence has collapsed, and retail rushed to redeem
from local open-ended bond funds given the panic or were asked by issuers to buy back bonds. Financial conditions remain tight due to liquidity
risks of corporate bond issuers, while contagion risk exists for other market participants, including banks, brokers, and others. Considering the
unfavorable market conditions for corporate bonds and the amount maturing near-term, it is difficult to issue new bonds or even roll over existing
debt.
We witnessed a significant trend in bond buybacks. Indeed, issuers (especially real estate firms) have been urged to buyback bonds prior to
maturity from April 2022, post-Tan Hoang Minh debacle. If we exclude bank bonds, the total amount of bond buybacks reached VND 70 tn, with
the majority coming from the real estate sector. Further, HNX data for the primary coupon rate rose during 4Q 2022, reflecting liquidity status of
the system. Non-bank bond coupons were 11.7% p.a, which was 2% higher than during 2021.
Non-bank bond buybacks (VND tn) Total NAV of top open ended bond funds (VND tn)
25 35.00
30.00
20
25.00
15
20.00
10
15.00
5
10.00
0
5.00
0.00
Jul-20
Jul-21
Jul-22
May-20
Sep-20
Nov-20
Mar-21
May-21
Sep-21
Nov-21
May-22
Sep-22
Nov-22
Jan-20
Mar-20
Jan-21
Jan-22
Mar-22
Real Estate Others
Source: HNX

Primary non-bank bond coupons vs 12 mo. deposit rate (% p.a)
14
12
10
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2021 2022
Non-bank coupon rate 12M deposit rate
Source: HNX, SSIR
How has the government responded?
The very first step, as expected, is in the form of possible regulatory changes to recently issued Decree 65/2022 for corporate bond issuance
private placement. The Ministry of Finance (MoF) has published a draft for public comment on the amendments to Decree 65. Currently, the
MoF has completed the review process and has already submitted the finalized version to the Ministry of Justice for final review and appraisal
prior to submitting it to the Vietnamese government for formal approval.
Decree 65 New draft SSI Research Comments
- Provides emergency deferral for issuers and

shields investors from “victim” bond insolvency
- Give bondholders decision as it requires the
approval from majority (65%) of bondholders,
Bond principal payment Not allowed for already Maximum two years of deferrals, with the though retail investors have limited choices
1
deferral issued bonds approval from 65% of bondholders - Two-year period too long for emergency
measures, and needs to be other simultaneous
policies to provide funding support for issuers
- Risks to bondholders if issuer cash flow is not
improved
Bond payment (principal - Aims to deleverage bond issuers

Acceptance of bond conversion to loans
2 and coupons) Not disclosed - Risk of bondholder asset evaluation as other
or other assets upon Civil Law
conversion assets are normally “not good”
Investor NAV of - Aims to boost corporate bond market demand
Definition of Delay the “180 consecutive days”
3 VND 2 bn for 180 - The resumption of bond demand and investor
professional investors requirement to Jan 1, 2024
consecutive days confidence in practice are not simple
Time schedule for each
Timeline for bond Delay the “30 days” requirement to Jan - Aims to smooth bond distribution process
4 tranche to not exceed 30
distribution 1, 2024
days
-Delay the financial check requirement for
Private placement bond private placement bond issuers to Jan 1, - Aims to reduce the issuance period and expenses
Credit rating
5 issuers require credit ratings 2024 (from Jan 1, 2023) - The credit rating market is not well-developed for
requirements
from Jan 1st 2023 -Public placement bonds require credit providing issuer assessment during early 2023
ratings from Jan 1, 2023
Source: Government website, SSI Research
The finalized draft is not much different from the proposal, but it does come with extra issuer responsibilities. If accepted by the government,
several regulations will take effect on 1 Jan 2024 (one year later than originally planned) to allow the market additional time to adjust to the new
regulations, clear up the liquidity bottleneck, and encourage market demand. Such deferred regulations include the definition of professional
investors, the timeline for bond distribution, and mandatory credit ratings.

The key amendment to the draft is the bond principal payment deferral and bond payment (principal and coupons) conversion, to relieve bond
refinancing risk. Issuers are allowed to extend bond principal payments a maximum of two years, or to modify bond terms (newly added term,
which will use for the deferral of coupon payments) upon 65% of bondholder approval. Bondholders have the full right to receive full repayment
if they opt to accept the deferred conditions.
The amendments allow for issuers and debtors to come to an agreement on the conversion of outstanding bonds into assets or loans, in lieu of
cash. If a bank or securities company is the bondholder, the conversion into a loan or asset could occur under the Law of Credit Institutions and
other related legal documents to calculate safety ratios and bad debt.
What will happen next in the corporate bond market?
While the new draft is certainly welcome and at some point will lead toward improved market sentiment, we believe that the draft version does
not resolve current problems. More action is needed to manage the risks of the corporate bond market for an orderly restructuring and soft
landing.
SSI Research believes that there are three key shortcomings which need to be addressed:
Except for the clause of bond principal repayment deferral, the remaining amendments date to the older Decree 153. The market needs a
resumption of bond demand and the restoration of investor confidence. To resume bond buyer confidence, reshaping the market structure is
needed, whereas intermediaries (banks, securities companies, bond funds) will need to comply with a higher standard of requirements and
responsibilities. Over the short-term, the authorities have put forth evidence of intermediary misconduct (rather than only issuers themselves)
which could help to regain retail confidence. Further, short-term deposit rates are at record highs (between 10.0%-10.5% for a 6-month term)
and prevent investors from returning to the bond market. Market-based actions (rather than administrative measures) are highly recommended.
Second, further policies to support issuer funding activities are in need of improvement. We believe that a better approach would be to target
issuers according to risk. For most distressed companies, the Vietnamese government likely will support commercial debt restructuring. Rescue
funds could be needed, although we recommended the government to not overly utilize this tool. For these companies, especially developers,
some of their land plots could be bought back for conversion to public housing. For high-quality issuers with short-term cashflow pressure,
banks could be called upon to provide liquidity with government guidance. For stable issuers, banks’ will provide additional liquidity support.
Third, as the corporate bond and property markets are highly correlated, policies which support property sales should provide stable cash flow
for developers, and therefore help to clear up the medium-term liquidity bottleneck. A decline in mortgage interest rates should be the key factor
for boosting home sales. House prices in key cities, such as HCMC, should hover near historical norms, with the possible easing of legal
permissions.
Corporate bond expiration schedule (VND tn)
80
70
60
50
40
30
20
10
-
Aug-23
Aug-24
Dec-24
Jun-23
Jul-23
Oct-23
Jun-24
Jul-24
Oct-24
Dec-23
Feb-23
Sep-23
Nov-23
Apr-23
Jan-24
Feb-24
Sep-24
Nov-24
May-23
Apr-24
Jan-23
Mar-23
Mar-24
May-24
Real Estate Banks Energy Others
Source: HNX, SSIResearch

2023 MARKET OUTLOOK: POUNCE SELECTIVELY
2022 – The worst year for the VNIndex since the global financial crisis in 2008.
• 2022 marked the worst year of the VNIndex since the global financial crisis of 2008, down 32.78% with extremes varying from a peak of
1,536.45 points in January to 873.78 points during the trough of November. A combination of headwinds, both expected and unexpected,
both externally and internally had weighed on the stock market. Abundant liquidity pouring into the market during Covid-19 pandemic time
(2020-2021) funneled out of the stock market at a record pace. Liquidity during 2022 averaged USD 787 mn, dropping -25% YoY. To recap,
liquidity has continuously trended lower through 2022, with Q4 liquidity being at just one third of the avalanche of liquidity during Q4 2021.
• Sector performance: Not a surprise, real estate (-32.9%) and materials (-43.4%) were the worst performers. Real estate stocks are most
exposed to crackdowns in the corporate bond market and rising rates environment. Materials saw a sharp correction in commodity prices
from H2 2022. IT (-0.5%) and utilities (-0.7%) were top performers, as these sectors were more resilient.
• Foreign flows were the silver lining: A significant market decline Chart: Foreign net inflow (USD mn)
and more stable local currency attracted foreign inflows into the
1,200
Vietnamese stock market, especially during Q4 2022. In total, for
2022, foreign investors net bought USD 1.24 bn (mostly in Q4), 1,000
which is the highest level since 2017. Injections via 14 ETFs which 800
track the Vietnam market totaled USD 1.1 bn for 2022, mostly 600
during Q4. Despite a sharp pullback in the general market, 2022 400
marked the largest ETF inflows into the Vietnamese stock market
200
in the history of the bourse.
-
2017 2018 2019 2020 2021 2022
Source: EPFR

VN Index performance VN30, VN Midcap, VN Smallcap performance YTD
110%
1,600 8.00%
1,500 6.15% 6.00% 100%
4.00%
1,400 1.99%2.00% 90%
0.76%
0.73% 0.00%
1,300
-1.29% -3.94%-2.00% 80%
1,200 0.14%
-4.00%
1,100 -6.00% 70%
-7.36% -8.00%
1,000 -5.42% 60%
-9.20% -10.00%
900 -8.40% -11.59% -12.00%
50% VN 30 VN70 VNSC
800 -14.00%
40%
10/20/2022
3/25/2022
12/31/2021
11/15/2022
11/28/2022
12/22/2022
1/14/2022
1/27/2022
2/16/2022
3/1/2022
3/14/2022
4/7/2022
4/21/2022
5/6/2022
5/19/2022
6/1/2022
6/14/2022
6/27/2022
7/8/2022
7/21/2022
8/3/2022
8/16/2022
8/29/2022
9/13/2022
9/26/2022
10/7/2022
11/2/2022
12/9/2022
Index Movement MoM performance
Source: Bloomberg Source: Bloomberg
Liquidity of VN Index, VN30, VN Midcap and VN Smallcap New retail accounts (monthly)
35,000 600,000
30,000
500,000
25,000
400,000
20,000
15,000 300,000
10,000
200,000
5,000
100,000
0
-
Jul-18
Oct-18
Jul-19
Oct-19
Jul-20
Oct-20
Jul-21
Jul-22
Jan-21
Oct-21
Oct-22
Jan-18
Apr-18
Jan-19
Apr-19
Jan-20
Apr-20
Apr-21
Jan-22
Apr-22
VNINDEX Index VN30 Index VN70 Index VNSC Index
Source: SSI Research Source: VSD

Returns by sector: 2022 VN Index: Sector weighting
0.1% 1.5% Unclassified

-0.47% Information Technology 0.0% 0.8% 2.4%
-0.70% Utilities Communication Services
-10.82% Consumer Staples 3.4% Health Care
-15.59% Health Care 6.9% Energy
-16.73% Consumer Discretionary Information Technology

39.0% 7.6%
-18.81% Financials Consumer Discretionary
-25.82% Industrials Materials
7.9%
-32.13% Energy Utilities
-32.78% VNIndex Industrials
-32.88% Real Estate 12.3% Consumer Staples
-43.36% Materials Real Estate
-45.17% Unclassified 18.0% Financials
-56.60% Communication Services
-60% -50% -40% -30% -20% -10% 0%

Regional performance Regional 2022 forward P/E (as of December 30th 2022)
10.00%
MoM YTD 18.00
16.08
5.00% 15.02
16.00 14.51
14.01
0.00%
14.00
-5.00% 11.47
12.00 10.64
-10.00%
10.00
-15.00%
8.00
-20.00%
6.00
-25.00% 4.00
-30.00% 2.00
-35.00% -
-40.00% Vietnam Thailand Philippines Indonesia Malaysia China
Liquidity, via order matching (mn USD) Total trading value (bn VND)
1,700 7,000,000
1,600
1,500
1,400 6,000,000
1,300
1,200 5,000,000
1,100
1,000
900 4,000,000
800
700
600 3,000,000
500
400 2,000,000
300
200
100 1,000,000
0
Sep-18
May-17
May-18
May-19
May-20
May-21
May-22
Sep-17
Sep-19
Sep-20
Sep-21
Sep-22
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Jan-22
-
2015 2016 2017 2018 2019 2020 2021 2022
Source: Bloomberg
Net foreign flows (mn USD) Foreign and local trading, by value (bn VND)
800 1,000,000
900,000
VND bn
600 800,000
700,000
400 600,000
500,000
200 400,000
300,000
0 200,000
Jul-22
Sep-22
May-20
Jul-20
Nov-20
May-21
Jul-21
Nov-21
May-22
Nov-22
Sep-20
Sep-21
Jan-20
Mar-20
Jan-21
Mar-21
Jan-22
Mar-22
100,000
-200 -
May-15
May-16
May-17
May-18
May-19
May-20
May-21
May-22
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Sep-21
Sep-22
Jan-16
Jan-19
Jan-15
Jan-17
Jan-18
Jan-20
Jan-21
Jan-22
-400
-600 Foreign trading value Local trading value
Source: Bloomberg Source: Fiinpro

ETF flows Active fund flows
Vietnam equity - passive fund 100 Vietnam equity - active fund 60

2000 250
0 40
200
1500 (100)
150 20
(200)
1000 100 0
(300)
500 50 (20)
(400)
0
0 (500) (40)
-50
(600) (60)
-500 -100
Jul-20
Sep-20
May-20
May-21
Jul-21
May-22
Jul-22
Nov-20
Sep-21
Nov-21
Sep-22
Nov-22
Mar-20
Mar-21
Mar-22
Jan-20
Jan-21
Jan-22
May-20
Jul-20
May-21
Jul-21
May-22
Jul-22
Sep-20
Nov-20
Sep-21
Nov-21
Sep-22
Nov-22
Mar-20
Mar-21
Mar-22
Jan-20
Jan-21
Jan-22
Flow US$ mil (RHS) Cum.Flow Flow US$ mil Cum.Flow
Source: EPFR Global

2023 Market Outlook: Pounce Selectively
• After a blowout 2022, the Vietnamese stock market has shifted into gear and leapt into 2023, with both positives and negative variables
influencing the market: A distinct positive is that we see market valuation has already priced in many risks, including revaluation risk from the
rising interest rate cycle, as well as a weaker growth outlook for 2023. Market P/E for 2023F was 9.2x as of December 30, 2022, which is a
35% discount to the median market P/E of 14.16x during 2009-2022. Another important plus for 2023 is that we expect the VND will exhibit
more elements of stability this year. On the other hand, a liquidity crunch might still exist through the year, as issuers might be pressed by a
tight corporate bond payment schedule. Additionally, though interest rates will likely peak, rates will only reduce by a mild pace. Such a pace
would be likely to prolong the less-than-desirable situation in the property market. Expectations run high regarding an effective Decree 65
revision to help revive the corporate bond market, but it could take some time to have the desired effect.
• Our base case is for the market to have an upside of 15% for the VNIndex by year-end, slightly higher than the earnings growth estimate
of 13.8% for 2023 (VN Index target of 1160 by year end). Please note that our VNIndex year-end target might be lower than the rallies that
might occur intrayear. Given a lot of macroeconomic challenges on the agenda to be fixed, we expect the equity market will be better than
2022, but is still too soon for a strong bull market to come back in the short term. Our key assumptions for the market can be distilled to 3
main dynamics: (i) Regarding the corporate bond market, default risks still exist - especially for smaller issuers. (ii) Big players in the corporate
bond market might be still safe. Follows ‘too big to fail’ theme, but still needs to be watched closely. (iii) The crackdown on corruption is still
going on, but will not result in a large impact in the market like in 2022.
• There will be 3 revolving themes for the stock market through the year: (i) Public investment; (ii) Chinese reopening; (iii) Flow from
foreign investors. Public investment has been a steady yet somewhat slow-acting catalyst for the stock market over the years, and this year
there is no exception as disbursement has been slow and much of the $15 billion earmarked for the stimulus package to be spent between the
2022-2023 period remains underspent. The Ministry of Finance announced that the 2023 state budget and investment development plan is
expected at VND 726 tn ($30.5 billion vs. $27.2 billion USD for the revised 2022 plan). The Chinese reopening theme is expected to play out
in full. Chinese tourists accounted for 32% of international inbound air traffic to Vietnam during 2019, while China was the largest tourist
destination for Vietnamese. We expect a gradual recovery in arrivals from China to Vietnam from 2Q 2023, prior to peaking during the 2023
summer holiday season. International arrivals in 2024 could ultimately surpass 2019 levels, which would mark a full recovery for the
Vietnamese aviation industry.
• However, we still expect strong volatility for the market given a low degree of expected trading liquidity (we expect that the market’s ADTV
will decline -25% YoY during 2023). Overall market liquidity will be low, therefore the market could easily change direction when there is
significant flow action, such as from foreign investors. Foreign investors started strong net buying since the 2nd week of November, and have
been a key driver for market performance since then. However, it might be still early to conclude that the Vietnamese stock market can bottom
out even before the global recession starts having an impact on Vietnam (and before all the macro challenges can fade out). Short rebounds
during the year may be based on the expectation that there could be a soft-landing scenario for both external and internal challenges, while
market valuation is attractive for the long-term horizon.
• As such, we believe there are good opportunities to BUY for the long term horizon during the time when market is negatively impacted by short-
term liquidity crunches.
Key catalysts to watch in 1H2023
• High inflation (expected to peak in 1Q23) to have negative impact on consumption.
• Tight corporate bond payment schedules for issuers (some bond payment schedules for various issuers was rolled over to 1Q23 from 4Q22);
pending wrongdoing cases relating to corporate bonds to be resolved
• Fed rate hike in Feb, Mar, and May will keep interest rates at high levels
• Revision to Decree 65 on corporate bonds to be approved in 1Q per our assumption

• Vinfast IPO after Lunar New Year
• Weak corporate earnings, with some sectors trading around their earnings growth trough
• Weak property market
• China reopening, but more likely to impact the Vietnamese tourism sector from the end of 2Q (summer holiday).
In the second half of 2023, there are a lot of questions in order to decide market direction: If consumption is to weaken, how weak would it be?
Will the global recession end soon? Is there any strong downside risk for interest rates? Will there be progress in anti-corruption efforts? Will we
see real, tangible implementation of the revised Decree 65?
In a bull case, though macro data looks somewhat weak, the market might be able to look past that and instead position for 2024 recovery.
However, we should not ignore the lagging impact of weak corporate earnings or weaker FDI, which might only start to show from 2H23.
Chart: Market P/E
27.00
24.00
21.00
18.00
15.00
median: 14.15
12.00
9.00
6.00
Mar-10
Mar-13
Mar-16
Mar-19
Mar-22
Jul-10
Jul-13
May-15
Jul-16
May-18
Jul-19
May-21
Jul-22
Aug-09
Aug-12
Aug-15
Aug-18
Aug-21
Apr-09
Jun-11
Sep-11
Apr-12
Jun-14
Sep-14
Dec-15
Jun-17
Sep-17
Dec-18
Jun-20
Sep-20
Dec-21
Jan-09
Feb-11
Jan-12
Feb-14
Jan-15
Feb-17
Jan-18
Feb-20
Jan-21
Nov-09
Oct-10
Nov-12
Oct-13
Oct-16
Nov-19
Nov-22
P/E
Source: Bloomberg

Consumer Discretionary - Textile & garment: Expecting headwinds, as sales volume

projected to decline
2023 outlook: Negative
Top picks: N.a
2022 Recap: Underperform – Inflation triggered slow orders in 2H22
Sector performance: Underperform
Industry performance in 2022

The textile and garment sector tumbled -41% in 2022,
underperforming the VN Index by 10.3%. Worst performers 130%
included: NDT (-70% YTD); ADS (-68% YTD); GIL (-64% YTD); VGT 120%
(-60% YTD); and TNG (-52% YTD). Yarn stocks, such as NDT and 110%
ADS, were highly sensitive to the sharp fall in cotton prices during 100%
2H22. Garment shares experienced decelerating quarterly earnings 90%
growth, with GIL falling more significantly than others as it 80%
completely lost the Amazon order book from 3Q22, which 70%
accounted for over 80% of the company’s revenue. 60%
50% VNIndex Consumer Discretionary Textile & garment
40%
Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22
Source: Bloomberg, SSI Research
Key highlights of the sector in 2022
• The expected… and the unexpected
✓ Having experienced impressive growth during 1H22, encouraged by a burst of pent-up demand (global non-luxury sales +11% YoY in
1H22), the textile and garment sector entered a difficult period mid-way through the year, given geopolitical tensions, unrelenting inflation,
and slumping consumer sentiment. McKinsey forecast global non-luxury sales to decline -5% YoY in 2H22. Luxury and discount fashion
continued to outperform, while physical retailers too rebounded in 2022.
✓ In Vietnam, textile and garment exports are estimated to reach USD 42 bn for 2022 (+3.8% YoY and +11% compared to 2019). During
9M 2022, export value for the entire sector reached USD 35 bn (+20% YoY), a record high growth level for the past ten years. The trend
quickly reversed during Oct’22, as export values declined YoY for the first time this year (-3% YoY), after exhibiting signs of decelerating
growth during Sept’22 (+12% YoY vs +39% YoY in Aug’22). Yarn exports were the first to experience a decline during July ’22 (-162%
YoY), following a sharp fall in global cotton prices during late June ’22 (-30% from peak). Garment exports recorded a -4% YoY pullback
by value during Nov’22 which was in line with weakened global demand.

Vietnam garment export Vietnam yarn export prices (USD/ton) Cotton price (USD/lbs)
USD mn
160
4,000 53% 60%
140
3,500 5,000
50%
4,500 120
3,000 35% 40% 4,000
28% 3,500 100
2,500
23% 22% 30% 3,000
80
2,000 18% 19% 2,500
20%
1,500 11% 11% 2,000 60
4% 10% 1,500
1,000 40
-4% 1,000
500 0%
500 20
0
0 -10%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jul-20
Jul-21
Jul-22
Oct-20
Oct-21
Oct-22
Jan-20
Apr-20
Jan-21
Apr-21
Jan-22
Apr-22
2020 2021 2022
2021 2022 % YoY
Source: Customs, SSI Research Source: Customs, Bloomberg, SSI Research
✓ To recap, listed companies posted mixed results during 9M 2022. Yarn manufacturers were the worst earnings growth performers (NDT,
ADS, STK), as export ASP began declining sharply during July ’22. Yarn export ASP declined -6% YoY during 3Q22 and -46% during
4Q22, an intimating expected losses for yarn manufacturers for 2H22. Garment manufacturers based in southern Vietnam (VGG, GIL,
TCM) were the best earning growth performers thanks to their low-base earnings in 2H21, being affected by Covid-19 lockdown.
Ticker Exchange 9M22 Sales 9M21 Sales 9M22 sales growth 9M22 NPATMI 9M21 NPATMI 9M22 NPATMI growth
VGT UPCOM 14,207,735 11,112,232 27.86% 651,958 568,823 14.62%
VGG UPCOM 5,818,216 4,389,977 32.53% 135,359 38,349 252.97%
TNG HNX 5,262,345 4,080,498 28.96% 231,368 168,783 37.08%
MSH HOSE 4,379,608 3,448,205 27.01% 307,479 333,749 -7.87%
GIL HOSE 2,904,673 2,751,583 5.56% 351,618 204,221 72.17%
TCM HOSE 3,400,055 2,706,898 25.61% 219,785 118,135 86.05%
STK HOSE 1,684,714 1,545,633 9.00% 197,483 203,274 -2.85%
PPH UPCOM 1,314,799 1,172,024 12.18% 382,751 297,752 28.55%
ADS HOSE 1,327,840 1,031,007 28.79% 58,143 63,913 -9.03%
NDT UPCOM 992,702 973,240 2.00% 45,909 64,928 -170.71%
Total VND mn 41,292,687 33,211,297 24.33% 2,581,852 2,061,927 25.22%
Source: Companies, SSI Research
Sector valuation: Over the past ten years, textile and garment names have traded at an average P/E of 8x. This year, the entire industry has been
de-rated from 14x at the beginning of the year to 6x following weak earnings growth during 2022 and a continued negative outlook for 2023.
Historical low valuations for the sector reached 5x between 2010-2011 and 2020, which indicates that stock valuations could fall further near-term,
a time when companies are expected to record earnings contractions for 2023.

2023 Expectation
• Looking toward 2023, we expect inflation to continue to challenge the market. McKinsey forecasts global sales for luxury fashion to grow
between +5-10% YoY, while the remainder of the market to experience a contraction of -3% YoY. Beyond the differences between luxury
fashion and other segments within textile & garment, regional differences should also be pronounced. The US economy, despite an expected
slowdown, is expected to be more robust than other major economies.
US EU China Japan South Korea

2022 Demand (USD bn) 116.9 264.7 34.3 36 8.8
22/21 (% YoY) -9% 1% 7% 8% -46%
2023 Demand (USD bn) 117.4 260 33 37.2 11.3
23/22 (% YoY) 0.4% -1.8% -3.8% 3.3% 28.4%
Source: Vinatex, SSI Research
• Inventory digestion is already underway at key retailers, most aggressively among sportswear players. However, data from the US still suggests
an elevated level of inventory at the overall sector which is expected to last through 2Q23. Orders should start accelerating (QoQ) during 3Q23,
although the prospect of earnings growth (YoY) remains uncertain during 2H23.
Chart: US retail inventory - apparel (USD mn)
60,000
58,000
56,000
54,000
52,000
50,000
48,000
46,000
44,000
42,000
40,000
Jul-20
Jul-21
Jul-22
Sep-20
Nov-20
Sep-21
Nov-21
Sep-22
May-20
May-22
Jan-20
Mar-20
Mar-21
May-21
Jan-21
Jan-22
Mar-22
Source: U.S. Census Bureau, SSI Research
• VITAS forecasts that Vietnam textile and garment export value will reach between USD 45 – USD 47 bn (7%-11% YoY) during 2023. We deem
this target to be rather aggressive given that the yarn sub-sector has begun recording losses during 4Q22, and Vinatex also forecasts garment
orders to decline -25% YoY during 2023.
• It is also anticipated that customers will reduce discretionary spend and down trade, and that retail sales will be driven by promotions and
discounts. Subsequently, we expect gross margins of the entire value chain to be under pressure, with local yarn and garment manufacturers
most vulnerable with a lower ASP.
• Meanwhile, we believe that raw material cost pressures have subsided at manufacturers, as cotton and oil prices have significantly declined
since 2Q22. Declining fabric costs should partially offset a lower ASP. However, we still expect that overall gross margins will fall, because (i)
local manufacturers have little negotiating power compared to retailers (especially during a period of weak demand) and (ii) basic wages are
expected to increase by 20% YoY. With interest rates expected to be high throughout the year, rising financial expenses likely will weigh on net
margins especially for those with high gearing ratios such as TNG.
• Valuations could decline toward the sector’s historical low P/E level of between 4x-5x (during 2010-2012 period, also due to global economic
slowdown) through 3Q23. As most companies earnings have peaked during 3Q22 (in absolute value), we expect earnings growth to decline
most significantly in 3Q23 and valuations to slowly rebound to the sector’s historical average P/E of 8x, as recovery signs should prevail
starting 4Q23.
• Catalyst/risks: (i) the US consumer is stronger/weaker than expected; and (ii) commodity prices higher/lower than expected and (iii)
competition from other low-labour cost countries such as Bangladesh and Pakistan as well as near-shoring manufacturing hubs.
Target
Current Price
% Upside Price Net Profit Growth P/E ROE Dividend Yield (%)
Ticker (VND)
(VND)
in 1yr in 1yr 12/30/2022 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F
MSH -10% 29,700 33,000 90.8% -20.7% -15.6% 4.0 7.5 8.9 30.1% 21.9% 16.7% 13.7% 7.6% 7.6%
STK -9% 24,900 27,500 92.9% -10.4% -9.3% 13.9 9.0 9.9 23.8% 17.9% 14.4% 2.7% 5.5% 5.5%
TCM -30% 36,900 53,000 -48.0% 93.4% -15.8% 38.4 15.7 18.7 8.4% 15.3% 11.7% 0.8% 0.9% 0.9%
TNG 12% 14,894 13,300 51.6% 38.7% -25.4% 13.5 4.3 5.6 17.8% 20.2% 13.5% 2.5% 3.8% 3.8%

Consumer Discretionary - Retail: Navigating the trough

2023 outlook: Neutral
Most Preferred: PNJ
2022 Recap: Outperform, thanks to pent up consumer demand
Sector performance: OUTPERFORM

Retail sector valuations declined -24%% in 2022, though shallower
than the VNIndex decline, which tumbled -32% in the year. Within the 130%
sector, PNJ was the best performer, as its share price during 2022 120%
110%
actually increased 15% resultant of a near doubling of net income
100%
growth (+96% in Jan-Nov ‘22), a successful capital raise, and low 90%
leverage. Stocks with a high exposure to ICT & CE and relatively high 80%
70%
leverage performed poorly (MWG’s and DGW’s share price dropped - 60%
32% and -42% YTD, respectively). Meanwhile, resilient performance 50%
VNIndex Consumer Discretionary Retail
40%
within the FRT pharmacy segment allowed the shares to gain 7% YTD
30%
despite the company’s ICT segment suffering from impact of the
economic downturn.
• What we have expected
• Inflation pressure escalated from June 2022, when gasoline prices marked a record high. The increase in rental and education fees
pressured consumers further. With relatively high inflation during 2Q22 and 3Q22, discretionary spend was somewhat impacted, but still
exhibited a positive YoY increase due to last year’s low base. From 4Q22, the impact of high inflation on discretionary spending was
revealed.
Chart: CPI YoY growth
5.0000
4.0000
3.0000
2.0000
1.0000
0.0000
-1.0000
-2.0000
Source: GSO
• ICT & CE (mobile phones and consumer electronics) retail: Resilient from last year low base: During 9M 2022, MWG revenue from the
ICT & CE segments increased by 27% YoY, while FRT revenue from ICT rose 32% YoY. However, ICT & CE revenue at MWG declined -
18% YoY during October and -22% YoY in November, reflecting last year high base and weak demand despite the high season.
MWG's ICT & CE revenue growth (%) FRT's ICT revenue growth
140% 120%
120% 122%
100%
97%
100%
80%
80%
62% 60%
60%
51% 53%
40% 40% 38%
36% 36%
20% 22% 21% 22%
20% 22% 22% 23% 22%
13% 20% 21%
10% 10%
3% 2%
0% 0% -1% 0%0% -1% 2% -2% 6%
-7% -9% 0%
-16% -3%
-20% -18% -18%
-22% 1Q20 2Q20 3Q20 4Q20 -11%
1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22
-23%
-28%
-20%
-40% -23%
-28%
-48%
-60% -40%
Source: MWG, SSI Research Source: FRT, SSI Research
• Jewelry: During 1H22, we witnessed a healthy recovery in gold demand of 7.8% YoY in Vietnam, with the absolute value surpassing that
of pre-covid years. The rebound in demand is explained by pent up demand and the demand for gold to store value in the context of rising
inflation. PNJ retail sales almost doubled (+92% YoY), as the company expanded its client base and served existing clients more
efficiently, gaining share. While 1H22 gold demand surpassed that of pre-covid years, demand during 3Q22 exhibited a slight decline vs.
pre-covid.
Chart: Quarterly gold demand
25.0 300%
264%
250%
20.0
200%
15.0 150%
100%
85%
10.0 50%
11% 6% 11%
0%
5.0 -15% -11%
-10%
-50% -49% -50% -50%
- -100%
Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22
Gold demand in volume (tons) Growth (% YoY)
Source: WGC, SSI Research
• Modern trade pharmaceutical chains have been expanding rapidly. During 1H22, the omicron variant began spreading. As symptoms
related to omicron-type infections are mild, people tended to self-medicate rather than seek treatment, allowing the drugstore channel to
gain clients from hospitals. To strengthen health, patients tend to purchase supplements which are mainly sold via modern trade
drugstores rather than traditional drugstores. In addition, issues of the medicine shortage may have helped modern trade drugstores to
win customers from traditional drugstores, as the latter normally do not have enough bargaining power to secure adequate inventory.

The Ministry of Health set a deadline to implement electronic prescriptions whereby drugstores need to equip themselves with adequate
systems to connect to the national electronic prescription system. This made it difficult for traditional drugstores to comply, while modern
trade drugstores quickly adapted to the new regulations.
Nevertheless, An Khang and Pharmacity slowed new openings notably during 2H22, as demand for supplements and the need for self-
medication has eased. Meanwhile, Long Chau continues to aggressively open new stores, as the chain focuses more on prescription
drugs and drugs for chronic diseases rather than on supplements or medicine for mild symptoms.
• According to e-Conomy SEA, the digital economy (measured by gross market value – GMV) is estimated to reach USD 23 bn (+28%
YoY) in 2022, which includes e-commerce GMV of USD 14 bn (+26% YoY). Ecommerce continued to attract customers post-pandemic
due to its convenience and competitive prices. Online revenue at MWG and FRT surged 52% and 39% YoY, respectively, over 9M 2022.
Chart: Ecommerce GMV, USD bn
16 0.7
14
14 60% 0.6
12 11
0.5
10
8 0.4
38%
8
0.3
6 5 26%
0.2
4
2 0.1
0.4
0 0
2015 2019 2020 2021 2022
Ecommerce GMV YoY growth (%)
Source: e-Conomy SEA
• What we have not expected
• From 4Q22, Vietnam export growth has slowed down notably. Labor intensive industries (textile & garment, aquaculture, wood and
tourism) are large contributors to total Vietnamese exports. As such, weakening exports weighed on disposable income and discretionary
spend.
• Grocery chains performance deteriorated relative to last year’s high base, when wet markets in Ho Chi Minh City were shut. In addition,
while household income was hurt by macro weaknesses, consumers switched their shopping habits from modern trade grocery stores
to wet markets for the cheaper prices. With the change in consumer shopping habits, MWG restructured the operation of the Bachhoaxanh
chain during 2Q22, as old inventory was cleared, the product portfolio was changed, costs were cut, and store formats were standardized.
MWG ceased new store openings to focus on improved efficiency. As a result, Bachhoaxanh revenue decreased -7% YoY between Jan-
Nov ‘22. Winmart revenue declined -9% YoY in 9M22 despite MSN continuing to open new stores in 2022. However, the gross profit
margin of Winmart improved to 22.9% during 9M22 from 19.5% during 9M21, while that of Bachhoaxanh deteriorated due to massive
discounts.

Chart: Gross profit margin
30.0%
28%
27%
26%
25.0% 25% 25% 25% 25%
23.1% 23.4%
21.9% 22.2%
21.1%
20.0%
18.9%
17.9%
15.0%
10.0%
5.0%
0.0%
1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22
Winmart Bachhoaxanh
Source: Companies
• Some retailers borrow in USD, taking on higher FX losses if the USD appreciates. Interest rates also picked up. USD-denominated
debt for MWG was USD 370 mn at 3Q22 (38% of its total debt), although the company repaid USD 120 mn in late November. By contrast,
USD- denominated debt for DGW accounted for <1% of its total debt at 3Q22, but the company’s COGS could increase along with the
appreciation of the USD. USD-denominated debt at FRT accounted for 6% of its total debt at 3Q22. FRT is most vulnerable to interest rate
hikes, while PNJ has the lowest leverage amongst retailers.
Chart: D/E ratio
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
-
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22
FRT MWG DGW PNJ
• Corporate earnings results
• MWG: Revenue and PBT for 9M 2022 was VND 102.8 tn (+18% YoY) and VND 5.1 tn (+16% YoY), respectively. Excluding one-off
expenses related to the closure of non-performing grocery stores, core earnings would have increased 28% YoY due to the recovery of
the ICT & CE segments. The performance of the ICT & CE segments began deteriorating the October-November period, with revenue
declining -18% and -22%, respectively. This can be explained by: (1) dismal demand from macroeconomic headwinds; (2) delay in the
delivery of the iPhone 14s; and (3) a 4Q21 high base. The poor performance of the ICT & CE segments combined with the sharp increase
in financial expenses between October and November dragged net income -37% and -67% lower, respectively. Revenue and net income
for the Jan-Nov period arrived at VND 123.7 tn (+12% YoY) and VND 4 tn (-9% YoY), respectively, having accomplished only 88% and
63% of annual targets.
• FRT: Revenue and pretax profit during 9M 2022 aggregated VND 21.7 tn (+55% YoY) and VND 369 bn (+169% YoY), respectively,
accomplishing 80% and 51% of the annual targets. Pretax profit of the ICT segment during the period improved 146% YoY due to: (1) the
recovery in demand post-lockdown; (2) cost cutting efforts; and (3) high sales prices of laptops during 1Q22 when the demand for
work/study from home was exceptionally high. Despite massive new store openings, pretax profit withing the pharmacy segment improved
notably to VND 34 bn (vs VND 1.2 bn during the same period last year) due to both: (1) consumer behavior of stockpiling drugs and
supplements in 1Q22; and (2) improved profit margins. However, we estimate 4Q22 earnings to tumble -72% YoY due to: (1) dismal
demand from macroeconomic headwinds; (2) delays in the delivery of iPhone 14s; (3) 4Q21 high base; and (4) and increase in financial
expenses.
• DGW: Revenue and net income during 9M 2022 was VND 18 tn (+38% YoY) and VND 528 bn (+60% YoY), respectively, accomplishing
68% and 66% of annual targets. Mobile phones and office equipment sales recorded solid growth of 41% and 49% YoY, respectively, due
to the recovery in demand from last year’s low base. Laptop sales rallied 28% YoY (mainly in 1Q22) due to work/study from home
demand. DGW began distributing home appliances during 3Q22, and this segment accounted for 3% of the total sales for 3Q22.
Nevertheless, 4Q22 earnings may drop -32% YoY due to: (1) dismal demand due to macroeconomic headwinds; (2) delays in delivery of
iPhone 14s, (3) 4Q21 high base effect; and (4) an increase in financial expenses.
• PNJ: Revenue and net income through 9M 2022 amounted to VND 25.6 tn (+104% YoY) and VND 1.3 tn (+132% YoY), respectively.
Such performance can be explained by: (1) pent up demand; (2) PNJ’s efforts to expand its client base, including opening stores in Tier
2-3 areas; and (3) levering existing clients more effectively. Concurrently, the gross profit margin during 9M 2022 declined from 17.4%
vs. 18.5% during the equivalent of 2021. This was due to the company opening more in Tier 2-3 stores and that customers prefer jewelry
with higher gold content to store value. October-November net income growth decelerated to +15% YoY (vs 9M22 net income growth of
132% YoY) on weakened demand and last year’s high base. We note that PNJ focuses on mid-high-end customers, who may not have
yet been impacted by the economic downturn.

What to expect in 2023
• Discretionary consumption should remain sluggish, at least through 1H23 due to macroeconomic headwinds. During 1H23, we expect
electricity prices, healthcare, and tuition fees to rise. VAT should increase to 10% (from the current rate of 8%) from January 1, 2023. These
multiple factors should weigh on the purchasing power of consumers. Under our base case, we assume that inflation will peak in 1H23 and
then ease in 2H23. We estimate spending on ICT & CE will decline -10% YoY and gold demand to remain flat in 2023, with weak spend through
1H23 and a gradual recovery beginning 2H23.
• Market consolidation will be more apparent during a global economic downturn. E-commerce platforms normally offer deep discounts,
generating thin profit margins. In the context of rising costs and weak demand, online retailers may incur losses, hence loosing market share.
Small retailers who cannot access bank credit may lose market share. As such, brick-and-mortar retailers with solid cash flow may gain share.
• Squeezed profit margin due to weak trading. Accelerating inflation will increase costs to retailers, as its difficult to pass along the increased
costs onto customers. Consumers have been looking for deep discounts and down-trading which may stretch into 2023.
• Financial expenses may ease in 2023. Given the Street’s belief in a softer increase of the US Fed funds rate during 2023, we forecast a
reduced USD appreciation. Similarly, we expect that the average interest rate may still increase in 2023, but more slowly (between 50-100 bps
in 2023 vs 200-300 bps in 2022). However, retailers may choose to stock up with less inventory in anticipation of weak demand – reducing
pressure on interest expenses. As a result, total financial costs for retailers with conservative new opening guidance during 2023 may decline.
• Capital raising is an influential catalyst for retailers, especially in the context of rising borrowing costs. MWG delayed its capital raise for
its grocery subsidiary from 1Q23 to 3Q23. A successful equity issuance would relieve pressure on financial expenses.
• Valuation: At year-end, the valuations of PNJ and MWG appear fair at a 2023F P/E of 15.0x and 13.2x, respectively. FRT is expensive at 19.4x.
Meanwhile, DGW’s 2023F P/E has declined to a more attractive level of 7x on decelerating earnings growth versus the 2017-2021 period.
Given that it is widely perceived that earnings growth may be negative 1H23 for ICT & CE retailers, we believe that there may be opportunities
for long term investors to accumulate shares during periods of price weakness before regaining positive earnings growth in 2H23.
Target
Current
Ticker Price (VND)
(VND)
MWG 1% 43,500 42,900 25.0% -10.8% 8.4% 19.8 14.4 13.2 27.3% 20.3% 19.6% 1.1% 3.5% 3.5%
FRT -13% 60,000 69,000 4244.8% -10.7% 8.3% 17.8 21.0 19.4 30.6% 21.8% 20.4% 0.5% 1.4% 1.4%
DGW 18% 44,600 37,750 146.1% 4.7% 17.4% 16.6 8.9 7.6 44.7% 33.5% 30.5% 0.8% 2.6% 2.6%
PNJ -2% 87,800 89,900 -3.8% 78.5% 13.7% 23.3 16.7 15.0 18.3% 24.8% 21.9% 2.1% 1.5% 1.5%

Most preferred: PNJ VN
150%
130%
110%
90%
70%
50%
30%
Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22
VNIndex PNJ
• Share price (30-Dec-22): VND 89,900; 1Y Target price: VND 87,800
• Investment thesis:
✓ Low leverage in a rising interest rate environment. The D/E ratio for PNJ is the lowest among retailers (only 0.25x). With a safe balance
sheet, the company is well positioned to gain share, while smaller competitors close during the upcoming downturn.
✓ Focus on mid and high-end customers, where demand is more resilient through an economic downturn.
✓ Market leader who will gain market share. Branded jewelry now accounts for ~40% of demand, and PNJ has a 57% market share
among branded jewelry.
• Risks
✓ Headwinds in gold prices could undermine gold bar sales growth.
✓ Inflationary pressure may weigh on disposable income, and ultimately jewelry demand.
(VND bn) 2018 2019 2020 2021 2022F 2023F

Net revenue (VND bn) 14,571 17,001 17,511 19,547 33,613 38,759
Net income (VND bn) 960 1,194 1,069 1,029 1,837 2,088
Net income growth (%) 32% 24% -10% -4% 78% 14%
EPS (VND) 5,365 4,931 4,308 4,132 7,173 7,966
ROE (%) 28.7% 28.7% 21.8% 18.3% 24.8% 21.9%
Dividend yield (%) 1.9% 2.1% 2.5% 2.1% 1.5% 1.5%
Debt/Equity 0.42 0.57 0.35 0.45 0.25 0.25
P/E (x) 17.37 17.27 18.80 23.28 16.72 15.05
P/B (x) 4.16 4.19 3.51 3.64 3.35 2.86
EV/EBITDA (x) 12.93 12.89 12.62 16.62 11.68 10.14
Source: Company, SSI Research

Consumer Discretionary - Automobile: Back on track with the pandemic in the rearview
mirror
Top picks: N.a
2022 Recap: Outperform due to pent up demand
Sector performance: Outperform

Pent up demand from Covid 19 has boosted the auto sales in 2022.
The chip shortage has plagued production worldwide, but created
opportunity for dealerships to charge as much as 50% more per
vehicle.
The auto industry essentially stood pat for 2022, outperformed the VN
Index by 35%. VEA represents 90% of industry market cap, and the
share price remained stable during the 2022 downturn. The best
performer is City Auto Ford (CTF), with a 56% share price appreciation
due to high demand for Ford vehicles. HAX ended the year with a 34%
decline due to market expectation that 2022 was already the peak in
terms of earnings.
Pent-up demand and government support were two main drivers that helped along the recovery of the automobile sector. During 2022, there
were approximately 3 million motorbikes sold (+20% YoY) which is still lower than pre-Covid level (2018: 3.3 million; 2019: 3.2million). As for
four-wheeler, there were 404,635 cars sold among Vietnam’s Auto Manufacturer Association (VAMA) members (+33% YoY) and this volume well
surpass the pre-Covid annual sales. The 50% registration fee cut for locally assembled cars also boosted demand for 1H2022. One factor worked
against the recovery is the chip shortage situation: 2022 was a difficult year for automakers, as the industry could not secure enough microchips
for their cars.

Motorbike volume sold by quarter Car volume sold by month
900,000 50,000
800,000 45,000
700,000 40,000
35,000
600,000
30,000
500,000
25,000
400,000
20,000
300,000
15,000
200,000 10,000
100,000 5,000
- -
1Q 2Q 3Q 4Q Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2021 2022 2021 2022
Source: Vietnam Association of Motorcycle Manufacturers (VAMM), SSI Source: VAMA, SSI Research estimates
Research estimates
Table: Important regulations supporting the auto industry
Number Effective date Detail

Decree 103/2021/ND- Dec 1 2021 –
50% registration fee cut for locally assembled cars
CP May 31 2022
Decree No. May 21 – Nov
Extended the deadline for paying special consumption tax on locally assembled automobiles
32/2022/ND-CP 20, 2022
Decree No. Mar 1 2022 –
For battery electric cars (BEV), registration fees will be waived.
10/2022/ND-CP Mar 1 2024
Circular No. Abolish current method of determining the localization rate for automobiles. This is intended to encourage
Oct 1 2022
11/2022/TT-BKHCN automakers to invest in production of auto parts in Vietnam, which should help car manufacturers in Vietnam.
Honda motorbikes and Toyota passenger cars were the most popular choices in Vietnam in 2022. For motorbikes, Honda remains in a near-
monopoly position, with an 80% share. Toyota, with a 22% market share (up from 17.5%), took the top spot for cars, surpassing Hyundai and its
sister brand, Kia. Breaking down by type of vehicles, passenger car volume increased 48%, while commercial vehicle and special purpose vehicles
volume were flat.
Vietnam passenger car market share by brand, 2022 Car volume sold by year, by category
600,000
13%
22% 500,000
7% 400,000
300,000
7%
200,000
17% 100,000
9%
-
10% 2018 2019 2020 2021 2022E 2023E
15%
Passenger cars (PC) Commercial vehicles (CV)
Toyota Hyundai Kia Mitsubishi Mazda Honda Ford Other
Special-Purpose Vehicles Non-VAMA*
Source: VAMA, SSI Research compiled data Source: VAMA, SSI Research
*Non-VAMA members include some major brands that do not disclose
information such as Nissan, Volkswagen, Subaru, Mercedes-Benz, Audi,
Volvo or Jaguar Land Rover.

Imported car is catching up to locally assembled cars in terms of volume sold. Imported volume increased 35% YoY in 2022, while locally
assembled cars increased by 31% YoY (according to VAMA). Imported cars account for a significant portion of total volume sold over the last few
years (between 30-40%). This rising trend is attributed to a variety of new brands entering Vietnam, especially Chinese brands which were sold at
attractive price points. We believe that vehicle imports will increase due to a stronger Vietnamese Dong, and some imported vehicles are now more
affordable than locally assembled models. Moreover, import tax waiver (from 50-70% to 0%) for Completely Built Up (CBU) cars from ASEAN
countries, introduced from 2018, will continue for another five years from 2023 through 2027 (according to Decree 126/2022/ND-CP). Currently,
the import tax rate for non-ASEAN countries is still kept at 50-70% the value of the car.
CBU (import) is catching up to CKD (local) in terms of volume sold Indonesian and Chinese cars imported into Vietnam are increasing in
value
70,000 100%
90%
60,000
80%
50,000 70%
60%
40,000
50%
30,000 40%
30%
20,000
20%
10,000 10%
0%
-
2018 2019 2020 2021 2022
1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22
China Indonesia Japan Thailand Rest of World
CKD CBU
Source: VAMA, SSI Research Source: VN Customs, SSI Research
Corporate earnings results were mostly strong thanks to decent sales.
City Auto (CTF VN) revenue and net profit in the first 3 quarters of 2022 reached VND 4.1 trillion (173 mn USD, +42% YoY) and a resurgence of
profit back to 78 billion VND (3 mn USD, +800% YoY) respectively. CTF is the largest dealership of Ford cars, and there was a surge in demand
for Ford pickup trucks in 2022.
For Hang Xanh Motor Services (HAX), Consolidated net revenue and net profit in the first 3 quarters after tax were VND 5.2 trillion (223 mn USD,
+52% YoY) and VND 192 billion (8 mn USD, +560% YoY). COVID-19 broke out during 2021, severely affecting business performance, but creating
a low base for steep growth in 2022.
Vietnam Engine & Agricultural Machinery Corporation (VEA) revenue and net profit in the first 3 quarters reached VND 3.5 trillion (150 mn USD,
+23% YoY) and 5.1 trillion (219 mn USD, +32% YoY) respectively. VEA’s profit is largely thanks to its partnership with Honda, Toyota and Ford
automakers, which gives out generous dividends. Higher interest income also contributes to VEA’s profit this year.
Even though not listed, but recent F-1 filing showed that Vinfast recorded 10 trillion VND (439 mn USD, -6% YoY) in revenue for the Jan-Sep 2022
period. It has sold around 22,900 cars for 10 months of 2022 (it did not disclose their Oct and Nov sale figures), of which approximately 7,000 are
electric vehicles. The company recently shipped 999 electric vehicles to San Francisco, USA with mission to enter the US market.
Net Revenue Gross profit PBT

9M21 9M22 3Q21 3Q22 9M21 9M22 3Q21 3Q22 9M21 9M22 3Q21 3Q22
CTF 2,839 4,050 342 1,486 188 338 19 137 12 93 -7 47
HAX 3,395 5,177 709 1,971 154 356 -1 117 44 241 -33 72
VEA 2,837 3,480 793 1,232 341 465 67 159 4,021 5,275 781 1,971

2023 Growth Outlook
Vehicle sales likely to see modest growth in 2023. After a strong 2022, it is estimated the car volume sold in 2023 will increase by only 5%
compared to 2022, surpassing 500,000 cars (EIU forecast). Auto chip shortages and supply chain disruption likely will be resolved, and should
no longer be problematic by 2H23.
Headwinds from worsen economic condition: As economic conditions worsen, car sales and auto sticker prices at auto showrooms may not be
as strong as they were during 2022, as consumers seek to spend less during the downturn. Secondly, financing for a new vehicle will be more
expensive and difficult than in 2022. Lastly, government supports (including registration fee cut and delay for SCT payment) has ended, as
consumption has returned to pre-Covid levels.
Local production capacity increase to bring car price down. THACO, a Vietnamese auto manufacturer, was recently granted permission to
assemble several BMW models (X3, X5, 3-Series, 5-Series) locally, putting pressure on other luxury brands. In another development, TC Motor, a
joint venture of Vietnam’s Thanh Cong Group and South Korea’s Hyundai Motor, completed Phase 1 of their second plant. The 140 mn USD plant
shall provide capacity of 100,000 units per year when both phases are expected to be completed in 2025.
A disruptive innovation in the horizon. We are very excited by the arrival of electric vehicles (EV). During 2022, Audi and Mercedes-Benz have
officially announced some EV models for sale within the high-end segment. In the mass market segment, Hyundai and Kia both introduced their
electric car models (IONIQ5 and EV6) in Vietnam.
However, it is too soon to say if Vietnam’s traditional auto industry will be under threat. These sales are considered experimental to gauge
consumer and government interest in switching to environmental-friendly vehicles. Vietnam has not yet developed a charging station infrastructure.
Furthermore, the price of EV models remains high relative to gasoline counterparts. We believe three things are needed from government if Vietnam’s
EV industry is to grow: generous tax breaks for EV cars; government market intervention artificially reducing demand for gasoline-powered cars;
and investment in charging infrastructure. Vinfast's case should undoubtedly provide useful insights for policymakers, manufacturers, and
consumers interested in future of EVs in Vietnam.
% Upside Target Price (VND) Current Price (VND) Net profit growth P/E ROE Dividend Yield (%)
Ticker
VEA 38% 56,252 40,800 3.50% 18% 5% 9.2 8.0 7.6 24% 29% 30% 11% 10% 10%
HAX -24% 12,400 16,300 22.60% 7% 9% 7.9 5.6 5.2 25% 20% 17% 6% 0% 0%

Consumer Staples - Fisheries: 2023E EPS decline given high base

Top picks: N.a
2022 Recap: Outperform, as earnings reached a record high

By stock performance, the fisheries sector declined -13% during 2022,
but still exceeded the performance of the VN Index by 20%. Sector 160%
valuations improved 50% during Jun’22 with earnings peaking during

140%
2Q22. The shares, however, were were de-rated quickly as quarterly
earnings growth decelerated. Best performers included VHC (+14.1%) 120%
and MPC (-11.8%), industry leaders whose shares remained buoyant 100%
post-earnings peak. Other key players experienced declines: FMC (-
80%
36%); ANV (-30%); and IDI (-27%).
60%
VNIndex Consumer Staples Fisheries
40%
• During 2022, the Vietnam fishery sector experienced an outstanding year of recovery and growth, despite having experienced a mixed bag
between the first and the second halves of the year. According to VASEP, Vietnam fishery exports reached USD 10.2 bn (+28% YoY) through
11M22, whereby shrimp and pangasius exports reached USD 4 bn (+14% YoY) and USD 2.3 bn (+64% YoY), respectively, due primarily to
impressive growth of 38% YoY through 9M 2022. This is a record high, compared to fishery export CAGR of 4% between 2011-2021.
• During the first half of the year, both shrimp and pangasius export growth was driven by high demand and rising prices (shrimp and
pangasius ASP to the US market was +11% and +55% YoY, respectively). During the second half, high inflation in major economies
dampen consumer sentiment, while inventories remain at elevated levels. Consequently, export volume quickly decelerated during 2H22.
In such difficult context, Vietnamese exporters also faced challenges such as currency fluctuation, especially those with USD debt
exposure and intense competitive pressure from rival suppliers - especially shrimp exporters. Having a more-reasonably priced product,
consumers will down-trade amid inflationary pressure and pangasius exports maintained growth momentum better than shrimp.
• During Nov’22, both shrimp and pangasius exports recorded declines of -18% and -23% YoY, respectively, with exports to the US declining
-55% and -11% YoY. Shrimp and pangasius ASP to the US has now declined -11% and -32%, respectively, from their peak. Cumulatively
though 11M22, shrimp and pangasius exports to the US decreased -21% and increased 61% YoY, respectively, indicating that consumers
will down-trade during periods of uncertainty.

Shrimp export (USD'000) Pangasius export (USD'000)

56%
500,000 60% 128% 123%
47% 350,000 140%
43% 114%
450,000 39% 41% 50% 84% 67% 100% 120%
300,000
400,000 31% 40%
73% 100%
350,000 250,000
30% 80%
300,000 13% 20% 200,000 43% 47% 60%
250,000 31%
-1% 10% 40%
200,000 150,000
0% 20%
150,000 -13% -15% -18% 100,000
100,000 -10% 0%
-23%
50,000 -20% 50,000
-20%
- -30% - -40%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2021 2022 % YoY 2021 2022 % YoY
Source: VASEP, SSI Research

Vanamei shrimp ASP to the US (USD/kg) Pangasius ASP to the US and China
USD/kg
6
13
12 5
11 4
10
3
9
2
8
1
7 US China
6 0
Sep-20
May-19
Jul-19
Nov-19
May-20
Jul-20
Nov-20
May-21
Jul-21
Nov-21
May-22
Jul-22
Nov-22
Sep-19
Sep-21
Sep-22
Jan-19
Mar-19
Jan-20
Mar-20
Jan-21
Mar-21
Jan-22
Mar-22
Dec-21
May-21
Jul-21
Nov-21
May-22
Jul-22
Feb-21
Mar-21
Sep-21
Oct-21
Feb-22
Mar-22
Sep-22
Oct-22
Jan-21
Apr-21
Aug-21
Jan-22
Apr-22
Aug-22
Jun-21
Jun-22
Source: VASEP, Agromonitor, SSI Research

Shrimp mateiral prices (VND/kg) Fish material and fingerling prices (VND/kg)
110,000
35,000 50,000
100,000 45,000
30,000
40,000
90,000
25,000 35,000
80,000 30,000
20,000
25,000
70,000 15,000 20,000
15,000
60,000 10,000
10,000
Fish material (LHS) Fingerling (RHS)
50,000 5,000 5,000
10/21
11/21
12/21
10/22
11/22
12/22
1/21
2/21
3/21
4/21
5/21
6/21
7/21
8/21
9/21
1/22
2/22
3/22
4/22
5/22
6/22
7/22
8/22
9/22
10/21
11/21
12/21
10/22
1/21
2/21
3/21
4/21
5/21
6/21
7/21
8/21
9/21
1/22
2/22
3/22
4/22
5/22
6/22
7/22
8/22
9/22
Source: VASEP, SSI Research Source: Agromonitor, SSI Research
• Listed companies posted strong results across the board through 9M22, although at a decelerating quarterly growth rate. Most companies
have benefited from the depreciation of USD/VND with sales being recorded in USD. Only those with USD debt exposure experienced
unrealized FX losses but USD-denominated debt exposure is relatively low. With declining demand and ASP and aqua feed cost not yet
having adjusted (+33% YTD), we expect companies to post earnings contractions during 4Q22.

9M22 NPATMI
Ticker Exchange 9M22Sales 9M21 Sales 9M22 sales growth 9M22 NPATMI 9M21 NPATMI
growth
VHC HOSE 10,755,331 6,361,328 69.07% 1,786,949 646,590 176.37%
ANV HOSE 3,752,368 2,436,027 54.04% 567,219 74,372 662.68%
IDI HOSE 6,221,871 4,311,612 44.30% 521,817 52,082 901.91%
ABT HOSE 472,570 210,788 124.19% 51,744 19,026 171.97%
MPC UPCOM 13,871,279 8,886,615 56.09% 571,383 543,981 5.04%
FMC HOSE 4,491,123 3,754,697 19.61% 231,594 162,054 42.91%
CMX HOSE 2,181,703 1,432,570 52.29% 65,738 46,302 41.98%
Total VND mn 41,746,244 27,393,635 52.39% 3,796,445 1,544,408 145.82%
• Sector valuation: Over the past ten years, tickers in the fishery industry have traded at an average trailing P/E of 8x. This year, the entire
industry was de-rated from 15x at the beginning of the year to 5x following weak earnings growth and the negative 2023 outlook. Sector
historical low valuations reached 4x during the 2010-2011 period and 2018, indicating that the shares could further derate over the near-term
when companies are likely to record negative earnings growth through 2023.

2023 Expectation
• For 2023, we expect that inflation will continue to be a challenge with inventory remaining slow moving. Although major seasonal events are
upon us (Super Bowl and Easter in the US), we do not believe that they will reduce the elevated level of inventory. We expect inventory to be
cleared sometime during 3Q23, with orders beginning to pick up at that point in time.
Chart: Total Business Inventories in the US (USD millions)
2600000
2500000
2400000
2300000
2200000
2100000
2000000
1900000
1800000
1700000
Jul-20
Sep-20
Jul-21
Sep-21
Jul-22
Sep-22
May-20
Nov-20
May-21
Nov-21
May-22
Jan-20
Mar-20
Jan-21
Mar-21
Jan-22
Mar-22
Source: U.S. Census Bureau, SSI Research
• VITAS targets fishery exports of USD 10 bn (-9% YoY) for 2023. As we believe consumers will trade down, pangasius sales should be less
affected than shrimp sales.
• China’s reopening is a catalyst for the sector in 2023. Although it should take more time to assess the quantitative impact of China’s reopening
on pangasius exports, we believe that it would benefit the sector’s sales volume as China is the largest Vietnamese pangasius export market.
However, the market is price sensitive and ASP to China has always been approx. 40% lower than ASP to the US. We believe that sales to
China will partially offset the slowdown in the US & EU markets, but it will unlikely provide companies’ earnings an opportunity to rebound in
1H23. This is likely due to the high base of earnings in 2022. We also believe that there is a degree of uncertainty surrounding Chinese
reopening policies. For now, however, we expect pangasius companies’ earnings to contract during 2023.
• We expect ASP to decline between -20%-30% YoY during 2023, and aquafeed costs should decline as well. Given the slow order volume, we
don’t anticipate a supply shortage for both shrimp and fish materials so we believe shrimp and fish material price will decline mildly due to
slow demand, at until the end of 1H23. We believe that gross margins will be squeezed in 2023. With interest rates expected to be high
throughout the year, rising financial expenses should continue to weigh on net margins, especially for those with high gearing ratios, such as
IDI. In general, we expect companies to post negative earnings growth for 2023.
• Valuations could fall towards the sector’s historical low P/E level of 4x through 3Q23, as earnings are expected to decline from their high base.
We expect earnings to decline most significantly in 2Q23, and valuations might slowly rebound toward the sector’s historical average P/E of
8x as inventory clears at wholesalers.
• Catalyst/risk towards: (i) US and China consumption is stronger/weaker than expected; and (ii) commodity prices higher/lower than expected.
% Upside Target Price (VND) Current Price (VND) Net Profit Growth P/E ROE Dividend Yield (%)
Ticker
VHC -10% 62,200 69,800 54.3% 98.2% -33.2% 10.4 5.8 8.7 20.1% 32.4% 17.8% 3.2% 2.9% 2.9%
ANV 12% 25,100 22,550 -36.3% 439.0% -23.1% 33.0 4.1 5.4 5.5% 25.7% 16.4% 3.0% 0.0% 4.4%
FMC -3% 32,433 32,200 27.0% 10.4% -9.8% 9.2 8.0 8.9 18.8% 15.4% 13.0% 6.2% 6.0% 6.0%

Consumer Staples – Food & Beverage: Margin improvement to be the only silver lining
in the high inflation cloud
Top picks: VNM, DBC. On Watch: SAB
2022 Recap: Outperform, as defensive stocks stood out in the bear market.

While the food & beverage (F&B) industry declined -20.7% during
2022, it still outperformed the VNIndex (which fell -32.8%).
110%
100%
Best performers include: SAB (+14.8%); KDC (+22.6%); and VNM (-
5.7%). As we pointed out in our previous report published in July 2022 90%
(link), during times of market downturns we favor defensive names 80%

due to the resumption of post-lockdown demand (such as SAB), as 70%
well as companies with relatively resilient sales, healthy balance 60%
sheets (VNM, KDC, QNS). VNIndex F&B
50%
Nevertheless, not all names did well. MSN, MCH, PAN, DBC, and MML 40%
declined significantly due to a sharp drop in earnings/margin 30%
contractions associated with high input costs (in the case of DBC &
MML). Compared to other products and services, F&B consumption
has been relatively resilient during this period of rising inflation and Source: Bloomberg, SSI Research
monetary tightening.
• Re-opening to spur consumption…
Our 2022 strategy note dated Jan 13th 2022 forecasted consumption to resume upon full reopening but that it might not rapidly return to pre-covid
levels. This theme largely played out. When Vietnam completely removed Covid restrictions during late March 2022, consumer activities rebounded
as noted in terms of high double digit retail sales growth and confirmed by Google mobility tracking. Notably, according to the GSO, nominal retail
sales during 2022 were only 82.5% of 2019 results, adjusting for three years of inflation. This implies that consumption (although having reached
a level that deems recovery) has still not rebounded to the strong growth momentum witnessed pre-covid. Elevated inflation and low tourism (due
to lack of Chinese tourists, et al) are amongst the reasons why that growth momentum hasn’t returned.
Data from Kantar also suggest that FMCG consumption growth has been mostly driven by higher ASP rather than volume.

Chart: Monthly retail sales, VND bn (RHS) and YoY growth Chart: FMCG consumption growth in urban and rural
80.0% 600,000 16%

14%
Urban Rural
60.0% 500,000 12%
10%
40.0% 400,000
8%
20.0% 300,000 6%
4%
0.0% 200,000
2%
Jul-19
Oct-19
Jul-20
Oct-20
Jul-21
Oct-21
Jul-22
Oct-22
Jan-19
Apr-19
Jan-20
Apr-20
Jan-21
Apr-21
Jan-22
Apr-22
-20.0% 100,000 0%
-2% 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22
-40.0% - -4%
Source: GSO Source: Kantar Worldpanel
Chart: FCMG growth overview, by volume and price
10% 9%
8%
6%
6% 5% 5% 5% 5%
4%
4% 3% 3%
2% 2%
2%
0%
3Q20 3Q21 3Q22
-2%
-2%
-4%
Urban volume growth Urban ASP growth Rural volume growth Rural ASP growth
Source: Kantar Worldpanel
As expected, in 2022, the beer sector recovered strongly in terms of both volume and price off of a low base of 2021 during Covid-19 lockdown
resulting in a chilling impact on beer consumption at the time. Retail sales of beer having witnessed resilient growth throughout the year due to
pent-up demand as on-trade channels reopened. Data from Kantar suggest that the beer sector experienced nominal value growth of 106% YoY
during Q1-Q3 ‘22, outperforming other FMCG categories. Market leaders, such as Heineken and Sabeco recorded sales growth of 37% YoY and
44% YoY, respectively, during Q1-Q3 2022.
• …but weaker than expected due to inflationary and recessionary pressures.
Although reported CPI remained well below target of 4% for 2022 (at 3.2% on average and 4.5% during Q4), consumers already felt the heat of
rising living costs. Rising fuel and food prices have become the biggest household concerns, as per a survey by Kantar during May 2022. The
dark cloud of inflation, rising interest rates, and recession globally has cast a shadow on Vietnam, causing weakened export activities, reduced
orders for textile & garments, footwear, wooden furniture, and electronic devices, knock-on effects which impacted hundreds of thousands of
laborers in industrial hubs. In addition, the tumble of financial markets as well as crackdowns within the property and corporate bond markets
have further challenged household income. Households have begun cutting back spending on unnecessary items, and down traded to lower cost
goods.
The effect of panic stocking has faded, as exhibited by: (1) stagnant consumption of packaged foods and cooking accessories; and (2) a slowdown
in momentum of the modern trade channel, which had significantly benefited from wet market shutdowns during lockdowns. For example, Masan
Consumer (MCH: HSX) largely benefited from panic buying with consumers stocking convenience food and seasonings during Q1-Q3 2021.
However, sales growth decelerated QoQ during 2022. WCM, the largest retail chain in Vietnam, also experienced a -9% revenue decline during
9M 2022 despite reopening (which should support sales of supermarket located in shopping malls). BHX, the second modern trade player,
paused its expansion (which was previously very aggressive) due to weak consumption.
Chart: MCH sales growth Chart: retail growth via channel (YoY)
150%
35%
30% 100%
25% 50%
20%
0%
15% 3Q21 4Q21 1Q22 2Q22 3Q22
-50%
10%
-100%
5%
0%
16% 5% 19% 31% 18% -2% 0% Online Hyper+super market Mini store
-5%
1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 Wet market Street shop
Source: MCH Source: Kantar Worldpanel
Margin contraction was in-line, but commodity price correction from the peak was much milder than expected. An unpredictable factor which
weighed on commodities was the Russia-Ukraine war, which drove soft commodities and oil prices sharply higher since February 2022. As such,
the Food and Agricultural Organization (FAO) food index increased to 159.7 points during March 2022, the highest level in decades. Subsequently,
this index declined more gradually to 132.9 points during December 2022, correcting 17% from its peak but flattish YoY due primarily to edible
oils and cereals. Oil prices soared 72% YTD to reach the peak of over USD 133/bbl in early March after the Russia- Ukraine war began and
resulted in a bottleneck of the global supply chain for both oil and distillate fuel. However, oil has subsequently corrected 37% to just around USD
85/bbl at end of 2022 due to weak demand and a concerns of global recession.
FAO Food Index
300.0
250.0
200.0
150.0
100.0
50.0
0.0
2019-05
2019-01
2019-03
2019-07
2019-09
2019-11
2020-01
2020-03
2020-05
2020-07
2020-09
2020-11
2021-01
2021-03
2021-05
2021-07
2021-09
2021-11
2022-01
2022-03
2022-05
2022-07
2022-09
2022-11
Food Price Index Meat Dairy Cereals Oils Sugar
Source: FAO
Except for SAB, most F&B companies saw margin contractions due to higher production costs, including raw material and crude oil prices
(resulting in higher packaging and transport costs). Most F&B brands hiked retail prices during 2022 between 4%-10% but were not able not fully
pass along rising costs.
In line with what we expected, soft commodities, such as edible oil, dairy, corn, and soybean prices, corrected by 7%-41% from peaks set earlier

in 2022, but still remained in a range of 12%-72% above 2019-2021 average levels. As it takes several months for high-cost inventory to deplete,
margins should improve from Q4 2022.
Gross margin 2020 2021 9M2021 9M2022

SAB 30.4% 28.9% 29.5% 31.9%
VNM 46.4% 43.1% 43.4% 40.2%
MCH 42.5% 42.5% 42.2% 41.2%
QNS 31.6% 30.8% 30.5% 29.7%
KDC 21.2% 19.5% 19.2% 20.8%
MML 16.9% 12.2% 13.0% 7.3%
DBC 25.5% 17.1% 19.1% 11.0%
BBC 27.0% 29.4% 27.3% 27.5%
• Corporate earnings results
For most recently available data between Q1-Q3, the F&B sector post revenue and earnings growth of 6.9% and 19.6% YoY, respectively, which
outperformed the overall market. However, slowdown in growth is well expected in Q4 2022.
SAB: According to management, SAB recorded net sales and net profit of VND 25.0 tn (+44% YoY) and VND 4.4tn (+75% YoY) respectively,
during 9M 2022. For sales, this is 11.4% lower relative to 9M19 (pre-COVID). We expect SAB to post net sales and NPAT growth of +30% and
+48% YoY, respectively, during 2022
VNM: During Q1-Q3 2022, VNM delivered revenue of VND 44.9tn (flat YoY) and NPAT of VND 6.7tn (-20.2% YoY). We expect NPAT for 2022 to
reach about VND 9 tn (-15.3% YoY). According to AC Nielsen, milk-based consumption inched 4% higher YoY during 3Q22. Amongst FMCG
categories, milk continuously underperformed other forms of consumption growth. With sales flat during 3Q22, Vinamilk seems to trail overall
industry growth, according to Nielsen data. However, management argues that the Nielsen data did not consider key accounts, such as schools,
industrial parks, and restaurants, and, as such, VNM’s market share should be better. Of note, VNM witnessed that key account sales increased
40% YoY during 3Q22 due primarily to last year’s strict lockdowns.
MSN delivered VND 55.5 tn in revenue (-14.3% YoY) and VND 3.1 tn NPATMI (+46.8% YoY) during 9M 2022, completing 62% and 56% of our
in-house forecast, respectively. Although Q4 is normally peak season, we still must revise our estimate for MSN based on: (1) weaker than
expected MCH and WCM revenue; and (2) lower than expected margins across segments. We also see the negative impact of rising interest rates
on the MSN bottom line near-term. Accordingly, we lower our NPATMI forecast for 2022 and 2023 to VND 4 tn (-53% YoY) and VND 3.3 tn (-
17% YoY), respectively.
QNS: QNS estimated 2022 net revenue and net profit of VND 8.3 tn (+13% YoY) and VND 1.2 tn (-4% YoY), respectively. During Q1-Q3 2022, the
company reported net sales of VND 6.3 tn (+9.3% YoY) and NPAT of VND 859 bn (-1.2% YoY), respectively. Soymilk volume reached 207 mn
liters (-1.3% YoY) with sugar output of 94k tons (+12% YoY) during 9M22. Weaker-than-expected earnings occurred during 9M22 due to: (1)
soymilk sales volume decreasing -1.3% YoY through 9M22 (-12% YoY in 3Q22); and (2) sugar segment GPM dropping from 20.9% during 9M21
to 16.5% during 9M22.
KDC: Through 9M 2022, KDC posted net sales and profit before tax of VND 9.6 tn (+29% YoY) and VND 487 bn (+2% YoY), respectively,
completing 68% and 54% of guidance. Net revenue growth was driven by both cooking oil sales of VND 7.8 tn (+26% YoY) and frozen foods sales
of VND 1.6 tn (+27% YoY). In addition, other revenue of VND 225 bn increased (+520% YoY), when KDC returned to the confectionery segment
and expanded the coffee shop chain. However, GPM declined from 23% during 1H22 to 17% during 3Q22 due to higher input costs in both the
edible oil and frozen food segments. KDC’s tax rate during 3Q22 was 50% due to the higher level of non-tax-deductible expenses and deferred tax
differentials. Hence, KDC’s 9M22 net profit was VND 370 bn (-24% YoY).
Farming companies: During 9M 2022, most companies in the sector recorded a mixed sales result with squeezed margins due to rising costs.
DBC posted core business net sales growth (real estate excluded) of 13% YoY, while net profit declined -68% YoY as GPM was squeezed -800 bps
primarily due to rising feed costs. BAF posted a net sales contraction of -46% yet turned a profit. BAF saw its farming operation sales double during
9M 2022 (albeit off of a low base). BAF experienced a transition of raw material trading to farming, which enabled net profit to expand. Similarly,
HAG saw its farming sales expand +125% YoY, while farming GPM declined -720 bps. During 9M 2022, MML recorded farm revenue of VND 663
bn (-6% YoY) and GPM of 24.5% (significantly contracting from 36.9% during 9M 2021) due to softer hog prices and higher feed costs.
Quarterly revenue growth Milk-based consumption growth in Vietnam
35.0% 30.0%
30.0% 25.0%
25.0% 20.0%
20.0% 15.0%
15.0% 10.0%
10.0% 5.0%
5.0% 0.0%
0.0% -5.0%
-5.0% 1Q22 2Q22 3Q22 -10.0%
-10.0% -15.0%
IDP MCM VNM Milk-based consumption growth (VN) VNM domestic sales growth
Source: VNM, SSI Source: AC Nielsen, VNM
• Sector valuation: F&B shares have been derated, but not as deeply as other sectors. Despite the market downturn during 2022, the F&B
valuation trough remained higher than lowest level recorded during 2011. During the market downturn, F&B shares would appear to less volatile
and are considered as a place to hide from market headwinds.
Chart: F&B stocks valuation
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
-
VNM SAB MSN KDC QNS PAN MML DBC MCM MCH
2023 P/E 2022 trough 2011-2022 trough Average

2023 Outlook
• Moderate revenue growth, as downtrading prevails
The combined force of inflationary and recessionary pressures should weigh on consumer spend at least for H1 2023. Headline inflation for 2023
is likely to be more challenging, especially considering the termination of petrol price supports and increasing government administrative costs
(electricity, minimum wage, medical, etc). Our macro and banking teams expect interest rates to begin inflecting from H2 2023, and only doing so
mildly at that (i.e less than 100 bp). As macro headwinds unfold, including high borrowing rates, rising inflation, and a comparatively weak labor
market, we do not expect consumption to be strong. Export activities are expected to be fragile though H1 2023, due to record high inventory within
the US and a recession in Europe, while China likely will return as the primary competitor to key export markets. As such, we believe that the lower-
income group, especially workers at industrial park sites, will continue to be impacted. We do expect tourism to rebound from Q2 2023 due to
China reopening, however, this likely will not be enough to completely offset the soft state of domestic consumption. As such, growth in revenue
of F&B companies likely will be driven by higher retail prices if any rather than volume during 2023, while downtrading continues.
• Gross margin improvement
As mentioned above, the correction in commodity prices (especially oil price) likely will be more supportive to production company margins. Gross
margin improvement should vary between companies, but we do expect a higher GPM to support bottom line growth. Companies could achieve
earnings growth during 2023 despite moderate sales growth. SAB could be exceptional, as malt price is +15% Yowith no sign of correction) and
SAB’s hedging contracts expire during Q3 2022. As such, we estimate GPM to narrow 170 bp during 2023 compared to the 2022 equivalent.
• Earnings outlook
Beer: We have a more cautious view on this segment’s outlook in 2023, due to the combination of recessionary pressure on consumer purchasing
power and rising input costs. We believe that the segment’s earnings growth will be normalized (single-digit growth) during 2023, settling after the
high base effect of 2022. Demand for beer in general could soften due to pressure from low-income consumers. Meanwhile, supply shortages are
driving up the cost of malt, as key raw materials (70% of COGS) continue to be stubbornly high, which should squeeze GPM for brewers if prices
cannot be fully passed along to end consumers. However, as China reopens, we still expect strong growth in tourism this year which could partially
offset the slowdown in domestic consumption. We expect SAB to post net sales and NPAT growth of +13% and +5.3% YoY, respectively, with
beer GPM contracting -170 bps in 2023.
Dairy: We do not see drivers for strong demand during 2023, especially when consumers are increasingly worried about income. Dairy consumption
in the urban market has been largely driven by premiumization, and this process should decelerate/disrupt during the economic slowdown. For the
rural market, we believe that demand remains somewhat more resilient than the urban market, as there remain room for volume growth given the
low base. The silver lining is input correction. Whole milk power, skimmed milk powder, and Anhydrous milk fat prices have corrected 28%,
32%,19%, respectively, from their peak during March 2022, which could improve dairy company margins from Q4 2022, especially VNM due to
its 65% reliance on imported milk powder. Dairy companies, such as VNM, IDP, and MCM, have strong balance sheets and healthy cashflow, and
therefore they should be resilient to rising interest rates. In terms of top line growth, we believe that smaller companies (MCM & IDP) will have
stronger momentum than VNM due to smaller size and capacity expansion (MCM from 2024).

Chart: Milk powder winning contract price
5,000 7,500
7,000
4,500
6,500
4,000 6,000
5,500
3,500
5,000
3,000 4,500
4,000
2,500
3,500
2,000 3,000
Jul-19
Jul-20
Jul-21
Jul-22
Sep-19
Nov-19
Sep-20
Nov-20
Sep-21
Nov-21
Sep-22
Nov-22
May-19
Jan-19
Mar-19
Mar-20
May-20
May-21
May-22
Jan-20
Jan-21
Mar-21
Jan-22
Mar-22
WMP SMP AMF (RHS)
Source: Global Dairy Trade
Hog market: OECD data suggest that pork consumption per capita had declined prior to the pandemic from 31.4kg/capita/year during 2018 to
26.8kg/capita/year during 2022F. It was also suggested that this figure will increase +3% YoY during 2023. With the surge in production volume
in recent months (+12.4% YoY in Jan-Nov 22), the supply of hogs is unlikely to be in shortage during 2023, provided that the disease outbreak is
well controlled. Therefore, we forecast that hog prices will not increase significantly. We expect hog price to reach approx. VND 60,000/kg in 2023
(+10% YoY). On the cost front, we expect that feed costs to start declining during 2Q23. As such, we expect farming costs to decline during 2023,
while hog prices slowly improve. We therefore expect farming companies to start recovering during 2023. The reopening of China should be a
catalyst to watch for, as we expect border trade to aid hog prices during 2023. Official export of hogs to China is also a possibility. However, this
is unlikely to take place due to various regulations related to origination and food safety. Commercial farms with a fully integrated ‘3F model’ should
be the main beneficiary should this pass.
• Corporate earnings:
Based on companies under our coverage, 2023 revenue and NPAT growth are estimated at 5.3% and 7.5%, respectively, largely led by KDC, VNM,
SAB, and DBC.
We estimate that KDC and DBC will post the sector’s strongest earnings growth during 2023. In the case of KDB, financial income from Calofic
divestment will be a key driver, while DBC’s subdued feed cost and a mild growth in hog prices (about 10% YoY) should drive the turnaround.
We also note that companies with high leverage ratios, such as MSN, will likely experience a decline in earnings due to significantly higher interest
expenses (between 200-300 bps YoY). We estimate NPATMI for MSN to decrease -17% YoY during 2023.
• Earnings path: Sales growth would be weak during H1 2022 due to the high base set during H1 2022 and weak consumer sentiment from the
perspective that CPI will peak during Q1 2023. Notably, as the Tet holiday arrives early this year, Tet sales should primarily be recorded during
Q4 2022. Excluding the Tet effect, for most F&B companies under our coverage, we expect stronger earnings growth during H2 2023 when
inflation cools down and interest rate starts to inflect.
• Catalysts: (1) stronger than expected consumption; (2) lower than expected input prices; (3) corporate actions including IPO of
subsidiary/holding company (MSN, SAB) or divestment (KDC) or M&A.
• Risk: (1) weaker than expected demand; (2) higher than expected input prices; (3) worse macro environment which impact capital markets
and cause a delay in corporate actions.

• Investment view: We have a NEUTRAL view on F&B sector for 2023 after outperformance during 2022. During H1 2023, with the assumption
in mind that macro headwinds will continue to weigh on equity markets, especially liquidity risk related to corporate bond segment and peaked
inflation, F&B names might still perform for a while, thanks to resilient earnings. However, we believe that equities have priced in the macro
headwinds in advances, while the valuation of F&B shares were not derated significantly, we do not expect a stronger rebound of F&B
stocks/sector compared to the overall market when it enters the recovery phases. With interest rates likely to inflect and inflation subsiding
during H2 2023, we believe that 2023 might be the time for faster growing companies rather than the usual F&B incumbents.
Most preferred stocks:
1. VNM VN
✓ Expected growth of 16% after a period of contraction between 2020-2022.
✓ Strong balance sheet and net income benefit from rising rates, without risk to property and corporate bond markets.
• Risk
✓ Competition from Nutifood, TH Milk, IDP, and imported brands.
✓ Moderate long-term growth, while inflationary pressure weighs on short-term demand.
✓ Higher than expected milk powder prices.
(VND bn) 2018 2019 2020 2021 2022F 2023F

Net revenue 52,562 56,318 59,636 60,919 62,359 66,352
Growth 3.0% 7.1% 5.9% 2.2% 2.4% 6.4%
Net income 10,206 10,554 11,236 10,633 9,007 10,264
Growth -0.7% 3.4% 6.5% -5.4% -15.3% 14.0%
ROA 28.3% 25.7% 24.1% 20.9% 17.6% 21.0%
ROE 40.7% 37.7% 35.5% 30.6% 25.6% 29.8%
Dividend yield 4.2% 4.3% 4.6% 5.8% 5.9% 5.9%
Debt/Equity 0.0 0.2 0.2 0.3 0.1 0.1
P/E 22.7 21.3 22.8 19.1 19.8 17.4
P/B 9.7 7.4 7.3 5.5 5.0 4.9
EV/EBITDA 14.4 12.9 11.2 11.5 11.0 9.8

2. DBC VN
✓ Strong earnings growth of +54% YoY expected during 2023, after two years of weakness.
✓ DBC benefiting from higher hog prices of +5% YoY, while feed prices decline during 2023.
• Risk
✓ Lower-than-expected hog prices.
✓ Unexpected widespread disease which leads to culling of inventory and write-off of expenses.
(VND bn) 2018 2019 2020 2021 2022F 2023F

Net income (VND bn) 360 305 1,400 830 324 500
Net income growth (%) 80% -15% 359% -41% -61% 54%
EPS (VND) 4,070 3,081 13,156 6,421 1,337 1,961
ROE (%) 13.7% 10.6% 38.7% 18.7% 6.7% 9.8%
Dividend yield (%) 3.8% 2.1% 2.6% 2.7% 0.0% 0.0%
Debt/Equity 1.46 1.54 0.81 0.70 0.73 0.88
P/E (x) 6.39 7.89 4.31 11.37 10.58 7.21
P/B (x) 0.78 0.73 1.41 1.80 0.65 0.66
EV/EBITDA (x) 6.68 6.62 3.68 5.47 6.76 4.97

On Watch: SAB VN
✓ Strength lies with the SAB standard beer portfolio, which benefits from consumer down-trades during periods of inflation.
✓ NPAT growth expected at 5% YoY, after a year of high base.
✓ Strong balance sheet, benefit from rising rates, and no risk to the property and corporate bond markets.
• Risk
✓ Aggressive competition from Heineken and imported brands.
✓ Higher-than-expected malt prices for 2023, which cannot be fully passed on to consumers.
• Table financial summary
(VND bn) 2018 2019 2020 2021 2022F 2023F

Net income (VND bn) 4,403 5,370 4,937 3,929 5,817 6,124
Net income growth (%) -11.0% 22.0% -8.1% -20.4% 48.0% 5.3%
EPS (VND) 6,143 7,477 7,133 5,502 8,228 8,664
ROE (%) 28.8% 29.7% 23.9% 17.9% 24.0% 22.1%
Dividend yield (%) 1.9% 1.5% 1.8% 2.3% 2.0% 2.0%
Debt/Equity 0.04 0.05 0.05 0.03 0.04 0.04
P/E (x) 43.55 30.49 27.34 27.44 21.27 20.20
P/B (x) 11.40 7.78 6.27 4.56 4.63 4.07
EV/EBITDA (x) 26.42 17.74 15.68 14.08 11.27 10.73
F&B stocks under coverage
Target
Current Market Cap
Ticker Price (VND) (USD mn)
(VND)
in 1yr in 1yr 12/30/2022 12/30/22 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F
SAB 22% 204,000 166,900 4,539 -22.1% 49.5% 5.3% 27.4 20.3 19.3 17.9% 22.4% 22.1% 2.3% 2.1% 2.1%
VNM 12% 85,000 76,100 6,745 -5.1% -15.4% 15.5% 19.1 19.8 17.2 30.6% 24.6% 28.9% 4.5% 4.6% 4.6%
MSN 11% 103,000 93,000 5,615 593.9% -53.1% -17.2% 23.5 32.8 39.7 30.0% 10.6% 9.0% 0.7% 0.0% 0.0%
KDC -22% 51,000 65,000 709 189.8% -7.9% 232.4% 21.1 31.9 9.6 9.0% 8.3% 26.1% 1.1% 2.5% 8.6%
QNS 13% 40,400 35,800 542 19.0% -4.4% 9.4% 11.8 9.1 8.3 18.3% 16.2% 17.3% 6.2% 8.4% 8.4%
DBC 26% 17,700 14,100 145 -40.8% -60.9% 54.0% 10.1 10.5 7.2 18.7% 6.5% 9.6% 2.7% 0.0% 0.0%

Oil & Gas: Oil price can stabilize from 2022 peak, but is likely to remain high
Top picks: PVD, PLX. On Watch: GAS
2022 Recap: Outperform thanks to favorable oil prices

While oil and gas names declined -16% in value during 2022, the sector
has outperformed the VN Index by 18%. Overall industry performance 150%
was driven by GAS, which is the only ticker whose share price
130%
increased, by +8.4%. On the other hand, most of other names
experienced a significant decline in share price of between -20% to - 110%
40%.
90%
70%
50%
VNIndex Energy Oil & gas
30%
Brent oil price (USD/bbl)

• Oil price movement: Oil prices soared 72% YTD to reach the
peak of over USD 133/bbl in early March after the Russia-
160
Ukraine war began and resulted in a bottleneck of the global 140
supply chain for both oil and distillate fuel. However, oil has 120
subsequently corrected 37% to just around USD 85/bbl at end of 100

80
2022 due to weak demand and a concerns of global recession. 60
On an average tracking basis, Brent crude oil for the 2022 period 40
was USD 100/bbl, a strong increase of 42% YoY. 20

0
7/13/2022
1/13/2020
3/13/2020
5/13/2020
7/13/2020
9/13/2020
1/13/2021
3/13/2021
5/13/2021
7/13/2021
9/13/2021
1/13/2022
3/13/2022
5/13/2022
9/13/2022
11/13/2020
11/13/2021
11/13/2022
Source: Bloomberg

• Vietnam E&P activities:
Stable production: By most recent available data, total oil exploitation volume between Jan-Nov 2022 was flat YoY at 9.9 mn tons but exceeding
the annual target by 13%. Dry gas volume is expected to grow around 7% YoY from 7.9 bn cubic meters last year, falling short of the government
guidance by over 10% due to higher utilization of hydropower plants and lower utilization from gas-fired power plants given the greater
precipitation during 2022.
Despite strong oil prices, 2022 was not a busy year for E&P activities in Vietnam, with no significant oil&gas discovery. However, prospects
may improve over time ahead with the new revised Petroleum Law (effective July 2023, and discussed in detail below).
• Update on key projects:
✓ The first LNG project in Vietnam - LNG Thi Vai: Completion of mechanical construction of the entire project, and expected to commence
operation in 2023.
✓ Su Tu Trang phase 2B: Su Tu Trang (White Lion) field phase 2A (located in Block 15.1) came on line on June 18th, 2021, with total
natural gas reserves of 5.5 bn cubic meters and 63 mn bbls of condensate slated for extraction between 2021-2025. The second phase,
Su Tu Trang 2B, features a total investment of USD 1.1 bn, is expected to launch EPCI during late 2023 and commence operation during
2026.
✓ Dai Nguyet gas field: First gas extraction during Aug 2022 should increase capacity of the Sao Vang- Dai Nguyet gas field to 1.5 bn gas
cubic meters.
✓ Block B mega project: The project’s total investment of USD 10 bn, of which the EPC backlog is valued at USD 4.6 bn. The deadline for
the FID (Final Investment Decision) for Block B mega project was moved to June 2023, allowing more time for EVN and PVN to iron out
the wrinkles regarding the Gas Selling Agreement (GSA), Gas Sales and Purchase Agreement (GSPA) and the Power Purchase Agreement
(PPA) between the two parties.
• 2022 earnings of oil & gas companies: During 9M 2022, revenue and earnings of key listed oil & gas companies surged 77% and 75% YoY,
respectively, led by strong growth in GAS and BSR due to high oil prices. According to preliminary results, the PBT of GAS, BSR and PVT in
2022 attained tremendous growth compared to 2021 figures, while the earnings of petroleum distributors such as PLX or OIL experienced a
decline due to the supply disruption and volatile oil price, especially in the second and third quarter of 2022.
Revenue PBT Revenue PBT (net income for BSR)

VND bn
9M22 9M21 Growth 9M22 9M21 Growth 2022 2021 Growth 2022 2021 Growth
GAS 78,672 58,815 34% 14,633 8,654 69% 100,000 78,992 27% 16,600 11,205 48%
BSR 126,717 66,588 90% 13,678 4,099 234% 165,500 101,080 64% 12,176 6,684 82%
PVT 6,609 5,288 25% 1,035 767 35% 9,150 7,460 23% 1,348 1040 30%
PVS 11,087 9,667 15% 672 698 -4% n.a 14,215 n.a n.a 877 n.a
OIL 79,625 37,809 111% 616 615 0% 100,000 57,848 763 928 -18%
PLX 225,777 119,812 88% 614 2,952 -79% 300,000 169,009 78% 2068 3,789 -45%
PVD 3,923 2,661 47% -169 8 -2111% 5,500 5,228 5% n.a 62 n.a

Oil prices could stabilize from the 2022 peak, will remain high: We expect that average oil prices will range between USD 80 – USD 90/bbl during
2023. According to the IEA, global oil demand could increase 1.7% during 2023 to 101.3 mn bbls/day. According to OPEC, the global oil supply
was in a surplus of 0.2 mn bbls/day during 2Q22 and 1.1 mn bbls/day during 3Q22, a shift from the deficit of 0.3 mn bbls/day during 1Q22. A
supportive catalyst for oil prices could be the reopening of China (the world’s largest oil importer) along with the easing of the Fed’s rate hike
campaign during the latter half of next year.
Drilling industry can benefit from warmer drilling activities in APAC region and Middle – East, leading to better outlook for day rate. Key
demand comes from international markets like Indonesia, Malaysia, and the Middle East. In southeast Asia, the total marketed utilization rate for JU
rigs reached 90% in Aug 2022, while the day rate was stable at around USD 90k/day over the past three months, with some contracts over USD
100k/day, according to IHS Markit. This has not been seen since 2015.
In our view, one of the key reasons for such a positive development in the drilling industry comes from the recent change in the outlook for global
energy. In previous years, oil price was low and the common view was a gradual process of decarbonization toward renewable energy sources
(wind, solar, hydrogen, etc.). The recent energy crisis in Europe brought on by the Russia-Ukraine conflict has brought more to carbon-based fuels
and energy security. For example, at the last OPEC oil outlook report, OPEC expects global oil demand to increase 10 mn barrels/day to 107 mn
barrels/day by 2027, with most growth coming from non-OECD regions. This is why we see ample demand for jack-up rigs in the Middle East, as
key players like Saudi Aramco and ADNOC have plans to expand production capacity. For example, Saudi Aramco expects to double their JU fleet
by 2024. Supply, on the other hand, is quite tight with the current orderbook equivalent to only 5% of the current JU rig fleet.
Vietnam E&P activities in coming years can be supported by the revised Petroleum Law
During Nov ‘22, the Vietnam National Assembly passed the Revised Petroleum Law (effective July 2023) which is supposed to create a clearer
legal framework for oil & gas activities, including new investments in E&P projects. Key changes include:
• More favorable tax treatment for investors in exploration projects.
• Allowing for the exploitation of oil fields which are near end of life, and are no longer economically efficient. This suggests that PVN can
continue to develop and exploit existing fields to fully extract remaining oil (which previously would have been abandoned due to economic
reasons), leading to greater demand for construction and development activities.
• Lengthening the duration of the project and the exploration process by five years.
• Separating the roles of PetroVietnam into a project managerial and investor, which should shorten the approval process for projects.
This should attract more investment (especially foreign investment) into the Vietnamese oil&gas sector, which could potentially create additional
opportunities for upstream players over the longer-term.
Earnings outlook: On the positive side on most fronts
In 2023, we see a lagging positive impact of high oil prices kickstart upstream-focused tickers. For example, PVD likely will start turning a profit
after breaking even in 2021 and taking a loss in 2022F given higher jack-up rig day rates and a higher utilization rates. Construction names, like
PVS, may need to wait a bit longer for large domestic oil&gas projects to kick off. In the meantime, we see positive signal that PVS is now entering
the potential offshore wind power market, which is forecasted to rapidly grow in the coming years. Overall, the outlook is better than what it was at
end of 2021 as we see signals of busier regional E&P market.
Midstream-focused names like PVT could record slower growth YoY in 2023, but still maintains a stable earnings outlook due to strong demand
from relevant markets. GAS and BSR, on the other hand, should see contracting profit due to the decline in average oil prices though gas volume
sold to electricity plants might still attain growth in 2023. BSR likely will also have lower sales volume during 2023 due to a 50-day offline period
for scheduled maintenance, and a more stable operation of Nghi Son Refinery.

Downstream names like PLX could also have a strong year off from a low base in 2022 thanks to a more stable supply chain and oil price, thus
would avoid a severe inventory loss as in 2022. Demand for oil products in the domestic market can be improved further with the economy in full
recovery mode (including the prospect of more international flights) but could be restrained by a slower and volatile economic environment, and
lower disposable income.
Overall for oil&gas names under over coverage, net earnings would increase by 11.2% YoY in 2022, led by PLX, PVD and PVS.
• Sector valuation
In terms of P/E, there was a diversion between valuations of oil and gas stocks during 2022. The stocks which have peak earnings in 2022
with an expected sharp earnings correction during 2023 such as BSR was trading at a lower-than-historical average P/E. On the other hand,
stocks which saw earnings bottom during 2022 (such as PLX, PVD, and PVS) are trading at higher than their historical value, by between
20%-40%. Current valuations remain much higher compared to their historical lows of Mar 2020, or even 2012.
On the basis of P/B, we see PVD and PLX to be at the lowest historical range, while PVS is at the high historical range.
Historical P/B 2010-2022 Historical P/E 2010-2022 (PVD on RHS axis)
4 80 400
3.5 70 350
PVD PVS
3 60 300
PVS GAS
2.5 50 250
2 GAS 40 200 PVT
1.5 PVT 30 150 PLX
1 20 100
PLX OIL
0.5 10 50
OIL BSR
0 0 0
12/1/2010
10/1/2011
8/1/2012
6/1/2013
4/1/2014
2/1/2015
12/1/2015
10/1/2016
8/1/2017
6/1/2018
4/1/2019
2/1/2020
12/1/2020
10/1/2021
8/1/2022
12/1/2010
12/1/2011
12/1/2012
12/1/2013
12/1/2014
12/1/2015
12/1/2016
12/1/2017
12/1/2018
12/1/2019
12/1/2020
12/1/2021
12/1/2022
BSR PVD
Source: Bloomberg
Looking toward 2023, PLX and PVD are our top picks considering their strong 2023 earnings recovery from the bottom in 2022, and improved
long-term outlook.
Key metrics of Oil&gas listed stocks
Current price
Target price
Ticker (VND) Net profit growth PE ROE Dividend yield
(VND)
(30-Dec-22)
2021 2022E 2023F 2021 2022E 2023F 2021 2022E 2023F 2021 2022E 2023F
PLX 42,000 31,700 148.4% -77.1% 259.1% 24.6 27.3 15.0 11.9% 5.7% 10.2% 2.2% 1.6% 5.4%
PVT 24,000 21,650 0.9% 23.1% 6.4% 6.8 9.3 8.8 12.7% 14.2% 14% 7.1% 5% 7%
BSR N.a 13,400 -333.5% 82.4% -38.8% 10.7 3.6 5.9 19% 28% 14% 1% 4% 4%
GAS 128,000 101,500 6.5% 56.5% -5.1% 24.5 17.4 18.3 17% 24% 19% 4.4% 3.0% 3.0%
PVD 21,200 17,900 -80.2% -806.2% N.a 649.5 (69.8) 28.0 0.3% -1% 3% 0.0% 0.0% 0.0%
PVS 22,700 21,600 -4.5% -8.5% 19.1% 8.9 22.1 18.1 5.3% 4.9% 5.8% 4.4% 5% 5%
Main risks for 2023 include: (1) a lower than forecast oil price, in case the global recession is more severe or prolonged than expected; and (2) a
further delay in key E&P projects, such as Block B.

Top picks/most preferred:
1. Vietnam National Petroleum Group (PLX VN)
✓ A market leader in petroleum distribution, with market share of around 45%
✓ Net income may bottom in 2022 and recover to VND 3 tn (+82% YoY) during 2023, driven by a stabilization in oil prices and an increase
of the standard cost and premium with the retail petroleum price formula.
✓ The divestment of PGB could bring an abnormal one-off financial profit.
• Risk
✓ A sharp decline in oil prices could impact the company’s margin over the near-term.
✓ As the market leader and a state-own company, PLX assures domestic petroleum supply. Thus, in case the domestic market has a supply
shortage, PLX must increase the weight of input from imported sources at higher prices to compensate for the deficit, which can negatively
impact company earnings.
2018A 2019A 2020A 2021A 2022F 2023F

Net income (VND bn) 4,155 4,677 1,253 3,112 1,652 3,013
NI growth (%) 6.2% 12.6% -73.2% 148.4% -46.9% 82.3%
EPS (VND) 2,897 3,213 764 2,187 1,162 2,119
ROE (%) 17.9% 19.1% 5.0% 11.9% 5.7% 10.2%
Debt/Equity (%) 63.7% 59.4% 66.4% 52.4% 71.6% 69.2%
Dividend yield (%) 4.9% 5.4% 2.2% 2.2% 1.6% 5.4%
P/E (x) 18.3 17.4 71.5 24.6 27.3 15.0
P/B (x) 3.4 3.1 3.3 2.8 1.6 1.6

2. PetroVietNam Driling & Well Services Corporation (PVD VN)
✓ Drilling market continues to recover after slowing down due to COVID-19 and low oil price. According to IHS Markit, utilization rate of
global jack-up rig fleet has gone back to 82%, highest from 2015, continuing its recovery from the trough in 2015. The newbuild number,
on the other hand, is low at only 5% of the current fleet, making it hard to increase supply in the short-term. This helps keep day rate to
increase sustainably and reach USD 80,000 – 109,000/day at the moment. Also, newly signed contracts also tend to have longer terms
(2-3 years), increasing the utilization rate of rigs.
✓ Average day rate of PVD can increase quickly in 2023-2024 for new contracts. According to our estimates, PVD would receive average
day rate of USD 74K/day in 2023 and USD 90K/day in 2024, up 18% and 22% YoY respectively. With longer term contracts (1-2 years),
we expect utilization rate can increase significantly from 85% in 2022 to 95% in 2023-2024, which would reduce significantly moving
cost and increase profitability of rigs.
✓ Earnings expected to turn around from 2023. In 2022, we expect PVD to record pretax loss of VND 136 bn, but that can change to a
profit from 2023 with higher day rate and higher utilization rate of rigs. We estimate NPATMI 2023-2024 of PVD to reach VND 373 bn and
VND 1,119 bn respectively
• Risk
✓ Oil price decline can lead to stock price volatility due to high correlation
✓ VND depreciation against the USD can lead to forex loss
• Financial summary:
(VND bn) 2019 2020 2021 2022F 2023F

Net revenue 4,368 5,229 3,988 5,230 6,252
Net income 172 184 36 -157 393
Net income growth -0.3% 6.8% -80.2% -532.0% -349.4%
EPS (VND) 438 442 46 -256 638
ROE (%) 1% 1% 0% -1% 3%
D/E 0.27 0.28 0.29 0.27 0.26
Dividend yield (%) 0% 0% 0% 0% 0%
P/E (x) 34.39 36.62 649.53 -69.81 27.99
P/B (x) 0.46 0.50 0.92 0.74 0.73
EV/EBITDA (x) 7.65 10.57 19.52 19.94 9.65

On watch: GAS VN
• Share price (30-Dec-22): VND 101,500; 1Y Target price: VND 128,000.
✓ Being a monopoly in gas transportation and leader in the LPG market (70% market share).
✓ Expected higher volume in 2023 thanks to increased demand from electricity plants
✓ Earnings surged 56% YoY in 2022 to an historical high of VND 17 tn (PBT), and may normalize to VND 16 tn in 2023 due to the correction
in oil prices.
✓ Strong net cash balance of VND 27tn, stable cash dividend despite high capex
• Risks:
✓ Oil price to sharply corrects from current levels.
✓ Weaker than expected consumption
✓ Delay demand from NT3,4 power plant
(VND bn) 2019 2020 2021 2022F 2023F

Net revenue 69,059 61,639 76,572 97,712 113,113
EBITDA 17,243 12,385 13,372 20,266 20,235
Net income 11,921 8,069 8,593 13,450 12,768
ROA 20.1% 13.3% 12.2% 16.6% 13.6%
ROE 25.4% 16.6% 17.0% 24.0% 19.1%
Dividend yield 5.7% 4.6% 2.6% 2.2% 3.0%
Debt/Equity 0.0 0.1 0.2 0.2 0.20
P/E 15.2 20.9 24.5 17.4 18.31
P/B 3.69 3.40 3.80 3.95 3.53
EV/EBITDA 9.0 11.7 12.1 6.9 7.17

Financials - Banking: More questions than answers

Top picks: VCB, STB, BID, ACB
2022 Recap: Outperform, due to solid earnings

The banking sector declined 21% during 2022, but still
outperformed the VN Index by 12%. Best performers include: 120%
BID (+4%); VCB (+2%); SSB (-7%); CTG (-20%); and ACB (- 110%
21%). 100%
90%
80%
70%
60%
50% VNIndex Financials Banking
40%
30%
• Stronger credit growth, with a tweak in credit structure due to reduced corporate bond issuance. Credit growth for 2022 is estimated
at 14.5% by the SBV, which is higher than the equivalent 2021 level of 13.6%. The driver for credit growth during 9M 2022 remained the
retail segment. VCB and CTG were the only two banks where corporate credit increased at relatively the same pace with retail credit.
Examining credit by sector, mortgage continued to outpace overall credit growth (+20.1% YTD through Sept), while credit to developers
rose 7.4% through Sept under stricter supervision on property lending. According to SBV data, credit to the property sector (including
developers and homebuyers) still accounted for 20.9% of total credit. Another trend was the thinning of the corporate bond book, in
particular at TCB and HDB.
Despite strong nominal credit growth, real growth could have been lower compared to 2021, due to inflation. Another characteristic of
2022 credit was the divergence between the two halves of the year, where credit growth was solid during 1H22 but decelerated from
Sept, with point-to-point disruptions in credit supply during 2H22. During late 3Q22, credit demand remained strong but disbursement
was challenged due to either a limited credit allocation limit imposed by the central bank, strict criteria for credit issuance at conservative
banks, or liquidity issues at banks which had stretched LDR too much during the first half of the year. A strong rise in deposit rates was
witnessed from Oct at some JSCBs (to between 9%-10%), which led to a surge in lending rates (for retail lending and SMEs between ~
14%-15%). Borrowers started to feel the burden if taking loan at such high lending rates, which negatively impacted credit demand toward
year-end.

Chart: Credit growth was strong but M2 & deposit was weak Chart: Net credit increase during 9M22 (VND tn)
30% 200
25%
150
20%
100
15%
10% 50
5%
-
0% VCB BID CTG MBB HDB ACB VPB MSB TCB OCB TPB VIB STB
(50)
M2 growth Deposit growth Credit growth Individual loans Corporate bonds Loans to corporate Remaining credit room
Source: SBV, Banks, SSI Research
• Vigorous earnings growth due to normalized asset yields and provisioning. As bank results during 2021 were impacted by Covid-19
and 2022 results have not reflected the impact of higher lending rates and a sluggish property sector, the YoY earnings growth for 2022
was robust in line with our expectation. Through 9M 2022, bank PBT rose +39% YoY, with details discussed in our previous report (link).
Growth is likely to weaken during 4Q22, by our estimate, given the fluctuation in funding costs, liquidity, and a lagged repricing of loans.
Not to mention the supportive packages which provide between a 1%-2% discounted lending rates during Nov and Dec. Hence, we expect
full year earnings growth to decelerate to 35% YoY.
Chart: NIM trend inflection point was in 3Q22 Chart: LDR stretch could not cover for the narrowing spread
4.2% 26% 4.0% 102%

100%
4.0% 25% 3.8%
98%
3.8% 24% 3.6% 96%

94%
3.6% 23% 3.4%
92%
3.4% 22% 3.2% 90%
88%
3.2% 21% 3.0%
86%
3.0% 20% 2.8% 84%
2016 2017 2018 2019 2020 2021 1Q22 2Q22 3Q22 2016 2017 2018 2019 2020 2021 1Q22 2Q22 3Q22
NIM - LHS CASA - RHS Pure LDR - RHS Interest spread - LHS
Source: Banks, SSI Research
• Asset quality fared well through Q3 but should weaken from 4Q22. For banks under coverage, reported NPLs, VAMC & legacy
loans, and Covid-restructured loans were 1.47%, 0.14% and 0.57%, respectively. The equivalents at year-end 2021 were 1.29%,
0.27% and 1.51%, respectively. This suggested that the Covid-restructured loans recovered during 9M 2022. We do, however, expect
credit quality to weaken from 4Q22, through disruptions in credit and higher loan rates.

Chart: NPLs
12%
10%
8%
6%
4%
2%
0%
2021
3Q22
2021
2021
2021
2021
2021
2021
2021
2021
2021
2021
3Q22
2021
2021
2021
2021
3Q22
3Q22
3Q22
3Q22
3Q22
3Q22
3Q22
3Q22
3Q22
3Q22
3Q22
3Q22
3Q22
ACB OCB BID CTG HDB MBB MSB TCB TPB STB SHB VCB VIB VPB TOTAL
Reported NPLs VAMC & Legacy Loans Covid-restructured Loans
• Stricter monitoring of bank safety and sustainable operations. This stance was at the end of 2021, with Circular 16/2021 limiting
the type of corporate bonds that banks could purchase, and setting a rigid deadline to lower the cap for the ratio of short-term funding
for the medium and long-term loan ratio (MLTL), 34% at Oct 22. During the year, SBV did work on a series of draft regulations on a
stricter framework for safety of the banking sector, including the limit of offshore borrowing, lending to risky segments (replacing
Circular 39), proposed revised methodology for LDR calculation, etc. Another move from the regulator to standardize and balance the
corporate bond market occurred with various draft revisions to Decree 153, which was finalized by Decree 65. Developing a funding
channel through the corporate bond market would be a way to reduce the burden on bank medium and long-term credit.
• The year of two wars…
What we had not expected was the Russia-Ukraine war and the global fight against inflation. This created a challenging backdrop
throughout the year. The SBV began 2022 determined to maintain interest rates at a low level to support an economic revival. Accordingly,
roughly USD 25 bn of foreign exchange reserves were sold by the SBV through 10M 2022. However, coupled with other headwinds within
the local market and USD inflows, SBV had changed tack and raised its policy rate twice by 200 bps between Sept-Oct 2022.
• …and a severe crackdown in various aspects of the Vietnamese market, which eroded market confidence
Although projecting a more stringent framework for the corporate bond market and credit to the property sector, we had not expected the
move by regulators to be so harsh. Following the Mar 2022 arrest of the FLC Group chairman over allegations of stock market
manipulation, the chairman of the property developer Tan Hoang Minh (THM) and related personnel were arrested on suspicion of
“fraudulent appropriation of assets” related to the issuance of bonds and the mobilization of funds from investors by Group member
companies. Accordingly, nine separate bond issuances with a total value of VND 10 tn (USD 425 mn) were cancelled, and THM was
forced to repurchase bonds - but THM did not have the funding to do so. There was also concern that the bond issuances of THM and
many other developers were made in convoluted structures designed to conceal disclosable risk. While market confidence was in a fragile
state, the incident of Van Thinh Phat and a related bank (SCB) was the last straw. This shook the entire capital market.

Average lending and deposit rate

With such an abrupt movement and the already challenging backdrop,
VND-denominated liquidity in the banking system nearly froze,
25
spooked by the surge in deposit withdrawals from SCB at that time.
The overnight interbank rate rose to as high as 8.33%. After the bank 20
run, the case was extended to bondholders at the retail level who
15
possess bonds issued by Van Thinh Phat subsidiaries under advice
from SCB and bond-fund run later on. 10
5
This has eventually led to accelerate deposit rate hikes at most banks
from Oct, with an average increase of 363 bps over two months vs. -
the slight rise of 77 bps during 9M 2022. M2 and deposit growth,
Dec22
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Nov22
2Q22
3Q22
however, was at a historical low level of 3.85% and 5.99% YTD as of
Lending rate Deposit rate
21 Dec 22, respectively, leaving the funding gap at negative territory.
This coupled with the maturity timeline for corporate bonds during
2023 could allow interest rates remain at relatively high levels without Source: GSO, Banks, SSI Research
support/special guidance from the SBV.
• Which heralded the return of regulatory support toward year-end
As sentiment was weak, we began noticing support signals from regulators before year end. The credit growth cap was lifted between
1.5% – 2%, while the SBV confirmed long-term liquidity support to commercial banks funding those loans. SBV has also committed to
provide liquidity to banks to ensure stable operations through Tet via 91-day reverse repos in the money market. Volume reached VND 21
tn in total, at between 6.3-7% p.a.
Secondly, the SBV is progressing a re-shape of the legal framework via the latest Circular 16/2022, expanding the scope of monetary
instruments which are considered eligible for open market operations at the SBV, which shall be executed via the rediscount/refinancing
channel or in the interbank market. Despite the time when corporate and bank bonds could actually be eligible for borrowing at the SBV
and the actual mechanism remaining uncertain, it does give some hope to those banks which are heavily exposed to corporate bonds.
Most importantly, the draft decree amending newly issued Decree 65/2022 (link & link) was in discussion during the final weeks of 2022.
If this draft ends up being approved, there could be a lower burden on bank profitability between 2023-24, as bond principal payments
could be deferred another two years (provided the issuer receives approval to do so from 65% of bondholders). However, this draft
revision alone cannot clear the liquidity bottleneck that developers are facing. More policies supporting property sales are needed for
developers to sell projects to refinance their debt. We view this more as a short-term sentiment support rather than a significant change
in the long-term fundamentals of the banks.
• Sector valuation has been approaching the historical trough
The trailing P/B of banks under coverage at year-end 2022 was 1.17x, much lower than the 2.11x year-end 2021 – nearly reaching the 0.98x
trough set during 2020. Most banks trade at P/B levels approaching the 2020 and/or 2011-12 troughs, except for VCB, BID, and STB. This
derating is a partial reflection of the risks associated with the property and corporate bond market. Outstanding loans to developers and
corporate bonds at 3Q22 was 53% and 25% of total equity, respectively, amongst banks under coverage.

Chart: Sector valuation was approaching the trough Chart: Most banks trading lower than 2023 BVPS
6 4
5
3
4
3 2
2
1
1
0 -
VCB BID CTG ACB STB MBB VPB TCB SHB LPB OCB MSB HDB VIB VCB BID CTG ACB STB MBB VPB TCB SHB LPB OCB MSB HDB VIB
Min P/B Max P/B Current P/B 5Y average P/B Forward P/B 2023
• Policy backdrop: Strict supervision mode On or Off?
We believe that policies will continue to set the tone for the banking system during 2023, as all eyes should be on the property and corporate
bond market. One of the major regulations which could impact the banking sector’s earnings outlook is the approval of the draft revision of
Decree 65. Given the political will to support the banking system’s stability, it is likely that regulators will work toward a more orderly
restructuring and a soft landing of the corporate bond market despite our belief that additional policy support is needed. With that in mind, we
assume a soft landing during 2023 with the revised Decree 65, under our base case. This should buy more time for both the banks and
property developers. Our previous estimate is now our bear case, in which there is no revision to Decree 65 but large developers shall be able
to negotiate with the banks on a repayment schedule.
Chart: Short-term funding used for medium long-term loan Chart: Corporate bond to be matured in 2023-24
35% 60,000
30%
50,000
25%
40,000
20%
30,000
15%
20,000
10%
5% 10,000
0% -
ACB OCB BID CTG HDB MBB MSB TCB TPB STB VCB VIB VPB
2021 Q3.22
Cap from Oct23 Cap from Oct22 Real Estate Energy Other

• Tailwinds could come from liquidity support and a more stable interest rate trend
As we set our base case of a gradual and balanced restructuring of the corporate bond market to maintain system stability, liquidity may not
be nearly as tight as it was during the Oct-Nov 2022 period given the harmonizing stance from policymakers. Accordingly, interest rates might
not rise significantly during 2023.
✓ Negative factors which could affect VND liquidity/interest rates include: (1) the pressure on rising USD rates, as the Fed could have some
additional rate hikes in store; (2) the negative funding gap of roughly VND 355 tn (USD 14 bn) at year-end 2022; (3) the requirement of
maintaining certain operational safety ratios (LDR, MLTL, etc); and (4) the amount of corporate bonds which come due during 2023. We
estimate that roughly VND 185 tn in non-bank corporate bonds will come due during 2023, the bulk of which come due during Jan, May
– Aug, and Dec. Interestingly, this figure has declined -24% over the past five weeks due to buyback activity.
✓ Meanwhile, supporting factors should come from: (1) stronger public disbursement, which will free up idle deposits of STV at banks
(roughly VND 380 tn at 3 SoCBs); (2) better calibration of FX supply and demand; and (3) the acceleration of the interest subsidy program.
Regulations will determine whether the positive or negative factors tilt the balance. Providing that there is timely support from the SBV for
liquidity, a reasonable framework for the application of safety ratio, and a revised Decree 65, the liquidity situation could improve compared
to 2H22. However, we believe that only when the Fed hikes end that the local VND rate might cool down – possibly during 2H23, though
an outright rate cut from the Fed could be unlikely this year. The gap between credit and deposit growth is likely to narrow versus 2022,
at between 12%-14% and between 10%-12%, respectively.
Chart: Funding cost and IEA yield Chart: NIM of banks
9% 8%
8% 7%
6%
7%
5%
6% 4%
5% 3%
4% 2%
1%
3%
0%
2%
2014 2015 2016 2017 2018 2019 2020 2021 2022F 2023F
Funding cost IEA yield 3Q22 2023F
• Headwinds in actual asset yield
Looking at the repricing period of the loans and deposits at the end of Sept, most banks maintained a relatively balanced position between
repricing deposits and loans during 4Q22. However, we believe that at the current lending rate between 14%-16% for retail and SME lending,
it is more a matter of which would be the rate that borrowers can endure (thus not incurring bad debt), rather than maintaining a stable interest
spread to protect the bank’s net interest income. With competitive pricing, we believe that the SoCBs have more flexibility to adjust lending
rates compared to JSCBs peers. This should be sufficient to cover the higher funding cost, and a possible scarcity of low cost STV deposits
during 2023 if/when public investment accelerates.
Another important point which should impact the 2023 NIM is the actual yield on performing assets. Despite the deferral of either principal or
coupon payment, this could still impact the actual asset yield of banks who hold corporate bonds. We believe that the NIM will be under more
significant stress for those with higher exposure to both the property and corporate bond markets. We closely watch the combination of rising
NIMs and rising accruals, which could signify overstated income for 2023.

Accordingly, we believe there will be a divergence amongst: (1) banks with high exposure to corporate bond/property sector (TCB, VPB, TPB,
MSB, OCB, and HDB); (2) state-owned commercial banks; (3) STB and (4) other JSCBs. The first group is projected to have NIM decline
between -41 to -76 bps, whereas the second group would have a NIM decline of -4 bps. STB is the only one that will make a strong leap
ahead, with a significant NIM increase of 134 bps.
Chart: Time until repricing period
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Loans
Loans
Loans
Loans
Loans
Loans
Loans
Loans
Loans
Loans
Loans
Loans
Loans
Deposits
Deposits
Deposits
Deposits
Deposits
Deposits
Deposits
Deposits
Deposits
Deposits
Deposits
Deposits
Deposits
VCB BID CTG ACB STB MBB TCB HDB VPB VIB TPB MSB OCB
Less than 3M From 3M to 6M From 6M - 12M More than 1Y
• PBT to grow 10% to 14% under our scenario
We expect that the NPL ratio will rise 26 bps to 1.71% for our coverage universe, with a surge in the NPL formation rate to 1.3% (from approx.
1% during the 2020-22 period) under the impact of higher lending rates. Credit costs, however, are still trending lower to 1.3% (from 1.5% for
2022F) due to the thick credit buffer. Bad debt associated with corporate bonds will not emerge immediately during 2023 under our base case
with the revised Decree 65, but still a major risk to watch for during the entire year.
Having said that, PBT for the sector is projected to reach VND 249 tn (USD 10 bn), up +13.7% YoY for 2023 under our base case. This is
equal to half of the growth rate during the 2017-21 period (28% YoY), and higher than the equivalent during 2014-15 period (11.3% YoY).
Earnings growth likely should be higher amongst state-owned commercial banks (+18.4% YoY) compared to private commercial banks
(+10.8% YoY) due to their better NIM prospects, as well as their modest exposure to the corporate bond and property markets. State-owned
commercial banks should also deliver strong fee growth due to fee waiver programs in 2022. Meanwhile, the deceleration in bancassurance
growth is what we observe at private commercial banks in 2022. Amongst these, we expect growth momentum to continue at STB and ACB.
Under our bear case (link), earnings growth likely will be 10% for 2023 or one third of the average growth achieved during the 2017-21 period.

Chart: Credit quality ratios for banks under coverage Chart: Troubled assets of the sector
1.9% 170%
1.7% 150%
1.5%
130%
1.3% 12.3%
110%
1.1%
90%
0.9% 8.1% 1.6%
3.4%
0.7% 70% 5.4% 1.3%
3.9% 0.5%
2.8% 2.1% 2.0% 1.6% 1.4%
4.9%
0.5% 50% 2.5% 2.0% 1.9% 1.6% 1.7% 1.9% 1.9% 2.0%
2014 2015 2016 2017 2018 2019 2020 2021 2022F2023F
2012 2016 2017 2018 2019 2020 2021 2022F 2023F
Provision coverage - RHS NPL formation rate - LHS Reported NPL VAMC & Legacy Loans
Credit cost - LHS Covid-restructured Loans C-bond to be matured within 2023
Source: SBV, Banks, SSI Research
• Valuation could find its inflection point sometime during 1H2023
Given our revised earnings forecast which factors in a soft landing for the corporate bond market during 2023, our target prices have been
increased and we have a Neutral view on the outlook of the sector for the year. For 1H2023, we still see negative factors affecting the banking
sector. This includes pressure on interest rates in line with the rising Fed Funds rate, decelerating earnings growth, and lingering NPL risk.
These headwinds could lead to some derating within the sector, which could offer good entry points for those with solid fundamentals. Our
top picks are: VCB, ACB, BID, and STB. While VCB and ACB are our best ideas for asset quality and stable operations, BID and STB would
appear to have interesting developing stories.
We maintain our cautious view on those names with high exposure to property lending and corporate bonds, even though we believe that there
will be large swings in these stocks during 2023 on any key property and/or corporate bond market regulatory change.
Table: Forecast summary (VND bn)

Table: Our calls
Market
Target Current
Cap
% Upside Price Price Net Profit Growth P/E ROE Dividend Yield (%)
Ticker (USD
(VND) (VND)
mn)
in 1yr in 1yr 12/30/22 12/30/22 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F
ACB 20% 26,300 21,900 3,137 25.0% 41.9% 15.1% 9.9 4.9 4.7 23.9% 23.3% 23.7% 0.0% 4.6% N.a
VCB 27% 101,700 80,000 16,056 18.8% 37.1% 18.2% 18.8 11.4 9.7 21.3% 23.2% 20.4% 0.0% 0.0% 0.0%
STB 31% 29,500 22,500 1,799 27.2% 48.3% 82.6% 19.3 10.5 5.7 10.8% 13.2% 22.0% 0.0% 0.0% 0.0%
BID 23% 47,600 38,600 8,281 50.6% 71.0% 21.6% 21.5 14.1 12.1 13.1% 18.2% 17.7% 0.0% 0.0% 0.0%
• Catalyst/risks that could affect our view
✓ Fed rate hike to be lower or higher than expectations;
✓ An escalating war between Russia and Ukraine; and
✓ Policies are made in a stricter manner. This means that the draft regulations on safety operations would be finalized while the draft revision
to Decree 65 is not approved.

Top picks/most preferred/On watch
1. JSC Bank for Foreign Trade of Vietnam (VCB VN)
• Share price (30-Dec-22): 79,500 VND/share; 1Y Target price: 101,700 VND/share
✓ A defensive play within the Vietnam banking sector. Given the recent volatility in the property and corporate bond markets, we believe that
investors should focus on banks which have limited exposure to those markets. Those type of banks tend to have a strong deposit
franchise and conservative credit buffers. VCB is one of those banks, given its prudent lending practices and strong risk management.
VCB should also be the beneficiary of a ‘flight to quality’ by retail depositors, which should mitigate near-term NIM pressure.
✓ Top notch asset quality. NPLs and provision coverage remain industry best. At 3Q.2022, the NPL ratio and LLCR were 0.8% and 402%,
respectively. The bank’s strong credit buffer should allow VCB to avoid sudden balance sheet shocks.
✓ With lower-than-peer pressure on both NIM and NPLs, we believe that PBT growth at VCB will outperform the sector average at 19.5%
YoY for 2023.
✓ The issuance of 6.5% pre-money charter capital should support medium-term growth. If successful, we estimate that the CAR ratio will
improve approx. 200 bps.
• Risk: Higher-than-expected credit costs and NPL-formation; and involvement in the support of a “zero-dong” bank.
Table: Financial summary
(VND bn, %) 2019 2020 2021 2022 2023F

TOI 45,693 49,063 56,711 68,157 77,528
PBT 23,212 23,050 27,376 37,524 44,362
% YoY 27.1% -0.7% 18.8% 37.1% 18.2%
Credit growth (%) 16% 14% 15% 19% 18%
Deposit growth (%) 16% 11% 10% 9% 14%
ROE (%) 26% 21% 21% 23% 20%
NIM (%) 3.09% 2.92% 3.16% 3.60% 3.58%
CIR (%) 34.7% 32.7% 31.0% 31.8% 31.7%
NPL (%) 0.79% 0.62% 0.64% 0.67% 1.30%
LLCR (%) 176% 368% 424% 465% 177%
BVPS (VND) 21,805 25,347 29,951 31,118 42,529
P/B (x) 4.02 3.72 2.55 2.51 1.97

2. Joint Stock Commercial Bank for Investment and Development of Vietnam (BID VN);
✓ Improving fundamentals. After clearing its VAMC bonds during 2019 and making a preemptive provision for Covid-impacted loans during
2020, fundamentals at BID have improved significantly. Noteworthy, ROE has doubled from 9% during 2020 to 18% during 2022. ROE is
now compatible with peer. Asset quality improved, as the NPL ratio declined from 1.76% at 2020 to 0.9% at 2022. Provision cover should
be amongst the highest in the sector at 245%.
✓ Decent risk vs. reward. For 2023, given the limited exposure to both the property and corporate bond market, we believe that BID’s
earnings growth could be a strong 19% YoY. Accordingly, the risk/reward profile is much more attractive than it was in the past with a
forward PB and ROE of 1.6x and 18%, respectively, versus 2.5x and 9.3% at 2020.
✓ The issuance of 9% pre-money charter capital should support medium-term growth. If successful, we estimate that the CAR ratio will
improve between approx. 130-150 bps. In addition, the possibility of an exclusive bancassurance deal could act as another catalyst for
the shares.
• Risk: Higher-than-expected credit costs and NPL-formation.
(VND bn, %) 2019 2020 2021 2022 2023F

TOI 48,121 50,037 62,395 70,656 76,729
PBT 10,732 9,026 13,602 23,187 28,188
% YoY 14.3% -15.9% 50.7% 70.5% 21.6%
Credit growth (%) 12.2% 8.2% 11.2% 12.7% 9.9%
Deposit growth (%) 14.3% 9.6% 16.6% 10.4% 11.3%
ROE (%) 13.3% 9.3% 13.2% 18.2% 17.7%
NIM (%) 2.7% 2.4% 2.9% 3.0% 2.8%
CIR (%) 35.9% 35.4% 31.0% 32.5% 33.0%
NPL (%) 1.7% 1.8% 1.0% 0.9% 1.6%
LLCR (%) 75.1% 89.2% 219.4% 245% 200.0%
BVPS (VND) 18,529 18,998 16,444 20,885 23,919
P/B (x) 2.74 2.52 2.61 1.85 1.61

3. Asia Commercial Joint Stock Bank (ACB VN)
• Investment thesis
✓ Well-oriented loan portfolio with zero exposure to corporate bonds. During 3Q22, ACB reduced its real estate and construction exposure
to 3.5% of total credit, with 1.5% of credit dedicated to real estate projects. This figure is well below peer (estimated of 14% credit
dedicated to real estate projects). In addition, we believe that the dysfunction of the corporate bond market will not severely impact ACB
given the bank’s well-balanced exposure.
✓ Conservative risk management with strong credit buffer. As ACB has fully made provision for Covid-restructured loan, the bank will be
able to maximize its core profit and strengthen its credit buffer during 2022. Given the many headwinds expected 2023, we believe that a
prudent lending strategy would benefit ACB to better limit NPLs and improve the bottom line (PBT growth of 15% YoY).
✓ Attractive valuation: ACB is trading at 2023 P/B of 1.05x, which is attractive given its ROE of 23.7%.
• Risk: Higher interest rate environment causing: (1) higher funding costs; (2) NIM contraction; and (3) higher NPLs.
(VND bn, %) 2019 2020 2021 2022 2023F

TOI 16,097 18,161 23,564 27,757 31,120
PBT 7,516 9,596 11,998 17,028 19,591
PBT growth (%) 17.6% 27.7% 25.0% 41.9% 15.1%
Credit growth (%) 16.6% 15.9% 16.2% 12.7% 0.13
Deposit growth (%) 18.2% 14.1% 9.4% 10.4% 12.8%
ROE (%) 24.6% 24.3% 23.9% 26.4% 23.7%
NIM (%) 3.59% 3.70% 4.06% 4.25% 4.05%
CIR (%) 51.6% 42.0% 34.9% 36.5% 35.1%
NPL (%) 0.5% 0.6% 0.8% 1.0% 1.1%
LLCR (%) 175.0% 160.3% 209.4% 162.8% 139.6%
BVPS (VND) 16,761 16,399 16,618 17,298 21,909
P/B (x) 2.21 1.71 2.08 1.32 1.05

4. Sai Gon Thuong Tin Commercial Joint Stock Bank (STB VN)
✓ Strong earnings growth: STB’s NIM at 3Q was 4.43% - the highest level since 2015. The bank has cleared all of its legacy accruals,
hence, NIM could be compatible to other JSCBs from this point onward. If STB can manage to maintain this positive trajectory, NII growth
should be fully reflected in the business results next year. We expect stronger growth during 2023F with a PBT forecast of VND 11.5 tn
(~USD 481 mn, +83% YoY) as we assume that most VAMC bonds will be fully provided for during 2023.
✓ Asset quality is under control: One of the key differences between STB and other commercial banks is that STB has zero exposure to
corporate bonds at Q3.2022, and limited loan exposure to real estate developers (2.1% of gross loans). Not to mention, STB’s NPL ratio
declined to just 0.9% at Q3.2022, which was lower than the sector average. The loan loss reserve (LLR) ratio reached a record high of
154%, from 138% at 2Q22. STB is a special case, as the bank has gone through a prolonged restructuring process with its risk appetite
likely being more conservative relative to peer.
✓ Stable balance sheet position and reasonable valuation: The LDR was a reasonable ~87% at Q3.2022. This should be a strong supportive
variable for credit growth next year. Meanwhile, STB is trading at 2023F book value and could be re-rated due to a strong earnings outlook.
• Risk
✓ The delay in disposing of the remaining collateral at STB due to unfavorable market conditions.
✓ Rising bad debt due to macro uncertainty.
(VND bn, %) 2018 2019 2020 2021 2022 2023F

TOI 11,677 14,635 17,271 17,704 28,788 31,781
PBT 2,247 3,217 3,339 4,400 6,322 11,544
% YoY 50.6% 43.2% 3.8% 31.8% 43.7% 82.6%
Credit growth (%) 14.1% 15.4% 14.9% 14.0% 13.0% 12.0%
Deposit growth (%) 9.2% 14.8% 6.8% -0.1% 10.0% 12.0%
ROE (%) 7.5% 9.6% 9.6% 10.8% 13.9% 22.0%
NIM (%) 2.7% 2.8% 3.0% 2.7% 3.5% 4.5%
CIR (%) 67.1% 63.3% 63.1% 55.5% 41.7% 41.2%
NPL (%) 2.1% 1.9% 1.7% 1.5% 1.4% 1.6%
LLCR (%) 64.9% 69.3% 93.7% 120.9% 118.9% 107.1%
BVPS (VND) 13,657 14,826 16,054 18,174 20,300 24,219
P/B (x) 1.19 0.68 1.05 1.73 1.16 0.97

Financials - Insurance: High interest rates to offer silver lining for insurers
2023 outlook: Positive
Top pick: BVH
2022 Recap: Outperform, due to high-interest rate

While insurance sector valuations declined -12% during 2022, it
nevertheless outperformed the VN Index by 20%. Such 130%
outperformance was primarily due to the expectation of rising 120%
110%
interest rates, rather than on insurer fundamentals. During 9M22,
100%
net income dropped -29% YoY. Insurance sector outperformance 90%
began in April 2022, when the banking and property sectors (which 80%
contribute largely to the VN Index) were brutalized. Best performers 70%
60%
amongst insurers included: PVI (+0.2%), BVH (-8.8%), and BIC (-
50% VNIndex Financials Insurance
10%).
40%
30%
During the 9M 2022, insurance premiums were VND 177 tn (+17% YoY), of which life and non-life insurance premium rose +16% and + 19%
YoY, respectively. However, growth slightly decelerated toward year-end, as direct written premiums reached VND 251 tn as of 12 Dec 22, up
+15.1% YoY. This growth rate was the lowest level since 2013, however.
• What we have expected/not expected
• Life insurance premium growth was less than anticipated. New business premiums (NBPS) inched up 6% YoY and total premiums (TPS)
increased +16% YoY through 9M 2022. This was much lower relative to average levels during both the Covid (17% for NBPS and 22%
for TPS) and pre-Covid period (42% for NBPS and 24-31% for TPS). The slower pace of growth occurred in both the agency and the
bancassurance channels, and could be explained by the following:
- A high-interest rate environment is not supportive for the sale of investment-linked products. In a relatively nascent insurance market
like Vietnam, most individuals look at insurance as another investment channel rather than protection. This is why insurers focus on
selling universal life and unit-linked products. We believe that these products accounted for 87% of total NBPS during 2022 (from
84% in 2021). However, as deposit rates rose swiftly to ~ 10% whilst the equity and corporate bond market tumbled, it is not
attractive to purchase an insurance contract with a low guaranteed rate which has investment exposure to equities and/or bonds.
- Some insurers have been restructuring their agency staff since 2021, trimming unproductive staff. At 3Q22, the number of agents at
certain insurers declined between -6% to -29%. Meanwhile, within the bancassurance channel where sales are typically tied to new
loan disbursement, a cap on bank credit growth imposed by the central bank weakened the acquisition process.

- Finally, even though Vietnam economic growth was stellar during a difficult year, we believe that the global landscape has triggered
concern amongst consumers. The Russia-Ukraine war, the fight against inflation in advanced economies, and prospect of a global
looming recession were factors which affected consumer confidence in Vietnam. Concerns over lower disposable income likely have
led to a lower budget for insurance products.
Life insurance premium growth New business premiums growth, YoY
40% 60% 1Q 2Q 3Q 4Q
1Q 2Q 3Q 4Q
35% 50%
30% 40%
25% 30%
20% 20%
15% 10%
10% 0%
5% -10%
0% -20%
2018 2019 2020 2021 2022E 2018 2019 2020 2021 2022
Source: AVI, SSI Research
NBPS, by channel Chart: Life insurance market share & premium growth, 9M22
Market share YoY growth Bancassuran
50 160% TPS NBPS TPS NBPS ce/NBPS
45 140% BVL 19.2% 10.6% 10.8% -13.6% 1.3%
40 120%
Manulife 17.9% 18.2% 8.7% -19.2% 40.7%
35 Prudential 16.8% 17.7% 17.4% 51.5% 62.7%
100%
30 Dai-ichi Life 12.3% 13.7% 23.0% 20.3% 61.4%
80% AIA 10.7% 7.0% 17.5% -9.3% 54.9%
25
60% MB Ageas 3.8% 7.6% 20.6% 13.4% 78.3%
20
40% FWD 3.2% 6.4% 54.2% 58.0% 73.8%
15
SunLife 2.9% 6.2% 59.2% 43.5% 75.5%
10 20%
Other 13.3% 12.6% 11.0% -5.9% 27.1%
5 0%
Total 16.1% 6.3% 49.7%
- -20%
2017 2018 2019 2020 2021 9M2022
Banca - LHS Agent - LHS Banca - YoY Agent - YoY
• Non-life insurance premium growth was a strong +19% YoY during 9M 2022. This was the highest annualized rate since 2011, which is
understandable since non-life insurance premiums normally track GDP growth. During 9M 2022, retail lines rebounded YoY, as a result
of the lockdown being lifted in 2022. Motor and health & personal accident insurance premiums each enjoyed the highest growth rate
over the last five years at +17% and +30% YoY, respectively. Meanwhile, cargo and marine insurance continue to achieve solid premiums
due to busy import-export activities during 9M22. Engineering insurance, however, decelerated for the fifth consecutive year which can
be explained by slow investment by both the public and private sector.

Chart: GDP and non-life insurance growth Chart: YoY growth of non-life insurance segments
25% 10%
35%
20% 8%
25%
15% 6%
15%
10% 4%
5%
5% 2%
-5% Motor Health PA Engineering Cargo Marine
0% 0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 9M22 -15%
Nonlife insurance growth - LHS GDP growth - RHS 2018 2019 2020 2021 9M22
• Competition has remained intense in both life and non-life. We have not witnessed a significant increase in pricing by insurers despite
the global “hardening” trend. Coupled with the normalization of the claims ratio to pre-Covid levels, this has led to underwriting profit
decline for most insurers during 2022. Within retail segments, leading insurers have switched toward health & personal accident insurance
instead of motor insurance. Health & personal accident insurance is deemed to have runway for future growth, as well as stronger
profitability relative to motor insurance. This was the growth engine for BVGI (+14%), BMI (+43%), BIC (78%) and MIG (175%) during
the first three quarters of the year. Meanwhile, the race for market share should continue to be intense between Top 3 life insurers (BVL,
Manulife and Prudential).
Table: Market share of insurers amongst various segments
• Both financial income and underwriting income were impacted. Despite a resilient top line, bottom lines were hurt, as PBT during the first
three quarters of 2022 dropped -29% YoY. The claims and combined ratio were 39% and 99%, respectively, compared to 35% and 95%
during the same period last year. The claims ratio accelerated at the beginning this year, reflecting the impact of high inflation.

% Investment Claim Combined

DWP UW %yoy %yoy NPAT %yoy ROI ROE P/B
yoy income ratio ratio
ABI 1,571 14% 128 -54% 96 2% 169 -42% 35% 91% 4.9% 17% 1.17
BIC 2,781 36% 44 -63% 215 -17% 183 -36% 27% 98% 5.9% 10% 1.25
BMI 3,962 25% 137 86% 150 -5% 223 31% 32% 96% 7.3% 13% 0.98
BVH 31,721 12% (4,038) -5% 5,940 2% 1,197 -9% 52% 100% 5.5% 7% 1.55
MIG 3,661 36% 38 -21% 149 -2% 135 -9% 35% 98% 6.7% 10% 1.30
PGI 2,682 15% 71 -58% 145 -12% 162 -38% 47% 96% 5.5% 12% 1.66
PTI 4,721 13% (407) -2034% 85 -64% (348) -272% 48% 112% 2.5% -23% 2.15
PVI 7,585 21% 209 -57% 518 2% 702 -13% 47% 94% 6.5% 12% 1.33
VNR 1,888 10% 132 167% 153 -42% 248 -10% 29% 87% 6.2% 10% 0.89
Total 60,572 16% (3,686) -42% 7,450 -3% 2,671 -29% 39% 99% 5.7% 8% 1.37
• Sector valuations in more reasonable territory, with an average trailing P/B of 1.37x (vs. 1.81x at the beginning this year). Except for BVH,
which is trading at a discount to historical median and similar to the trough of 2020, all other insurers are still trading above their historical
median.

• Not a bright outlook for sales growth and underwriting profit
Given intense competition, we do not expect increased revenue from improved/higher pricing, except in the case of motor insurance. Growth
for most insurance segments likely will continue to rely more upon the number of winning contracts by insurers. With the enactment of the
new Law on the Insurance Business, we believe that insurers will more aggressively promote ‘microinsurance’. We note that MIG, BVGI, and
PTI (among others) have actively deployed these products during 2022, which could continue be the case in 2023. When it comes to
commercial lines, the growth engine likely will depend on the disbursement of public investment, the restart of halting construction sites, and
the re-opening of China. These factors are wild cards for premium growth (in particular cargo, marine, and property & casualty). We expect
that non-life insurance premium growth will be lower than the 2022 equivalent, achieving between approx. 10%-12%.
The claims and combined ratio is projected to be under stress due to high inflation, higher cost of assets, and medical expenses, as well as
life and non-life claims related to the complexity of new disease & health conditions. Meanwhile, insurance fees are likely to remain stable
under competitive pressure.
As for life insurance, we expect total premium to rise between 16%-18% YoY, which is higher than the 2022 equivalent but lower than the
2012-21 historical average of 26%. Despite the proposal for recording the entirety of bancassurance advisory process and archiving it for five
years not being approved, the sales of insurance products through bank branches is being monitored more closely by regulators. We believe
this will ultimately affect the overall pace of growth for the market.
Claim ratio of insurers ROI of insurers
50% 10%
9%
45% 8%
7%
40%
6%
35% 5%
4%
30% 3%
2% ROI 12M deposit rate
25% 1%
0%
20%
Q3/2019
Q4/2018
Q1/2019
Q2/2019
Q4/2019
Q1/2020
Q2/2020
Q3/2020
Q4/2020
Q1/2021
Q2/2021
Q3/2021
Q4/2021
Q1/2022
Q2/2022
Q3/2022
Q4/2022
Q1/2018
Q2/2018
Q3/2018
Q4/2018
Q1/2019
Q2/2019
Q3/2019
Q4/2019
Q1/2020
Q2/2020
Q3/2020
Q4/2020
Q1/2021
Q2/2021
Q3/2021
Q4/2021
Q1/2022
Q2/2022
Q3/2022
Source: Insurers, SSI Research
• However, a high interest rate could be the savior to the bottom-line growth for insurers
Deposit rates rose between 400-500 bps YTD and the 10Y government bond yield increased 257 bps YTD during 2022, while insurer ROI
remained at 5.8% - even lower than the 2021 equivalent of 7.6%. This was primarily due to the rate rise during late 3Q22, resulting in the
VNIndex tumbling during the year. For 2023, we expect insurers absorb the full impact of higher deposit rates, and for life insurers to benefit
from a lower mathematical reserves as the technical rate increases in line with government bond yields for tenures over 10Y.
We expect financial income to be sufficient to fill the shortfall in underwriting profit, allowing non-life insurers to enjoy double-digit earnings
growth 2023. For BVH, we expect the company to achieve solid growth (+34% YoY) due to both improved underwriting profit (for life
insurance) and financial income.
Earnings for non-life insurers is expected to be volatile between quarters. However, given the low base in 2Q and 3Q 2022, stronger growth is
expected in Q2 and Q3 2023.

Table: Investment portfolio of insurers by the end of 3Q22
ABI BIC* BMI BVH MIG PGI PTI PVI VNR

Value (VND bn)
Deposit 2,733 3,914 2,972 102,579 1,847 2,984 3,768 6,121 2,520
Bond - 650 187 62,061 577 400 899 3,895 709
Equity - 297 108 2,632 - 147 - 1,555 15
Other - 76 58 6,523 1,170 47 102 65 629
% of total portfolio
Deposit 100% 79% 89% 59% 51% 83% 79% 53% 65%
Bond 0% 13% 6% 36% 16% 11% 19% 33% 18%
Equity 0% 6% 3% 2% 0% 4% 0% 13% 0%
Other 0% 2% 2% 4% 33% 1% 2% 1% 16%
Source: Insurers, SSI Research
*Data as of 2Q22
Bond includes both Government bonds, financial institution bonds and other corporate bonds
• Regulatory framework shall continue to be completed, with a valuation upside surprise depending on insurers’ capital raising plans
The Law on Insurance Business is effective from 1 Jan 2023. The guiding Decree and Circular, however, are in Draft form only, and we keep
our eyes peeled for new developments. The most significant change that we expect is more transparent and consistent periodic information
disclosure, as well as a gradual transition to a globally standardized risk management framework. The latter could trigger a capital raise for
insurers, spurring foreign investor interest in the space.
• Investment risks:
• Less-than-expected interest rate rise globally
• Higher-than-expected rates from reinsurers

Top picks: BVH VN
• Share price (30-Dec-22): VND 46,600/share; 1Y Target price: VND 62,500/share
✓ Currently ranks #1 in life insurance and #2 in non-life insurance in Vietnam. With exposure to both the life insurance and non-life
insurance market, BVH benefits from both a higher ROI and a lower mathematical reserve. Despite demand for life insurance being a
challenge for the short-term, we believe that BVH should benefit from both a “supply push” and “demand pull” over the long run.
✓ Valuation is at a relatively low level of 1.55x P/B vs. historical average of 2.2x. The lowest P/B of BVH was 1.23x during the 1st Covid
wave, and 1.25x between Dec 2009 and Sept 2012. We believe that 2023 will not yield a sharp correction in interest rates. Hence, we
believe that the current valuation is attractive given our expected 34% PBT growth rate and stable 8% cash dividend.
✓ Upside surprise from future capital raise. BVH likely will raise capital over time (either at the parent level or through BaovietLife/BVGI),
which could act as a positive catalyst for the shares.
• Risk
✓ Interest rate declines faster than expected.
✓ BVH opts for a more conservative approach, and chooses a lower-than-expected technical rate.
Table: Key financials (VND bn)
2019 2020 2021 2022F 2023F

Direct written premium 35,748 37,727 39,504 43,297 47,445
% YoY 14.0% 5.5% 4.7% 9.6% 9.6%
Gross underwriting profit (765) (2,041) 603 714 661
% YoY -71.0% 166.8% -129.6% 18.4% -7.5%
Net underwriting profit (3,707) (5,218) (4,991) (5,205) (5,932)
% YoY -33.2% 40.8% -4.3% 4.3% 14.0%
Financial income 5,687 7,654 7,852 7,987 9,573
% YoY -22.5% 34.6% 2.6% 1.7% 19.9%
PBT 1,512 1,953 2,376 2,356 3,174
% YoY 8.3% 29.2% 21.7% -0.9% 34.7%
Claim ratio 60.8% 56.5% 47.8% 45.8% 44.7%
Combined ratio 106.5% 106.5% 103.0% 101.7% 100.0%
ROI 5.5% 6.5% 5.7% 5.3% 5.8%
ROE 6.7% 7.9% 8.9% 8.6% 11.1%
BVPS 25,688 27,033 28,546 28,060 30,683
P/B 1.81 1.72 1.63 1.66 1.52
Source: BVH, SSI Research

Appendix – Valuation of insurers vs. historical median

ABI BIC
3 2.5
2.5
2
2
1.5
1.5
1
1
0.5 0.5
0 0
BVH MIG
6 3
5 2.5
4 2
3 1.5
2 1
1 0.5
0 0
PGI PTI
2.5 3.5
3
2
2.5
1.5 2
1 1.5
1
0.5
0.5
0 0
PVI VNR
1.8 2.5
1.6
1.4 2
1.2
1.5
1
0.8
1
0.6
0.4 0.5
0.2
0 0

Financials - Brokerage: A turnaround theme in late 2023

Top picks: N/A
2022 Recap: Underperform

2022 was a difficult year for the brokerage sector, given the weaker
equity market, the regulatory crackdown on corporate bond market, 120%
tighter financial conditions, and retail investor risk aversion. Brokerage 110%
stocks rallied, however, with perceived better market prospect during 100%
late 4Q 2022, but not nearly enough to recover the entire 2022 loss. 90%
80%
Brokers declined an average of -61.8% during 2022 (VNIndex -32.8%) 70%
60%
and stood at the second weakest sector. TVB VN (-85%) was the worst VNIndex
50%
performer, dragged down by investment losses and involvement in Financials
40% Brokerage
alleged market manipulation. Others experienced declines of between 30%
60%-70% YoY. Top 4 listed market cap players, include: SSI (-61%),
VND (-58.6%), VCI (-57.2%) and HCM (-56.0%).
Commission/trading fees trending down amid fierce competition
With the removal of the trading fee floor rate during 2019, several brokers have opted out to 0% in an intensively competitive environment, especially
after witnessing the rapid influx of retail post-Covid. As such, this declining trend has been witnessed across the board, including traditional brokers,
such as SSI, HCM, VND and VCI. At 3Q 2022, commission fees within the Top 4 traditional ones were estimated to decline 1 bp vs 4Q 2019
whereas new players (VPBS and TCBS) dropped 5 bps. However, this trend appears to have stabilized and the commission gap between both types
of brokers finally closed during 3Q 2022 as the Top 4 companies have offered various fee options for customers, from traditional one to online
accounts while new players such as TCBS have boosted the traditional-style commission fees in their trading options or VPBS free trading fee
marketing programs only offer in a limited period (normally 3 to 6 months).

Estimated trading fees over quarters on the declining trend (%)
0.22%
0.20%
0.18%
0.16%
0.14%
0.12%
0.10%
1Q2020 2Q2020 3Q2020 4Q2020 1Q2021 2Q2021 3Q2021 4Q2021 1Q2022 2Q2022 3Q2022
Top 4 New players
Source: Companies’ statements, SSIR estimates. Top 4 includes SSI, HCM, VND and VCI whereas new players are VPBS and TCBS
Retail investors remained the key power of trading wave
Throughout 2022, the market remained dominated by domestic investors, which contributed 92.6% of the market’s total trading volume for 2022
whereas foreign participation increased to 7.4%, from their historical low of 6.7% during 2021 which remains far below the double-digits seen pre-
Covid. As such, brokers which focus on retail successfully retained market share, whereas traditional brokers have not improved. However, we
note that the share of traditional institution brokers (SSI, HCM, VCI) has marginally improved during 4Q22 (21.3%, from 20.3% as of 4Q21) due to
large foreign inflows into the Vietnamese stock market while the sharp turbulence in the bond market during Oct and early Nov has hit on companies
who are also active on the bond distribution.
Retail investor participants (% market turnover) HSX brokerage marker share (%)
96.0% 45
94.0% 40
35
92.0%
30
90.0% 25
88.0% 20
86.0% 15
10
84.0%
5
82.0%
0
80.0%
78.0%
Top 4 New players
Source: HSX, HNX, SSIR
Trading volume and new account opening topped in Q4/2021
Amidst the weak equity market, we were not surprised to see that both trading volume and new account openings decelerated during 2022, given
the high level of retail participation. The average trading value (ADV) peaked during 4Q 2021 at USD 1.4 bn and decreased by half to just USD 600
mn at 4Q 2022. For the entire year, ADV dropped 22% YoY yet tripled pre-Covid ADV level. Excluding the noise of new account opening during 2Q
2022, it had also topped-out during 4Q 2021.

Average trading value (USD bn) ADV/Margin lending balance (%)
1.6 20%
1.4
1.2 15%
1
0.8 10%
0.6
0.4 5%
0.2
0 0%
1Q2019
2Q2019
3Q2019
4Q2019
1Q2020
2Q2020
3Q2020
4Q2020
1Q2021
2Q2021
3Q2021
4Q2021
1Q2022
2Q2022
3Q2022
4Q2022
4Q2019
3Q2021
1Q2019
2Q2019
3Q2019
1Q2020
2Q2020
3Q2020
4Q2020
1Q2021
2Q2021
4Q2021
1Q2022
2Q2022
3Q2022
Source: HSX, HNX, SSIR
Margin lending balance peaked in Q1/2022 but not yet reflected the deleveraging
The market’s margin balances peaked during 1Q 2022 at VND 200.6 tn (USD 8.5 bn) and decreased to VND167 bn (USD 7.1 bn) at 3Q 2022. As
such, this helped the required safety ratio of margin lending over brokers’ equity to improve, decreasing from 155% at 4Q 2021 to 120% to 3Q
2022. However, the ADV/margin loan ratio decelerated from 2Q 2021, as delivering not being fully reflected in broker loan books, as expanding
margin loans were in line with accelerated capital raises across the sector.
We should have more clarity of broker earnings during 4Q 2022, as there was a market-wide forced purge of margin loans from October through
early November post-Van Thinh Phat. It was a rare occasion to see hundreds of counters aggressively sold off over technical factors (margin calls
and forced selling by local brokers). Margin calls occurred with enterprise owners, management, and large shareholders.
9M22 earnings results of top brokers have not reflected the worst yet
During 9M 2022, earnings at our covered brokers (SSI, HCM, VCI, VND, TCBS and VPBS) were divergent but all had not as yet reflected the worst.
Although sector PBT dropped 10.8% YoY, new players exhibited a much better performance (VPBS +21.5% or TCBS -3.8%) whereas traditional
brokers declined an average -15% YoY. However, we expect that Q4 earnings performance might stand out as the worst earnings for years for
brokerage, not only from the significant decline on ADV (Q4/2022 ADV -58% YoY and -12% QoQ) but from the investment losses in prop trade or
rising in NPLs relating to the margin loans force cell after the VTP event.
Unit: VND billion SSI HCM VCI VND VPBS TCBS

Operating revenue 4,219.8 2,267.2 1,860.1 3,397.4 3,713.9 4,170.1
Prop trading 732.0 498.4 426.7 564.4 (138.9) 904.6
Treasury 335.4 - 37.1 334.0 73.3 26.1
Margin lending 1,455.5 1,018.6 545.7 1,264.8 980.7 1,169.7
Brokerage fee 1,436.6 693.8 812.4 1,057.5 2,342.5 780.1
IB revenue 65.9 49.7 37.9 158.5 12.9 1,287.7
Operating expenses (1,299.2) (1,099.1) (380.3) (866.1) (2,310.8) (582.0)
Prop trading expenses (36.9) (57.0) (13.4) (12.4) (316.6) -
Provision for financial assets and loans 1.2 (574.7) - 18.0 - -
Brokerage expenses (1,065.5) (443.4) (344.8) (591.4) (1,988.6) (161.0)
IB expenses (25.2) (21.0) (22.1) (18.9) (5.6) -
Financial Net Income (891.4) 2.7 (437.8) (675.1) (293.3) (523.9)
Exchange Rate (106.8) - 17.5 (94.9) (0.5) 12.6
Interest expenses (780.0) - (346.9) (591.5) (437.6) (460.3)
Others (4.5) 2.7 (108.4) 11.3 144.9 (76.2)
SG&A (210.9) (262.8) (58.6) (288.3) (199.4) (351.0)
PBT 1,821.1 908.5 1,027.4 1,567.9 912.3 2,738.1
%YoY -13.8% -21.1% -18.9% -19.1% +21.5% -3.8%
Source: Companies reports, SSIR

Higher market share won the game
Though ADV during 9M22 dropped by -5.9% YoY, brokers with higher market share definitely won the game. The strong result of VPBS and TCBS
came from their expanding market share and in turn reflected in the brokerage revenue (VPBS +13.2% YoY and TCBS +20.3%). On the other hand,
for full-services brokers, weak results in brokerage lines have been widely seen at VND (-2.6%), SSI (-18.6%) or HCM (-32.7%). For VCI, due to
their complexity between the IB and brokerage activities and there are differences between their published income statement and earnings release
(in VCI’s website) so we do not have a comparison.
Margin lending yields have not kept pace with rate hikes
Revenue from margin lending during 9M 2022 were the key drivers of brokers during the first 9M 2022, increasing 54.6% YoY reflecting an
improvement in broker loan books (+8.2% YoY). TCBS was an outperformer (+106.3%) due to improvement of its customer base. The rest also
did well: VND (73.2%), VPBS (+51.8%), SSI (+43.4% YoY), VCI (38.3% YoY) and HCM (+26%). However, as we note above, 3Q22 margin level
has not reflected the turburlence in market yet. Further, the recent 200 bp policy rate hike and around +400 bps to the market lending rate have
not been taken into account as of 3Q22. The average broker yield was 80 bps lower than at 2021. In Q4/22, we observe that several brokers
announced to raise their margin rate to keep up with the trend, by an average of around 200 bps.
Table: Lending rates at brokers
Early-2022 Late-2022
SSI 12% 14.20%
VCI 12% 14.50%
HCM 14.60% 14.60%
VND 12% 13.70%
VPS 9.8%-14% 14%
TCBS 10.50% 14%
Margin lending yields (% p.a) Corporate bond balance (% owner equity)
13.00% 70%
60%
12.50%
50%
12.00%
40%
11.50%
30%
11.00% 20%
10.50% 10%
0%
SSI VND HCM VCI VPBS TCBS
Source: SSIR
Prop trading slid
As expected, prop trading revenue witnessed a 24.7% YoY decline during 9M 2022 as the market fell sharply during 2022. On the prop trading
balances, we do note a decline in outstanding balances, which reflect the lower mark-to-market asset valuation. On the other hand, some brokers
saw their corporate bond exposures increase. We also note that the required safety ratio for brokers to hold corporate bonds is 70% of owner
equity. TCBS has high violation risk but they confirmed to raise the capital raise in late 2022.
Fee revenue from investment banking stalled due to a weaker equity market and regulatory crackdown on corporate bond market

IB was hard hit by a weaker equity market (companies postponing their IPO or capital raise plan) and regulatory crackdown on corporate bond
market (which froze the entire corporate bond market). As such, IB fees dropped 19.5% during 9M 2022. TCBS - the largest broker in terms of
bond issuance and distribution, witnessed IB revenue trending lower on a quarterly basis through 9M22 at VND 1.2 tn (-5.8% YoY) due to large IB
revenue booked during 1Q22 (VND 723 bn).
Sector valuation has been wandering around the historical troughs
Brokerage trailing P/B has been de-rated from its historical high of 4.0x at 2021 to 1.0x during 2022, following weak earnings results (due to a drop
in trading volume) and a partial reflection of risks associated with the property and corporate bond markets. Indeed, the sector has reached an
historical low valuation range (of P/B slightly under 1.0x, similar to the 2011-2012 period) during 3Q 2022 but started to decelerate during late Q4.
What to expect in 2023: A turnaround theme
As brokerage sector is highly geared to the market and macro, we remain focused on market returns, interest rates, and trading volumes. We outline
our general assumptions below:
2022 2023E
Average deposit rate (%) 6.5% 8.0%
VNindex (point) 1007.9 1160
Equity market returns (%, in local currency) -32.8% +15-20%
Earnings growth 15.3% 13.8%
ADV (USD mn) 866 650
Source: SSIR
The above assumptions exhibit that 2023 VNindex market returns should be positive by year-end. Importantly, however, we expect a volatile path
during the year, as noted in our Equity Strategy.
Trading volume is still on focus
As trading volume continues to define sector growth drivers for 2023, we see somewhat of a mixed bag. Considering our macro assumption of
deposit rates remaining at such a high level through year-end, we do not expect similarly strong increases in trading volume as in 2021 as deposit
channels remain more attractive. As a result, we expect that ADV will decline 25% during 2023. However, supportive factors include: 1) retail
investors are more experienced and should be more opportunistic; and 2) strong flows from foreign investors. Anyways, the expected not-so-high
trading volume will not prompt the capital raise trend as seen in 2021 except companies that are high exposure to corporate bonds (such as TCBS).
Policy backdrops
We believe that policies will continue to set the tone for the sector during 2023. Most importantly, the approval of Decree 65 amendments and other
government and SBV liquidity support should afford a more orderly restructuring and soft landing for the corporate bond market and build market
confidence.
We see two opportunities for sector. Firstly, the new KRX trading platform and additional capital market developments (ie. the adoption of central
counterparty clearing [e.g. CCP]) should be major catalysts throughout the year. In fact, the establishment of the Vietnam Securities Depository
and Clearing Corporation (VSDC) during Dec 2022 is an important step to allow the new system to go-live during Jun 2023. Under our best-case
scenario, the launch of the KRX trading system followed by the adoption of the CCP clearing system is supportive of the upgrade of Vietnam to EM
status by the FTSE.
Second, the new HNX secondary corporate bond trading platform, which is expected to launch in 1Q 2023 should provide corporate bond market
transparency and improving liquidity for the market.

Long-term catalysts: Bullish views on the Vietnam stock market
For the medium- to long-term, we believe that stock market valuation is at attractive level despite the short-term headwinds. Besides, more
sophisticated products could be introduced (ie. short selling, options, etc) which would peak greater interest in market participation. The Vietnamese
government aims to increase the country’s stock account penetration rate to 10% by 2030.
Sector earnings could have a turnaround theme in late 2023
We believe that the broker performance could turnaround during 2023:
First, if NPLs and loans provisions are properly reflected during 4Q 2022 and investment assets are at distressed valuations at 2022, the turnaround
should occur during 2023.
Second, margin lending rate increases will be reflected in brokers’ PnL in 2023 and NIM will be improved..
Third, full-service brokers are diversifying revenue away from transaction fees toward other asset-based revenue such as the asset management
or wealth management activities.
Fourth, brokers are likely to restructure their business operations after a turbulent year, in a better risk management practice, including cutting SG&A
costs for efficiency.
Accordingly, we believe that the turnaround theme will likely boost the traditional brokers due to their diversification portfolios. Further, the return of
foreign flows will favor top institutional brokers, including VCI, HCM and SSI.
Valuation
Valuations could decline closer to the sector’s historical low P/B of under 1.0x when Q4 earnings results are published. As most companies had a
high base of earnings for 1H22, we expect that earnings growth will continue to decline. However, valuations likely will rebound to the sector’s
historical average P/B with recovery signs from 3Q23.
Risks
Policies are being made in a strict manner, with the draft revision of Decree 65 not yet approved or there will be no actual improvements to the KRX
system.

Real Estate - Residential Developers: Struggles persist

2023 outlook: Underweight
Top picks: N.a
2022 Recap: Underperformed due to multiple headwinds
Sector performance: Underperformed

The residential property sector tumbled -53.8% in 2022,
underperforming the VN Index by -21%. 120%
110%
Worst performers include: HPX (-86.2% YTD); NVL (-84.6% YTD); PDR 100%
(-80.5% YTD); and DIG (-82% YTD) due primarily to their significant 90%
troubles related to corporate bond repayment and massive share sell 80%
off pressure from margin calls during the year. 70%
60%
Meanwhile, VIC and VHM, whose market-caps account for the lion’s 50% VNIndex
share of the industry, have considerably underperformed the VN-Index 40%

Real Estate
Real Estate (Residential Developer)
as well (-43% YTD and – 37.5% YTD, respectively). Other mid and 30%
small cap shares also plunged between -40% to -80% YTD.
VPI was the top performer, increasing 7.8% YTD, outperforming the
sector and VN Index due to strong earnings growth through 9M22.
The weak performance of the industry during 2022 is attributed directly

to the impact of tighter credit, especially with the more stringent
regulations on corporate bond issuance and higher interest rates.
Vietnam’s residential real estate sector has gone through a challenging 2022 with: (i) tighter credit for the entire sector; (ii) the government’s
investigation of land auctions and corporate bond issuance; and (iii) weaker demand for residential properties as lending rate rose. As such, most
developers have witnessed a slowdown in presales and recorded decelerating earnings growth since Q3.
Struggled with financing
To avoid a bursting bubble in the real estate market, after two years of aggressive price escalation due to low interest rate environment and relaxed
funding, the Vietnamese government and SBV have become more cautious about lending and corporate bonds related to the real estate market.
Bank credit offered to the real estate sector was tightly monitored by the relevant authorities and bank management and with a credit growth ceiling.
• Specifically, there are more stringent regulations (on process, condition, procedures, capital use plan, debt repayment plan, etc.) for loans
issued with the purpose of purchasing new homes, for construction and renovation, and for the receipt of land use rights to build homes.
Accordingly, if one needs to borrow to buy/construct a home, he/she must have a detailed dossier of their plan. Previously, such home loans
were not required to have a project plan. In addition, banks are no longer allowed to disburse loans for the purpose of depositing for
home/project purchase in the future. Practically, most real estate projects transferred in the market are not in full compliance with related laws
(i.e., no construction permit, no land use right certificate, or other requisite documents, etc.). After being granted credit, the borrower could

cancel the deposit contract due to failure to complete the required legal procedures. Therefore, granting credit to customers for the purpose of
deposit for home/project purchase is considered a risky endeavor which requires strict supervision.
• According to the SBV, at the end of September, total credit to the property sector grew 15.7% compared to 2021, accounting for 20.9% of
total credit within the economy. Credit to developers, accounting for 33% of total credit to the sector, grew 7.3% in 9M22. Meanwhile, credit
to mortgages increased 20.3%, accounting for two thirds of the total credit to the sector. By our observation, credit was still available for those
who sought out for it but came with tighter requirements. For banks, a limited credit issuance ceiling regarding the total disbursement of such
loans meant that banks were more selective in which clients they extended their limited credit to. As banks were more prudent with real estate
lending, loans have been harder to obtain, not only for developers but also for buyers.
Credit to the property sector
14,000,000 45.0%
40.0%
12,000,000
35.0%
10,000,000
30.0%
8,000,000 25.0%
VND, bn
6,000,000 20.0%
15.0%
4,000,000
10.0%
2,000,000
5.0%
- 0.0%
2017 2018 2019 2020 2021 30/9/2022
Total credit Credit to property sector Total credit growth Credit growth to prorperty sector
Source: SBV, MoC, SSI Research
• While bank credit was tighter, capital mobilization through bond issuance encountered challenges after the investigation of Tan Hoang Minh
and Van Thinh Phat, as stringent regulations on corporate bond issuance activities were put in place. The issuance of Decree 65 during
September more strictly regulates bond private placement (i.e., require details on bond issuance purpose, solvency status, financial position,
etc. from issuer side; applies higher criteria for bond investors or require more responsibilities from bond service providers) which made it
harder for bond issuance and restricted developer refinance opportunities. In recent months, several developers had to urgently handle defaults,
especially the failure of maintaining collateral values since most of corporate bonds were collateralized with corporate shares. Due to stock
market volatility, several bonds fell into technical default and were required to top up collateral.
• In addition to funding headwinds, developers were also materially affected by the interest rate hike starting from September 2022. Since then,
a significant increase in both deposit and lending rates occurred. By our observation, when interest rates for mortgages rose to between 13%
- 15% p.a, both home buyers and real estate investors put purchasing plans on ice. This made even more of a negative impact for developers,
leading to lower-than-expected presales performance and future earnings.

Lending Rate vs. Deposit Rate (%)
25.00
20.00
15.00
10.00
5.00
0.00
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2Q22 3Q22 Nov-22 Dec-22
Lending rate Deposit rate
Source: GSO, SSI compiled data
Market liquidity saw slowdown
From Q2, the real estate market began to cool. A series of tightening measures caused overall market sentiment to turn negative and transactions
subsided. There have been multiple brokerage companies closing or suspending operation due to a lack of market liquidity. In addition, due to
limited funding and low cash collection from buyers, developers suspended project development and/or offered deep discounts to boost sales
performance.
According to the Vietnam Association of Realtors (VARS), total 2022 market supply was 48,500 units, down ~10% compared to 2021 (severely
hit by Covid 19 – outbreak) and down -72% if we were to compare to it to the peak of 2018 (pre-Covid level). Most of the supply was in landed
properties, followed by high-end and mid-end condominiums which are seen as an unbalanced product for sustainable market performance. The
key reason for the supply drop is attributed to a prolonged licensing process and tighter credit policies, causing delays in project launch or temporary
suspension of project development. According to the Ministry of Construction, for 9M 2022, the number of newly licensed commercial
housing/mixed-use projects declined -49% YoY to 104 projects with total units of approximately 49,700 (-41% YoY). We think this will continue to
be the case in the just recently passed Q4.
As stated in the VARS 2022 market report, the number of transactions were 19,000 units in 2022, down -31% YoY and equivalent to merely 17%
of that of 2018 or pre-Covid. Accordingly, the absorption rate sharply fell to 39% from 51% during 2021 and it was only 14% in Q4. Such poor
performance is attributable to increasing interest rates, difficulties in accessing mortgages, and weak market sentiment resultant of the government’s
investigation of several property firms.

Market Performance, by year Supply breakdown by segment, by year
200,000 80%
2022
150,000 60%
2021
100,000 40%
2020
50,000 20%
2019
0% 20% 40% 60% 80% 100%

- 0%
2018 2019 2020 2021 2022
Affordable apartment Mid-end apartment
Total Supply Transaction Volume Absorption Rate High-end apartment Landed properties
Source: VARS
According to VARS, sale prices of landed properties have declined to 2021 levels – prior to the land fever during early 2022 which pushed prices
dramatically higher across various cities and provinces. This segment normally attracts more speculative activity with leverage to make a real estate
investment. Once credit becomes tighter and interest rates increase, this investor is likely the first to cut sale prices. We also witnessed that sale
prices of landed properties in some hotspots in 2nd tier provinces saw greater decline than that in key metropolitan areas (i.e., Hanoi and HCMC)
which normally came with limited supply and more developed infrastructure, thus, sliding down at slower pace. Meanwhile, the sales price of
condominiums has yet to decline due to solid real housing demand. The absorption rate of projects with reasonable prices, attractive rental yields,
and flexible payment schemes remained strong; however, the number of transactions were not high given the limited supply of affordable segment
and loan restrictions to the property sector.
Earnings results diverse among top developers
• During the first nine months of 2022, most top developers witnessed a double-digit decline in revenue due to lower sales during the past two
years of Covid (2019 – 2021 period) along with the timing of project delivery. Only VPI and NLG recorded strong top line growth of 118% and
244% YoY, respectively, as VPI delivered low rise project - Vlasta Sam Son (Thanh Hoa) and NLG recognized sales from Akari City and
Southgate.
• VPI had the highest NPATMI growth of 237% YoY through 9M22 due to growing revenue and an improved gross margin, as the majority of
delivered products were landed properties which normally have higher margins. Meanwhile, KDH and PDR during this time also posted NPATMI
growth thanks to extraordinary income from asset revaluation and project transfer. On the flip side, VHM witnessed negative growth in both
revenue and NPATMI through 9M22, as most of its mega projects were delivered during 2021 while new launches just started handover in
August. For other developers, NPATMI declined, as revenue dropped due to low deliveries and rising costs. As such, we believe that most
developers would unlikely meet their full year targets, except for those who had bulk sales (i.e., VHM) or managed to book extraordinary gains
from asset sales or revaluation.

Summary of 9M22 earnings
9M21 Revenue (VND, 9M22 Revenue (VND, % Revenue 9M21 NPATMI (VND, 9M22 NPATMI (VND, % NPATMI
No. Ticker
bn) bn) Growth bn) bn) Growth
1 VIC 90,848 60,356 -33.6% 3,193 6,793 112.8%
2 VHM 61,681 31,199 -49.4% 27,084 19,700 -27.3%
3 NVL 10,312 7,894 -23.5% 2,413 2,025 -16.1%
4 KDH 3,148 1,678 -46.7% 788 983 24.8%
5 VPI 640 1,394 117.9% 106 357 236.8%
6 NLG 787 2,710 244.1% 709 119 -83.2%
7 PDR 2,391 1,490 -37.7% 1,111 1,412 27.1%
8 DIG 1,655 1,518 -8.3% 138 142 3.0%
9 DXG 7,819 4,597 -41.2% 882 556 -36.9%
10 HDG 526 368 -30.1% 48 21 -55.5%
• In terms of presales, except for VHM which maintains momentum with its bulk sale strategy, other developers such as NVL, NLG, DXG,
etc… had record low presale results during Q3 – falling well short of their initial targets set at the beginning of 2022. Various developers
had to postpone their sale plan, capital raising or IPO activities beyond 2023.
Sector valuation
Historical P/E & P/B – Real Estate Sector

Since 2009, property stocks have traded at an average P/E of
21.8x. In 2022, the entire industry trended lower from 23.9x at the 50.00
beginning of the year to 14.9x by year-end, following market 45.00
40.00
negative sentiment on tighter credit for real estate, investigations
35.00
over bond issuance (Tan Hoang Minh, Van Thinh Phat), and stock 30.00
price manipulation (FLC), amid escalating debt service burdens. 25.00
20.00
We anticipate this negative outlook to linger through 2023.
15.00
10.00
Sector P/E valuations reached historical lows of 7.3x and 12.2x 5.00
0.00
during the bear markets of 2011 and 2020, respectively, implying
that stock valuations could decline further over the near-term - a
period with the largest amount of corporate bonds coming due, P/B P/E
low presales, and high interest rates impact company earnings.
Regarding sector P/B, in 2022, the industry trended down from Source: Fiinpro, SSI Research
3.6x at the beginning of the year to 1.5x by year-end which is the
historical low since 2009. Although it is seen to be an attractive
level for long-term holding, we remain a conservative view toward
property stocks with multiple headwinds and uncertainties ahead.

2023 Expectation
We maintain our view that the Vietnamese real estate market will remain pressured through to 2023. Lending rates may cool toward the end of
2023, but we do not expect a sharp decline. In addition, developers with weak financial status or lack of sales capability likely will continue to
struggle from a cash flow perspective if this tight credit policy continues and market liquidity does not improve.
Supply remains moderate
• We expect that interest rates could peak during mid–2023 – possibly into 2H23. As such, we do not expect liquidity to improve at least through
1H23 given the fundraising difficulties and rising funding costs. Additionally, the plethora of upper-end and luxury condominiums may take
time absorb, preventing market performance from immediate recovery.
• Given the continued debt repayment pressure and difficulties of fund raising on top of rising loan rates, we believe that the delay in project
development will continue through 2023. As such, supply may remain limited.
Weak demand may persist
• We expect that demand will be weak though 1H23 as buyers maintain their “wait and see” attitude for a further price correction and possible
mortgage rate declines. In addition, housing demand has been redirected toward more to the secondary market, especially for homes with
lower prices where previous buyers used high leverage (having to cut losses under increasing mortgage rate environment). This could also
affect sale results in the primary market.
• In addition, income could decline due to unfavorable macro conditions which could pressure home purchase demand.
Selling price may keep trending down
• Limited supply seems to allow pricing to be maintained at high levels, however, the challenged liquidity situation is not the best situation for
investors. Therefore, we expect that there would be potential housing market restructuring more towards the mid-end and affordable segment.
If it turns out to be the case, average selling prices should trend lower.
• Looking back to 2012, developers shifted their high-end products to small-sized affordable units or applied to convert into social housing
projects to boost liquidity to receive preferential loans to maintain their operation. This time may be different, with the expectation of more rapid
involvement by the government to provide supportive policies. Thus, it is expected that market recovery may come sooner.
Corporate bond issues may continue to weight on the sector
• The MoF recently published the finalized draft for amendments to Decree 65 – the latest legal framework for corporate bonds, of which a
number of regulations will take effect from 1 Jan 2024, a year later than originally proposed which allows the market more time to adapt to the
new regulations to clear up the liquidity bottleneck as well as improve market demand. Such a deferral includes: (i) the definition of professional
investors; (ii) the timeline for bond distribution; and (iii) mandatory credit ratings.
✓ The key amendment to the latest draft is the clause of bond principal payment deferral and bond payment (principal and coupons)
conversion, to alleviate bond refinancing risks. Issuers will be allowed to extend bond principal payment by a maximum of two years, or
to modify bond terms (newly added point, which will be used for the deferral of coupon payments) upon 65% of bondholders voting in
favor. Meanwhile, bondholders have the right to receive full payment if they opt to refuse to accept the deferral conditions.
✓ The amendments may also allow for issuers and debtors to come to an agreement for the conversion of outstanding bonds into assets
or loans, in lieu of receiving repayments in cash. In the case that a bank or securities company is the bondholder, the conversion into
loans or assets would occur under the Law of Credit Institutions and other related legal documents for the calculation of safety ratios, as
well as the calculation of bad debt, which likely will be a complicated process.

• While the amendment of Decree 65 is expected to ease bond market constraints, we anticipate that corporate bonds to continue to weigh on
the real estate sector. According to SSI Research data, the total maturity value of corporate bonds during 2023 and 2024 are VND 221 tn and
VND 318 tn, respectively, of which, real estate accounts for the largest portion at VND 131.5 tn and VND 125.3 tn. The majority of bonds will
mature during Q2 and Q3 of 2023, accounting for ~57% of due. Although banks may be more willing to disburse credit to the real estate
developer and homebuyer ecosystem once 2023 rolled in with a reset credit limit, the pressure for bond repayment remains considerable, in
our view.
Corporate bonds: Payment obligation timeline (VND, bn)
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-
Aug-23
Aug-24
Jun-23
Jul-23
Oct-23
Feb-23
Apr-24
Jun-24
Jul-24
Oct-24
Nov-24
Sep-23
Nov-23
Dec-23
Feb-24
Sep-24
Dec-24
Apr-23
May-23
May-24
Jan-23
Mar-23
Jan-24
Mar-24
Real Estate Financial Instituition Energy Other
Source: HNX, SSI Research
• Corporates typically roll over debt by issuing new bonds, taking out bank loans, or issuing shares; however, the ability to raise capital is likely
to remain difficult given the current stock market volatility and various regulatory issues of corporate bonds. Rising deposit rates also make it
more difficult for the corporate bond market, as retail investors become more hesitant to buy even when coupon rates increase. As a result,
companies in riskier positions may face greater default risk. Therefore, project presales should play a critical role in cash flow management
and financing.
• Looking back to the 2011-2012 period, several significant M&A deals took place when distressed developers needed to dispose of their
projects to repay short-term debt. We also expect that M&A activities likely will be a popular topic amongst real estate developers throughout
2023, as several developers could be knocked out of the market, given the dwindling state of sales, and soaring financial distress.
• Among listed developers, NVL has the highest debt service burden with debt/equity ratio of 1.6x and 24% of its debt (3Q22) becoming due
during 1H23. The company has been under intense pressure to repay loans and topping up collateral since October 2022 due to the decline
in the share price and it is undergoing comprehensive business restructuring with the expectation to enhance liquidity. VIC has a gearing ratio
of 1.26x and 36% of its debt at 3Q22 which will comes due during 1H23. VIC is proceeding with an IPO of Vinfast – its automobile
manufacturing entity. If the IPO is successful, it should help VIC to deleverage.

Listed property developers’ debt status to 1H.2023
Debt to reach maturity by the end of % of total debt as of Debt/Equity as at 30- Bonds to reach maturity by the
No. Company
Q2.23 (billion VND) 30-Sep-22 Sep-22 end of 1H23
1 NVL 17,300 24% 1.60 4,600
2 VIC 62,820 36% 1.26 20,152
3 DIG 803 15% 0.70 0
4 PDR 1497 28% 0.50 1139
5 KDH 1029 17% 0.62 0
6 DXG 3,064 51% 0.41 1,479
7 NLG 1625 35% 0.35 407
8 VHM 21,583 54% 0.29 3,340
Source: SSI Research, Company FS
Regulatory changes should have impacts
To continue state policy improvement and increase the efficiency of land management, the government promulgated Resolution 18-NQ/TW
requesting an amendment to 2013 Land Law and multiple related laws be completed by 2023 to ensure legal consistency. Among these, we believe
that the revised Land Law will be the most impactful to the market. While discussions continue before the final version will be ratified, we note that
the following topics will have considerable impact on the real estate market:
• Abolishing land price brackets, setting land price based on market principle
✓ The current approach is one in which the government issues land price brackets or frameworks every five years, providing a price range
for all type of land in certain regions. Local authorities issue land price tables as the basis to calculate land rental, land use fees,
administrative sanctions, and compensation in the case of land expropriation.
✓ According to draft of land law amendment, multiple land use right (LUR) valuation methods (i.e., direct comparison, income method,
surplus method, subtraction method, etc.,) were delineated as procedures for retrieving data, applying formulas, etc. Local authorities
must provide an update to LUR price movement quarterly and publish it within the first 10 days of each quarter. Another update will be
provided annually (on Jan 1st) by the local authorities. We note that it is ultimately the provincial authorities who decide which methods
will be used. If the relevant authorities decide that more than one method is to be applied, the best valuation (i.e., the highest contribution
to the state budget) will be selected.
✓ We do not have a problem with the valuation method, but that local authorities will regularly update land prices and other relevant data is
a significant change in conducting LUR valuation. We also note that data collection should remain an issue. Therefore, proper procedures
are needed to improve the process of LUR valuation in Vietnam.
• Land auction & project bidding/tendering – the main forms of land granting from the Government
✓ The 2013 land law states that land allocation, lease, and change in land use purpose will be decided based on the annual provincial land
use plan or on demand indicated by the investment project, or the application for land allocation, land lease, and change of land use
purpose.
✓ The draft law proposes that land allocation and land leasing will be conducted mostly via bidding on project LUR. In the case there is no
bidding procedure or change of land use purpose, a decision will be based on the province’s annual land use plan, valuation document
for land use demand by the relevant authorities, or approval of the investment projects by state budget.
✓ The draft version also specifies criterion and eligible cases for land allocation, and land lease with/without bidding. However, this may
create inconsistencies with bidding, investment, and housing laws, which may need to be cleared before being ratified.

• Land expropriation
✓ The 2013 land law states that land expropriation will be carried out if: (i) land is unused for 12 consecutive months; or (ii) the land use
schedule is delayed over 24 months from the project implementation schedule. As such, developers may be given a 24-month land use
extension and pay extra land rental for 24 months.
✓ The amended law proposes that any non-agricultural project which fails to comply with a project schedule could be expropriated if: (i)
investors have already been fined with additional land rental; and (ii) fail to pay the additional land rental. This seems to be a stricter
regulation; however, it does not provide details on minimum period of a project delay before land expropriation nor whether developers
can keep paying the penalty to maintain access to the land. We await more clarity.
• Clarification on tourist condos and villas, officetels, etc.
✓ The amended law states that buyers of a tourist condo, villa, or officetel can be granted a land use right certificate with duration of
ownership to be determined with reference to land use terms in accordance with the land law. This should pave the way for these segments
back on track in both the primary and secondary markets, as buyers become more confident in certified ownership.
✓ Another critical point relating to the sale of these property types is that if there is a profit-sharing commitment (i.e. a lease-back structure,
or cooperation agreement), developers must have a bank guarantee for the commitment, and it must be specified in the property sale and
purchase agreement. This is to avoid the failed execution that has occurred on multiple projects, increasing disputes between the two
sides.
Earnings Outlook
For 2022, we anticipate that most of developers will unlikely meet targets for the whole year, except those who have bulk sale deals (i.e., VHM) or
manage to book extraordinary income from asset sales or revaluation gains.
Under the tension of 2023 tight operating cash flow, developers could curtail sales prices to attract larger pool of demand, preventing tight liquidity
or even solvency; thus, challenging developer profit margins. Amid rising funding costs, companies may try to scale down their debt, but this may
not be easily given the stagnant market. Therefore, heightened capitalized interest costs may affect company earnings growth, lead to a slowdown,
or delay of project implementation.
Among developers under our coverage, we see that for 2023, VHM, NLG and DXG could deliver reasonable earnings growth from delivery of
previously sold projects. Specifically, we forecast VHM’s 2023 earnings to increase 10% YoY, primarily due to the delivery of The Empire and The
Crown (2nd & 3rd phase of Vinhomes Ocean Park, Hanoi) with a combination of retail and bulk sale. For NLG, we anticipate that earnings could
continue their momentum with an estimated NPATMI of VND 1.4 tn (+13% YoY) due to the delivery of the Akari, Mizuki, Waterpoint, Can Tho
project and the remaining 25% stake transfer in Paragon. We expect 2022 earnings to be modest at DXG, however, 2023 earnings should deliver
double-digit growth over the 2022-low base with major contributions form Opal Skyline and Gem Skyworld, NPATMI growth could be the order of
14% YoY.
By contrast, we do not expect earnings growth for NVL during 2023 since it continues to struggle with debt repayment with a substantial amount
of corporate bonds coming due this year. For KDH, we anticipate a slight decline in earnings (-1% YoY) with a key contribution from the delivery of
The Classia (low-rise) and The Privia (high-rise).
Catalyst to watch
• Public investment acceleration could bring about demand in surrounding areas, boosting transactional liquidity, and price.
• Possible supporting policies by the government to enhance market liquidity.

Risks
• Further interest rate hikes.
• Weaker than expected demand due to lower income.
OUR VIEW
Given the gloomy outlook, we do not expect the residential real estate sector to strongly rebound during 2023. Thus, we remain UNDERWEIGHT on
the entire sector.
However, we note that there may be some supportive policies to remove bottlenecks to avoid a hard landing which could be catalysts for property
stocks, especially over the short run.

Real Estate - Industrial Park Real Estate: Limited supply, positive outlook in 1H23
Top picks: IDC, KBC. On watch: BCM
Sector performance: UNDERPERFORM

During 2022, the industrial real estate sector declined 38.6%, slightly
underperforming the VN Index by 6.7%. 120%
110%
Most stocks in the IP industry (i.e., IDC, KBC, GVR, LHG, SZC)
100%
significantly declined, especially in the medium and small-cap space.
90%
Industry performance during 2022 is attributed to multiple factors,
80%
including slow land delivery (due to prolonged approval process) or
70%
management restructuring. ITA was the worst performer (-75.3% YTD),
as the stock was put on the warning list by the General Department of 60%
VNIndex Real Estate Real Estate (IP Developer)

Taxation. 50%
40%
Meanwhile, BCM was the best performer, increasing 25.7% YoY during
2022 due to the successful land sales in Binh Duong New City to
CapitaLand (18.9 ha with total value of USD 242 mn) and strong growth Source: Bloomberg, SSI Research
in net income (+60% YoY during 9M 2022).
• Sustained FDI inflows According to MPI, Vietnam’s FDI rose 13.5% YoY to USD 22.4 bn during 2022 - the largest over the past five years.
Meanwhile, registered FDI, which indicate the size of future FDI disbursements, decreased 11% YoY to USD 27.7 bn. However, we note that
additional registered FDI was USD 10.1 bn, increasing 12.4% YoY and reflecting the solid commitment of existing FDI investors in Vietnam.
The manufacturing sector was due to receive the largest amount of investment, accounting for 67% of total registered FDI, followed up by the
real estate sector (w/ 13% of total FDI). Newly registered FDI was supported by a USD 1.3 bn investment from LEGO Group.
Registered FDI, by category (USD mn) FDI inflows, Vietnam (USD mn)
35,000 Disbursed FDI Registered FDI (New+Add)
30,000
35
25,000
30
20,000
25
15,000
20
10,000
15
5,000
10
-
5
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
0
Manufacturing Energy Real Estate Others 2015 2016 2017 2018 2019 2020 2021 2022
Source: MPI

• The new Decree 35/2022/ND-CP (Decree 35) issued on May 28, 2022 (replacing Decree 82/2018/ND-CP) has simplified the approval
process for industrial park developers by removing industrial park establishment procedures. Meanwhile, it aims to further decentralize
the role of state management by delegating the responsibility to the MPI and the provincial People’s Committee who implement industrial park
activities. We believe that the simplification of legal procedures and greater decentralization of management delegated to provincial authorities
could reduce approval procedures for industrial parks.
• Land clearance progress remains slow Although legal procedures have been streamlined to shorten the licensing process of industrial park
development, land clearance progress remains slow due to:
(1) Sharp increase in compensation costs. “The designated compensation price” for 2020-2024 announced in most provinces and cities,
replacing the land price announced for the period 2015-2019, in which prices in industrial park hubs rose sharply (+20% in HCMC,
+15% in Hanoi, +1.5x – 3x in Dong Nai, +20% - 45% in Binh Duong, +50% - 2.73x in Ba Ria – Vung Tau, +84% in Binh Phuoc, +40%
in Bac Ninh, +60% in Long An, +36% in Bac Giang and +39% in Hung Yen).
(2) Difficulties in special clearance compensation for existing households. The land clearance and compensation is originally executed by
the District Land Fund Development Center and the approval for compensation plan of industrial park projects is implemented by the
Provincial People's Committee. We realize that the clearance compensation period is prolonged due to: (1) The differences between
compensation prices for land clearance approved by State regulations is too wide over the years; (2) Some households do not cooperate,
while other households have approved the compensation plan but have not received compensation.
• Limited supply
According to JLL, Vietnam had three new industrial parks in south Vietnam coming on line during 2022, namely Nam Thuan Industrial Park
(Long An), Viet Phat Industrial Park (Long An) and VSIP 3-Stage 1 (Binh Duong), with a total land area of 413.7 ha. Binh Duong and Dong Nai
still lead the market, accounting for 27% and 25% of total supply, respectively. Total industrial land in south Vietnam is 27,780 ha.
Two industrial parks were put into operation in north Vietnam, including Thuan Thanh I, Bac Ninh (160 ha) and An Phat 1 Industrial Park, Hai
Duong (130 ha) raising total industrial land area in north Vietnam to over 10,314 ha.
We believe that the expansion of new industrial parks in south and north Vietnam during 2022 will only reach 707 hectares, lower than the
average of between 1500-1800 ha during the 2017-2021 period.
Industrial land (ha) and occupancy rate (%) in Southern VN Total land area (ha) and occupancy rate (%) in Northern VN
12,000 100% 3,000 120%

90%
10,000 80% 2,500 100%
8,000 70%
2,000 80%
60%
6,000 50%
1,500 60%
40%
4,000 30% 1,000 40%
2,000 20%
10% 500 20%
0 0%
TP HCM Dong Nai Binh BR_VT Tay Ninh Binh Long An 0 0%
Duong Phuoc Ha Noi Hai Phong Bac Ninh Quang Ninh Hai Duong Hung Yen Vinh Phuc
Leased land Occupancy rate Leased land Occupancy rate
Source: JLL
Demand remains strong, and the occupancy rate is high. According to JLL, during 3Q22, the industrial park occupancy rate in south Vietnam
reached 85.2% due to strong net absorption of new completions during 1H22. Lego plans to rent 44 ha and Pandora 10 ha in VSIP3 - Binh
Duong, whereas Long An also received Coca Cola's factory investment project worth over USD 136 mn in the Phu An Thanh Industrial Park.

The occupancy rate of industrial parks in north Vietnam was 80% during 3Q22, rapidly increasing over the 75% during the same period last
year. Projects in the VSIP Bac Ninh IP increased investment capital by USD 941 mn and Goertek Group's manufacturing plant project in Que
Vo IP (Bac Ninh) increased capital by USD 306 mn, LG Display increased USD 1.4 bn, raising total investment capital in Haiphong to USD 4.7
bn.
The average leasing price during 3Q22 reached USD 110/m2/period (+4.3% YoY) in north Vietnam and USD 125 /m2/period (+10% YoY) in
south Vietnam. We would like to note that in some Tier 2 provinces, leasing price in 2022 increased at much higher pace than regional average
such as Ba Ria Vung Tau and Binh Phuoc with an average price increase of more than 30% YoY and 21% YoY respectively.
Average asking rent (USD/m2/period) in 3Q22 Average leased price (USD/m2/period) in 3Q22
130
125
120
115
110
105
100
95
90
Q1/2020Q2/2020Q3/2020Q4/2020Q1/2021Q2/2021Q3/2021Q4/2021Q1/2022Q2/2022
Southern IP Price Northern IP Price
Source: CBRE
Through the first three quarters of 2022, listed IP companies posted revenue of VND 51.2 tn (+13.4% YoY) and net income of VND 13.2
tn (+29.9% YoY). In which:
Industrial park companies with strong profit growth - such as BCM - saw net income reach VND 1.6 tn (USD 68 mn) [+60% YoY] due to: (1)
recovered demand for lettable land in industrial parks, as well as from the sale of residential real estate in resettlement areas; and (2) the
sharply reduced cost of supporting Covid-19 prevention. During 9M 2022, KBC only recorded VND 1.3 tn in revenue – down 58% YoY - while
net profit increased 191.3% YoY to VND 2.1 tn due to an asset revaluation gain during 3Q22. Meanwhile, thanks to one-time revenue associated
with My Xuan IP, IDC’s profit increased 338% YoY, reaching VND 2.3 tn.
On the opposite side, SZC, D2D, TID and LHG witnessed a contraction during the period. For example, SZC’s net income was VND 23.3 bn (-
38% YoY), as compensation costs increased 54% YoY. While there was no revenue and profit recorded from Loc An residential project - the
main earnings contributor, D2D’s profit after tax dropped 98% YoY to VND 3 bn. TID profit after tax decreased -46% YoY due to: (1) gross
profit margin of coffee trading was only 2% (-1% YoY); (2) revenue from industrial park leasing and gross profit margin decreasing -41% and
-9% YOY, respectively, due to difficulties in site clearance compensation.
Companies that convert rubber plantation land to industrial park land such as GVR, PHR, and DPR have hardly recorded any revenue from land
compensation due to lack of legislation in the auction of rubber plantation land. In the first 9 months of 2022, PHR recorded 140 billion in
revenue from compensation for rubber land from VSIP 3.

Revenue and NPAT of listed industrial parks, Q1-Q3 2022
18,000 400%
16,000 350%
300%
14,000
250%
12,000
200%
10,000 150%
8,000 100%
50%
6,000
0%
4,000
-50%
2,000 -100%
- -150%
GVR TID IDC BCM SIP SNZ KBC PHR DPR SZC LHG ITA SZL SZB BAX NTC TIP IDV HPI MH3 D2D VRG
Revenue NPAT NPAT growth (%)
Source: Finnpro
• The P/E and P/B of industrial park developers was 12.8x and 1.8x in 2022, respectively, down slightly from 13.6x and 2.1x during 2021 due
to improved net profit with lease prices increasing across industrial parks (for areas available for lease) and profits from retroactively, re-
evaluate industrial parks that are 100% filled.

• Despite headwinds, demand is expected to stay resilient in 2023.
Taking into account the slowdown in newly registered FDI in the end of 2022, 2023 might be a year with more challenges to FDI activities in
Vietnam due to global recession risks. However, The ongoing megatrend production shift from China to Vietnam has been a constant dynamic..
Vietnam is one of the countries attracting large manufacturers, such as Lego (invested capital of USD 1 bn), LG likely will further invest
USD 4 bn in Vietnam as it seeks to make the country a future smartphone manufacturing hub, as well as Foxconn, one of Apple's key suppliers
is planning to invest USD 300 mn. Samsung is seeking to raise investment capital in Vietnam to USD 20 bn, focusing on artificial intelligence,
big data, and other areas. During 2022, Quanta Computer - the world's third largest outsourcing company - is said to be planning to build a
factory in north Vietnam, where the manufacturer expects to fulfill orders for Apple MacBooks.
Large industrial land transactions in the first 3 quarters of 2022
Province Industry Nationality Tier1/Tier 2 Size (ha)

Binh Duong Toy/Plastic Denmak Tier1 44
Vinh Phuc Funiture Japan Tier2 40
Nghe An Logistics/ RBF Hong Kong Tier2 30
Bac Giang Logistics Singapore Tier2 30
Bac Giang Solar energy Hong Kong Tier2 20
Bac Ninh Logistics Hong Kong Tier1 20
Quang Ninh LPG+polypropylen Vietnam Tier2 20
BR-VT Lubricant Germany Tier2 20
Long An F&B USA Tier1 19
Hai Phong Logistics Hong Kong Tier1 17
Dong Nai Logistics China Tier1 16
Hung Yen Logistics/ RBF Vietnam Tier1 10
Source: CBRE
Investment in Vietnamese IPs is attractive, given: (1) The exchange rate of VND has depreciated less than other regional countries such as
Indonesia, Thailand, India, and Malaysia, and other key APAC markets such as Japan; (2) Vietnamese policies to attract FDI have also helped
bring investors back to the fray, wooing FDI investors with incentives such as corporate income tax exemptions for the first four years of
operation, reduction of 50% of corporate income tax over the next five years, and other pro-business incentives; (3) Industrial park land prices
in Vietnam remain low compared to other ASEAN countries, and between 30%-36% lower than Indonesia and Thailand. According to Colliers,
in IP hubs like Bogor -Sukabumi, Tangerang, Tangerang, and Bekasi in Indonesia, the average land price ranges between USD 164/m2/period,
or 36% higher than Vietnam industrial park hubs such as Binh Duong, Dong Nai, Bac Ninh, and Haiphong.
Exchange rate: Vietnam, Thailand, India, Indonesia Leasedprice in ASEAN countries in 3Q22 (USD/sqm/period)
120 450
115 400
110 350
105 300
250
100
200
95
150
90
100
50
0
USDVND USDIDR USDTHB USDMYR USDINR
Singapore Vietnam Indonesia Philippine Malaysia Thailand
Source: Bloomberg

• Continued infrastructure improvement supports IP connections
Future infrastructure improvement for Bien Hoa - Vung Tau Highway, Dau Day - Phan Thiet Highway, North - South Highway, Cai Mep Thi Vai
Port, and Gemalink Port, and Ring Road 3 & 4 should create more convenient connections between industrial parks.
Traffic system of Southern VN industrial parks Traffic system of Northern VN industrial parks
Source: CBRE
• Leased price is expected to increase slightly upon new industrial park openings
During 2022, the Deputy Prime Minister approved the establishment of nine new industrial parks, with a total site area of 2,472 ha (~ VND
29.4 tn of total investment). We view the supply of industrial parks to be limited in 2023 due to:
✓ Difficulties in special clearance compensation for existing households.
✓ Conversion of land from rubber plantations to industrial parks face difficulties due to bidding regulations.
✓ In addition, Resolution No. 115/NQ-CP dated September 5, 2022 on the 5-year National Land Use Plan between 2021-2025 requests to
limit and strictly control the conversion of rice land, especially when converted to industrial land.
We predict southern Vietnam industrial land prices to grow at a decelerated pace of between 1%-2% pace, as properties in Tier 1 (HCMC, Binh
Duong, Dong Nai, Long An) cities are limited while new launches in Tier 2 (Ba Ria-Vung Tau, Binh Phuoc, Tay Ninh, etc.) cities should increase
between 5%-6% YoY.
Haiphong and Bac Ninh should continue to lead northern Vietnam supply with the largest amount of lettable land, whereby Tien Thanh Industrial
Park (Haiphong) and Gia Binh 2 (Bac Ninh) with 410 ha and 250 ha, respectively, will come on line, so the average leased price in northern
Vietnam industrial parks likely will increase between 1%-2% during 2023.

Area of newly operated industrial park land, Southern VN (ha) Area of newly operated industrial park land, Northern VN (ha)
250 2,500
200 2,000
150 1,500
100 1,000
50 500
0 -
2019 2020 2021 2022 2023F 2019 2020 2021 2022 2023F
Tier 1 Tier 2 Tier 1 Tier 2
Source: CBRE
• In 2023, net profit of listed industrial park companies is expected to grow approx. 12% YoY, due to: (1) total leased land area to grow
approx. 10% per annum; and (2) leasing prices are expected to grow 3% YoY in industrial parks in southern Vietnam and 2% YoY for the
equivalent in northern Vietnam for 2023.
Some of the main highlights include:
✓ The booking from MOU contracts in 2022 will help the profit of industrial parks to grow positively in 1H23. We saw a strong increase
in land rental demand in industrial parks in 2022, so a part of MOU contracts should be completed in 1H23. Specifically, among listed
industrial parks, we forecast that IDC could record between 60-80 hectares (+100% YoY) in 1H23 from Phu My II expanded IPs, Huu
Thanh. Meanwhile, BCM should book 60 ha in the Bau Bang Industrial Park and Cay Truong Industrial Park, and SZC recorded 20 ha,
mainly from a contract with the Sonadezi Corporation (SNZ).
✓ Positive cash flow when changing the lease payment schedule for investors. We note that some industrial park players have changed
the payment time from one year to six months from 2H22, such as: the signing of an MOU on payment of 5% of the contract value, next
ten days to three months paying between 50%- 60% of contract value, next three months to pay 95% of contract value. We believe that
by accelerating the payment process, that cash flow of businesses with large areas available for lease such as IDC, SZC, & BCM will be
positive, reduce debt, and increase dividend payouts.
✓ Listed industrial parks with remaining land to lease with the advantage of low investment costs should continue to maintain high
profit margins. We prefer companies with remaining land plots available for lease when investment costs are low such as IDC, SZC,
BCM, VGC, etc., which featured a high lease price during 2022, helping to maintain a gross profit margin over 40% during 2023.

Remaining leasable Areas (ha) of listed industrial parks:
Ticker Total area (ha) Commercial land area (ha) Remaining area (ha) LoCation
SZC 1,556 1,251 588 Ba Ria- Vung Tau
SIP 3,195 2,113 234 HCMC, Tay Ninh, Dong Nai
VRG 200 140 68 Hai Duong
MH3 293 212 13 Binh Phuoc
D2D 331 282 - Dong Nai
NTC* 965 683 255 Binh Duong
BAX 500 325 - Dong Nai
TIP 334 232 - Dong Nai
IDV 377 242 44 Vinh Phuc, Ha Nam
BCM 4,420 3,048 878 Binh Duong
IDC 3,251 2,279 755 Dong Nai, Long An, Ba Ria- Vung Tau, Bac Ninh, Thai Binh
ITA 800 532 50 HCMC, Long An
KBC 4,290 1,784 543 Bac Ninh, Bac Giang, Hai Phong, HCMC
LHG 374 273 40 Long An
HPI 590 384 - HCMC
SZL 488 309 - Dong Nai
TID 4,839 3,163 477 Dong Nai, Ba Ria- Vung Tau, Long An
SZG 529 332 71 Dong Nai
DTD 162 85 - Ha Nam
VGC 4,408 3,036 676 Bac Ninh, Ha Nam, Quang Ninh, Phu Tho, Thai Binh
Source: SSI collect
• Risks: (1) FDI could slow due to the impact of the world economic recession, especially in the manufacturing sector which accounted for
more than 65% of total FDI; (2) The occupancy rate of key industrial hub such as Binh Duong, Dong Nai and Bac Ninh are all over 85%. Should
the land clearance progress be prolonged, it could lead to limited supply of land in remaining industrial parks, affecting the leasing of large
areas; and (3) Legalization of new industrial parks could be delayed.

Top picks:
1. IDICO Corporation - JSC (IDC VN)
• Investment thesis: IDC is trading at a 2022 P/E of 5.5x and P/B of 2.1x -- lower than industry average 12.8x and 2.8x. We recommend a BUY
rating on the shares of IDC, wherein our 1-year target price is adjusted to VND 59,300/share. IDC is one of the largest industrial park developers
in Vietnam with 717 ha of leasable land in Long An, Ba Ria Vung Tau, and Thai Binh. Low compensation and clearance costs should enable
IDC to maintain its industrial park gross profit margin at above 50% from 2022 through 2026. IDC/s dividend yield is 12.2%.
Strong leasing demand from new domestic and foreign customers. During 3Q22, IDC signed new lease contracts for 37.9 ha, including with
large customers such as Hoa Phat Container, Heineken, Phu My Super White Glasses, etc., bringing the total let land to 129.7 ha in 2022. With
the advantage of being close to the Cai Mep - Thi Vai port area, the expanded Phu My II and Phu My II Industrial Park are expected to be a
magnet for heavy industry. Not to mention, convenient traffic connections via the Trung Luong My Thuan Expressway which allows it to attract
consumer goods and logistics businesses in the Huu Thanh Industrial Park. We forecast that IDC will maintain its lease plan of 150 ha per year
between 2023-2024.
The leasing price of industrial park land increased, allowing IDC to maintain a high profit margin from 2022. We found that the lease price
of the Phu My II Industrial Park has increased 20% over the same period during 2022, while the Huu Thanh Industrial Park also recorded an
increase in the average lease price to USD 135/m2/period (+8% YoY). Most land has already been cleared in the expanded Phu My II and Huu
Thanh industrial parks, enabling IDC to streamline land lease deals and maintain a profit margin of over 50%.
Positive cash flow, maintaining high dividend payout ratio. The MOU signing area of IDC industrial parks by the end of 2022 should be 180
ha, and at the same time, the payment schedule should be reduced from one year to six months, improving cash flow. We believe that IDC
can maintain its cash dividend at 40% on par value during 2023.
For 2023, we forecast net revenue of VND 9.4 tn (+8.6% YoY) and net income of VND 2.7 tn (+9.3% YoY).
• Risks: (1) Demand for leased land decreases when FDI slows down; and (2) an increased cost of site clearance compensation for new projects
should reduce profit margins from over 50% to between 30%-35% after 2026.
(VND bn) 2017 2018 2019 2020 2021 2022F 2023F

Net sales 4,921 5,119 4,931 4,561 4,324 8,645 9,392
Net sales growth 11% 4% -4% -8% -5% 100% 9%
Gross profit 821 914 838 775 737 3,359 3,714
Gross profit margin 17% 18% 17% 17% 17% 39% 40%
Financial income 180 166 129 149 605 182 154
Financial expense (191) (251) (206) (230) (294) (271) (294)
SG&A (185) (210) (197) (184) (189) (234) (250)
Net other income 22 16 29 69 64 64 64
Profit before tax 540 555 574 521 768 3,068 3,285
Net income 442 475 477 430 590 2,480 2,708
Net income growth -2% 8% 0% -10% 37% 320% 9%
Net income margin 9% 9% 10% 9% 14% 29% 29%
EPS (VND) 1,116 1,165 1,149 1,014 1,555 7,626 7,759

2. Kinh Bac City Development Corporation (KBC VN)
• Share price (30-Dec-22): VND 24,200/share; 1Y Target price: VND 28,000/share
✓ KBC directly and indirectly possess several industrial parks with a vast land bank nationwide, which should be adequate for the company
to maintain development over the long term.
✓ We believe that KBC will continue to benefit from sustained FDI inflows, especially from the trend of production relocation away from
China.
✓ The committed land leases in Nam Son Hap Linh and Quang Chau IP of ~100 ha should be a key earnings driver in 2023, as well as
potential revenue streams from projects in Long An, Hai Phong which are expected to debut this year.
• Risk:
✓ Delay in land delivery due to prolonged procedural process may impact company earnings.
✓ Increased compensation cost of land clearance for new projects may affect profitability.
✓ Weaker demand for industrial land when FDI decelerates.
(VND bn) 2017 2018 2019 2020 2021 2022F 2023F

Net sales 1,260 2,491 3,210 2,151 4,246 3,983 10,760
Net sales growth -36.1% 97.7% 28.9% -33.0% 97.4% -6.2% 170.1%
Gross profit 650 1,469 1,847 689 2,467 1,748 5,447
Gross profit margin 51.6% 59.0% 57.5% 32.0% 58.1% 43.9% 50.6%
Financial income 431 92 80 314 170 307 273
Financial expense -109 -194 -223 -230 -541 -626 -375
SG&A -177 -307 -314 -323 -618 -737 -1,614
Net other income -2 -26 -27 1 -127 20 65
Profit before tax 812 1,047 1,364 453 1,364 2,921 4,039
Net income 619 809 1,041 320 954 2,483 3,433
Net income growth -13.0% 30.7% 28.7% -69.3% 198.2% 160.3% 38.3%
Net income margin 49.1% 32.5% 32.4% 14.9% 22.5% 62.3% 31.9%
EPS (VND) 1,244 1,588 1,955 483 1,388 2,967 4,102

Healthcare: Normalized earnings growth

On Watch: TRA, DBD

Poor performance during 2021 created a low base for most
pharmaceutical companies and demand increased due to stockpiling
habits post-pandemic. Many companies recorded double digit growth
in revenue and profit.
Accordingly, stock price outperformed. Notable performers were TRA

(+4%) and DBD (-2%), while both DHG and IMP witnessed a decrease
of 22%.
Overall, the healthcare sector corrected -21% for 2022, outperforming

VN Index performance. Pharmaceutical stocks decreased slightly less,
logging a 15% decline for the year.
2022 saw a decent recovery in healthcare spending according to BMI. The sector is expected to increase 25% from 2021, reaching VND 155
trillion (6.6 billion USD), which is significantly higher than pre-Covid level (2019 sale was 4.7 billion USD). 2021 was a low base for activities at
hospitals and sales of drug to hospital channel, as people refrained from going to hospital to avoid the virus. As such, we see a decent recovery of
hospitals as well as revenue of pharmaceutical companies to hospital channel (in the case of IMP) in 2022 and the overall sectoral growth of ETC
segment was 29% YoY. Sales at pharmaceutical retail chains tended to soften from high base in 2021 but still maintain high growth at 23% YoY.
We note that during 2021 covid-19 lockdowns, pharmacies were still allowed to open, and people stocked a lot of drugs and supplements.
Public hospital activities were in disarray during 2022. Firstly, they faced a shortage of medicines and medical supplies due to legal barriers in
procurement and drug tenders. Secondly, the resignation wave of healthcare workers at these hospitals continued due to low pay, long hours, and
exhaustion post-pandemic. As a result, many public hospitals could not provide examination and treatment services for patients, which, in turn,
negatively affected the consumption of drugs and other consumer health products. Meanwhile, private hospital groups are performing well, with
qualified manpower and less legal barriers.
Most companies recorded double digit growth in revenue and net profit on 2021 low base of ETC segment despite the fact that pharmaceutical
companies were also faced with many challenges such as disruption in supply and anti-corruption campaign within the healthcare industry. Notable
mentions include: Hau Giang Pharmaceutical (DHG, revenue increased by 14% YoY and net profit increased by 24%), Traphaco (TRA, net profit
increased 28% YoY) & Imexpharm (IMP, revenue and net profit increased over 20% YoY). As for Binh Dinh Pharmaceutical (DBD), a strong 2021
base and problems with public hospital channel were the cause of a 5% decrease in revenue, but net profit increased thanks to lower COGS.

A good year of growth for pharma stocks: Percentage increase for Overall revenue increase across big pharmaceutical companies
9M2022 compared to 9M2021 for 9M2021 and 9M2022
30% 28% 4000

27%
24% 24%
25% 22% 23% 3500
22%
20% 3000
14% 14% 2500

15% 12%
2000
10%
4% 1500
5%
1000
0%
DBD DHG DHT DMC IMP TRA 500
-5%
-5% 0
-10% DBD DHG DHT DMC IMP TRA
Revenue Net profit Revenue 9M21 Revenue 9M22
Source: SSI Research Source: SSI Research (unit: VND billion)
What we expect in 2023
Sector’s growth is modest, profitability may get worse before getting better. We expect the sector to grow by 8%, reaching VND 169 trillion (7.2
billion USD) in 2023. The post pandemic landscape should be stable in most aspects, but economic downturn may stagnate healthcare spending.
As for costs, first half of 2023 shall be an unpredictable period for active pharmaceutical ingredient (API) and excipient supply chain. About 65% of
API used in production in Vietnam are from China. The country is reopening as we speak, but we fear shortages may still happen. Moreover, with
the Russia-Ukraine war well underway, specialty ingredients and drugs imported from Europe may run the risk of be in short supply. Companies
which can source their API ingredients locally should find themselves in a better position (such as TRA).
Pharmaceutical sales (LHS) and growth in Vietnam Gross & net margin level of pharmaceutical companies in 9M2022
180 35% 60% 57%
160 48%
30% 50%
44%
140 42%
25%
120 40%
100 20%
28%
30%
80 15% 20%
60 20%
10% 15% 14% 14%
40 10% 11%
5% 10% 6%
20
0 0% 0%
2018 2019 2020 2021 2022F 2023F DBD DHG DHT DMC IMP TRA
ETC OTC ETC growth OTC growth Gross margin Net margin
Source: BMI, Unit: VND trillion Source: SSI Research
The race is on for better quality at big pharma. Many companies such as DHG, IMP, DBD, TRA and Cuu Long Pharmaceutical (DCL) are pursuing
EU GMP qualification for their production facilities. Products made under EU GMP standard can qualify for highest-quality category of generic drug
at public hospital tenders (category 1). By doing so, local companies can expect to sell their products at a higher price point but still lower than

many imported drugs. Per our estimate, only 6% of drugs in category 1 are made domestically, with the rest being dominated by imported products.
Secondly, this will help increase the quality of their products and create more competitiveness. As of this writing, there are only eight companies
which possess EU GMP-approved production lines or equivalent in Vietnam. However, given the high CAPEX investment/maintenance, strict
requirements, and long approval time for EU GMP, companies should consider whether to pursue this race or invest in other aspects of their
business which can yield a better return.
Drug tenders based on categories from 2019-2022
45%
41%
40%
35%
34% 34%
35%
30% 28%
27%
25% 23%
20% 18%
17% 17% 17%
14% 14% 14% 14%
15% 13%
10% 7%
6%
5% 5% 5% 5%
4% 4%
5%
0%
2019 2020 2021 2022
Branded Cat 1 Cat 2 Cat 3 Cat 4 Cat 5
Source: DAV
Catalysts to watch: Shortage of supplies and manpower at public hospitals expected to improve from 2Q23. The Ministry of Health has been
advocating for a revised law on medical examination and treatment to address legal framework shortcomings that public hospitals are facing,
especially the problem of low service pricing and ambiguous tendering process mentioned above. During 2023, public hospital fees will likely
increase and sales of prescription drugs through hospital channel should recover. In the meantime, the private healthcare sector should benefit
from an influx of patients that the public hospitals cannot serve.
Target price (VND) Current price (VND) Net profit growth P/E ROE Dividend Yield (%)
Ticker % upside
1Y 30-Dec-22 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F
TNH -5% 33,200 34,950 31.0% 2.0% -11.4% 12.7 12.6 14.3 20.1% 17.1% 13.0% 0.0% 0.0% 0.0%
TRA 16% 103,000 89,000 22.0% 21.6% 15.1% 14.8 12.9 11.2 21.7% 23.5% 23.3% 3.5% 3.3% 3.3%
IMP 7% 64,657 60,200 -9.80% 13% 12% 26.8 18.8 16.7 10.70% 12% 13% 2% 1.60% 1.60%
DBD 7% 42,200 39,450 20% 16% 12% 12.5 13.0 11.2 17.80% 17.6% 17.5% 0% 4% 4%

On Watch: TRA VN
• Share price (30-Dec-22): VND 89,000; 1YR target price: VND 103,000
✓ Double digit growth driven by new product development: After two years of building a new synthetic drug factory and Covid delay, we
expect that TRA will finally benefit from the sales of new products transferred from partnership with Daewoong Pharmaceutical. The
second phase of product transfer is well under way with a focus on blood pressure, diabetes, and high cholesterol treatments.
✓ Less vulnerable to supply chain disruption: TRA’s subsidiary provides 80% of herbal extract ingredients within the traditional herbal
medicine category, accounting for 65% of revenue of the company.
• Risk:
✓ Stagnate consumer spend for health supplements.
✓ Delays in new product registration approval.
(VND bn) 2018 2019 2020 2021 2022F 2023F

Net sales 1,798 1,710 1,909 2,161 2,444 2,704
Net sales growth -3.9% -4.9% 11.6% 13.2% 13.1% 10.6%
Gross profit 935 940 1,031 1,147 1,298 1,461
Gross profit margin 52.0% 55.0% 54.0% 53.1% 53.1% 54.0%
Financial income 2 5 7 11 15 36
Financial expense -12 -18 -12 -6 -6 -6
SG&A -708 -713 -762 -821 -904 -1,028
Net other income -1 0 2 -1 0 0
Profit before tax 216 215 267 331 402 462
Net income 175 171 217 264 322 370
Net income growth -32.9% -2.4% 27.1% 22.0% 21.6% 15.1%
Net income margin 9.7% 10.0% 11.4% 12.2% 13.2% 13.7%
EPS (VND) 3,770 3,701 4,723 5,828 7,059 8,122

DBD VN
• Share price (30-Dec-22): VND 39,450; 1YR target price: VND 42,200
✓ Expected price hike when products move up from category 4 to category 1&2 of hospital tenders; price increase can be as much as
200%. The necessary condition is an EU GMP approval of its cancer treatment drug production line, which is they have submitted earlier
in 2022. Currently cancer treatment drug portfolio makes up of 12% of the company's revenue.
✓ Potential M&A target. Recent trend has shown a preference for foreign pharmaceutical companies to acquire Vietnamese peers. DBD
can benefit from having a strong strategic investor to expand their product portfolio as well as utilizing their production capacity for export.
• Risk:
✓ EU GMP approval taking longer than expected.
✓ OTC channel growth decreasing.
(VND bn) 2018 2019 2020 2021 2022F 2023F

Net sales 1,401 1,262 1,257 1,559 1,690 1,811
Net sales growth 0.9% -9.9% -0.4% 24.0% 8.5% 7.2%
Gross profit 428 415 491 623 683 771
Gross profit margin 30.6% 32.9% 39.1% 39.9% 40.4% 42.5%
Financial income 16 13 8 6 0 0
Financial expense -12 -15 -14 -9 -3 -4
SG&A -242 -254 -309 -405 -414 -456
Net other income 0 0 3 2 2 3
Profit before tax 201 174 193 232 283 329
Net income 163 142 158 189 226 263
Net income growth -0.8% -12.7% 11.0% 19.8% 19.8% 16.3%
Net income margin 11.6% 11.3% 12.6% 12.1% 13.4% 14.5%
EPS (VND) 3,112 2,715 3,014 3,283 3,025 3,517

Industrials – Seaports & Logistics: Bracing for headwinds in a downcycle

Sector weighting: Neutral
Top picks: GMD
2022 Recap
Sector performance: In line with VN-Index

The seaport & logistics sector started off the year on a high note, as
most stocks outperformed VN-Index during Q1. However, the sector
fell sharply over the next three quarters and ended up slightly higher
than the VN-Index (-32.8% YTD), declining -31% by the end of the year.
Among the best performers, PDN (+59% YTD) and STG (+38% YTD)
are the only stocks to achieve positive returns. GMD’s shares were
quite resilient at -2% YTD, while TMS, VSC, DVP, TCL, CLL, ILB lost
between -11% to -20% YTD, and HAH -32.7% YTD. The worst
performers include: PHP (-38%); VOS (-38%); MVN (-42%); VTP (-
60%); and SGP (-61%). Despite strong earnings results during 2022,
most stocks have been de-rated to reflect upcoming difficulties.
• Container shipping market upcycle was over, normalization is underway
A demand-induced down cycle. The container shipping market craze ended during 2022, as many expected. However, the reasons were
somewhat unanticipated. The Ukraine war sent the world into a supply shock, pushing up energy prices and commodity prices. Consumer
confidence was severely affected by skyrocketing inflation from importing countries. Also, consumer spend gradually shifted from goods to
services post-Covid, driving down demand for containerized goods. In addition, retailer inventory remained high as imports were pulled forward
to avoid shipping delays. The typical high season was absent during 2H22 and shipping demand fell dramatically toward year-end. Reduced
demand paved the way for a gradual ease of congestion, leading to a significant increase of supply being released onto the market. Weak
demand and released capacity have driven container freight rates -77% lower YoY or -80% from the Sept 2021 peak. Similarly, charter rates
also plunged from 3Q22 to end the year -77% from their peak - yet still 2x higher than pre-Covid.

World Container Index Containership charter rate by vessel size (USD/day)
12000 1100 Vessel Size in TEU

150,000
1700
10000 130,000
2500
110,000
8000 3500
90,000
6500
6000
70,000 8500
4000 50,000
30,000
2000
10,000
0 -10,000
Aug-20
Aug-21
Aug-22
Oct-20
Jun-21
Oct-21
Jun-22
Oct-22
Dec-20
Dec-21
Feb-22
Dec-22
Feb-21
Apr-21
Apr-22
Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
Source: Drewry, SSI Research Source: Harper Petersen, SSI Research
Domestic market followed international market downtrend. 2022 container throughput volume growth remained a positive +5% YoY.
However, we observe that volume weakened from 2H 2022 in both international and domestic volume. Further, domestic vessel supply
significantly increased as a large number of vessels could not renew their charter contracts subsequently returning to the domestic market.
This triggered a deep fall in domestic freight rates to a level not seen since 2020, or -50% off peak levels.
Monthly container throughput volume of Vietnamese ports (‘000 TEU)
2,800 2019 2020 2021 2022
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Vinamarine, SSI Research
• Dry bulk shipping was under pressure. The Baltic Dry Index continued to decline -32% YoY to end 2022 at 1,515, or -73% from the October
2021 peak. During 2022, dry bulk shipping demand was primarily affected by the loss of Ukrainian grain volume, while demand for iron ore
dropped due to construction slowdown in China - on top of the lower demand from Europe and Japan.

Baltic Dry Index
6000
5000
4000
3000
2000
1000
Jul-22
Jul-18
Oct-18
Jul-19
Oct-19
Jul-20
Oct-20
Jul-21
Oct-21
Oct-22
Jan-18
Apr-18
Jan-19
Apr-19
Jan-20
Apr-20
Jan-21
Apr-21
Jan-22
Apr-22
Source: Baltic Exchange
• Tanker shipping accelerated following structural changes in the market. Since the Russia – Ukraine war began, demand for tankers
increased as sanctions on Russian energy pushed the world to source energy from other markets, increasing the tonne mile demand for the
industry. Meanwhile, vessel supply was constrained, as orderbooks remained low. As a result, the Baltic Dirty Tanker Index and Baltic Clean
Tanker Index have increased +138% and +171% YoY, respectively, during 2022, and even higher than 2020 peak level.
Baltic Dirty Tanker Index Baltic Clean Tanker Index
3000 2500
2500 2000
2000
1500
1500
1000
1000
500 500
0 0
Jul-18 Jul-19 Jul-20 Jul-21 Jul-22 Jul-18 Jul-19 Jul-20 Jul-21 Jul-22
• Corporate earnings peaked, valuation reached historical lows
Earnings growth remains resilient for all sub-sectors, with the shipping subsector’s NPATMI increasing 59% YoY through 9M 2022, followed
by logistics (+31% YoY) and seaport (+26% YoY). However, we note that earnings peaked during 2Q 2022, as NPATMI declined -19% QoQ
during 3Q 2022. On the other hand, lower prices have caused stock valuations to drop to historical averages or even to historical lows in the
case of the shipping stocks P/E.

Revenue (VND bn) NPAT (VND bn) Net profit margin

Ticker Subsector TTM P/E TTM P/B
9M 2021 9M 2022 YoY 9M 2021 9M 2022 YoY 9M 2021 9M 2022
MVN Seaport 9,544 11,025 15.5% 1,805 2,367 31.2% 18.9% 21.5% 8.1 2.2
GMD Seaport 2,168 2,850 31.5% 513 941 83.6% 23.7% 33.0% 13.7 1.9
VSC Seaport 1,386 1,488 7.4% 307 323 5.2% 22.2% 21.7% 10.3 1.3
SGP Seaport 995 876 -11.9% 296 193 -34.6% 29.7% 22.1% 3.5 1.1
PHP Seaport 1,687 1,737 3.0% 526 572 8.8% 31.2% 32.9% 9.1 1.2
DVP Seaport 455 445 -2.1% 219 230 5.1% 48.0% 51.5% 6.4 1.3
CDN Seaport 818 863 5.5% 181 197 8.7% 22.2% 22.8% 11.2 1.9
PDN Seaport 678 805 18.7% 130 193 48.8% 19.1% 24.0% 11.6 3.1
TCL Logistics 875 1,024 17.0% 88 94 6.6% 10.1% 9.2% 7.9 1.9
TMS Logistics 4,061 2,935 -27.7% 374 553 47.7% 9.2% 18.8% 7.9 1.8
STG Logistics 2,154 2,065 -4.1% 203 209 2.9% 9.4% 10.1% 16.6 2.0
SFI Logistics 1,138 1,257 10.4% 76 185 142.9% 6.7% 14.7% 2.6 0.9
VTP Logistics 15,461 16,385 6.0% 247 257 4.2% 1.6% 1.6% 9.9 1.9
HAH Shipping 1,284 2,360 83.8% 284 861 203.4% 22.1% 36.5% 2.6 1.0
VOS Shipping 964 1,804 87.1% 408 470 15.3% 42.3% 26.0% 3.0 1.1
VNA Shipping 628 831 32.4% 138 219 58.8% 22.0% 26.4% 2.2 1.3
VTO Shipping 746 838 12.3% 39 28 -27.8% 5.3% 3.4% 4.9 0.5
SWC Shipping 572 660 15.3% 146 168 15.0% 25.5% 25.4% 5.8 1.0
PVT Shipping 5,288 6,609 25.0% 603 832 37.9% 11.4% 12.6% 8.6 1.2
TOTAL
50,902 56,857 11.7% 6,582 8,894 35.1% 12.9% 15.6% 7.7 1.6
(Average P/E, P/B)

• Container shipping demand to face significant difficulties ahead. We observe that consumer demand will continue to be weak during 2023
amid high inflation (while personal income and savings weaken due to slow economic growth), and the spending mix still favors a shift from
goods to services. Further, inventory destocking should take at least two quarters, and we expect that shipping demand will pick up from 2H
2023 to prepare for the year-end shopping high season. China reopening its borders and international flights returning could be the most
significant catalysts for the sector. However, heavy congestion should return to Chinese ports at the beginning of the reopening just as a new
wave of infections affect port operations. The supply chain disruption could be substantially resolved after China reaches Covid herd immunity.
• Increasing pressure from new vessel supply. According to Clarksons, the total orderbook stands at 26.3% of the existing fleet, of which 9%
is expected to be delivered during 2023 and 16.3% from 2024 onwards. Further, the released capacity from eased congestion should add
pressure to the oversupply within the shipping market. On the other hand, two IMO new carbon rules (the Energy Efficiency Existing Ship Index
– EEXI, and the Carbon Intensity Index - CII) should be effective from 2023 and help remove ~5% capacity in the form of low steaming
requirements. We also expect that scrapping activities will accelerate, however, not to the extent of offsetting newly added capacity. Thus,
oversupply should exert pressure on the container shipping market. We expect a continuing downtrend in freight rates during 1H 2023, albeit
at a slower pace, and a slight recovery could occur during 2H 2023 if demand picks up.
Orderbook delivery schedule (by TEU and % of end 2021 capacity)
Source: Clarksons, Deutsche Bank
• Domestic market oversupply to return in line with global market. Thus, we expect domestic freight rates will be stable at low level, and
reduce shipping companies’ profitability.
• Container throughput volume should remain weak through 1H 2023, especially at deepwater ports where vessels are mainly from the US
and Europe. Feeder port volume could hold up better due to the reopening of China. We expect that the shipping high season will return during
2H 2023, and support port volume growth.
• Tanker shipping demand would still be higher than pre-Ukraine war level, but tanker rates might soften after the winter. At the time of
writing, Baltic clean tanker index (BCTI) has declined by 62% YTD in 2023 and also by 62% from the peak, while Baltic Dirty Tanker index
(BDTI) also declined by 22% YTD and 41% from the peak. This is partly caused by the usual low season effect at the beginning of the year.
Another reason might be a warmer winter leading to lower than expected demand for energy products while inventory has been pushed to very
high level in the previous period before the sanction deadline in 5th Dec 2022 for Russian crude oil. There will be another round of sanction
and price cap on Russian product oils on 5th Feb 2023 (including fuels like diesels or naptha), which might lead to EU bloc importing these

products from further markets like Middle East, keeping demand ample in the short-term. So even though rates are softening after the recent
spikes, we do not expect it to revert back to 2021 level. Currently BCTI and BDTI is still higher than 2021 average level by 53% and 124%
respectively.
• Large capex investment across the sector. We note that there are a large number of new projects in the pipeline of companies, such as PHP
(Lach Huyen deepwater port berth 3+4), GMD (Gemalink Phase 2, Nam Dinh Vu port Phase 2+3), VSC (Cat Hai deepwater port), HAH (four
new building vessels), and the Cai Mep Downstream project (pending). These projects are expected to enhance the capability of logistic
companies and allow the adaptation to the growing trend of larger vessels with higher efficiency. However, competition likely will intensify
within the sector when these projects complete and bring new capacity to the market (especially the Haiphong area). Financial burdens should
be a challenge during this high interest rate environment as all above-mentioned projects require significant debt borrowings, leading to high
depreciation cost and high interest costs during the first years of operation.
Seaports Project Pipeline
Project Project owner Construction kick-off Operation starts Capacity (TEU) Capital requirements (VND bn)
Lach Huyen berth 3+4 Hai Phong Port 2022 3Q 2024 1,100,000 7,000
Lach Huyen berth 5+6 Hateco pending 6,400
Cat Hai deepwater port Viconship pending 5,000
Gemalink P2 Gemadept 2023 2025 1,500,000 4,400
Nam Dinh Vu P2 Gemadept Dec 2021 1Q 2023 500,000 2,200
Nam Dinh Vu P3 Gemadept 4Q 2023 2025 500,000 + 3M Tons 2,200
• M&A is a new theme. 2023 should be busy for M&A within the sector, with a number of deals already on the docket. By 2025, Vietnam
Maritime Corporation - VIMC (MVN:Upcom) plans to divest Hai Phong Port (PHP:Upcom), Quy Nhon Port (QNP), Can Tho Port (CCT:Upcom),
Cam Ranh Port (CCR:HNX), Da Nang Port (CDN:HNX), Vinaship (VNA:Upcom) et al. Meanwhile, the CMSC will reduce the State ownership of
MVN to 65%. VSC intends to purchase up to 49% of VNA, and announced the purchase of a port terminal in the Haiphong port cluster. GMD
plans to divest Nam Hai Dinh Vu port, and sell a 24% stake in Gemalink Port to a strategic investor. Vietnamese port operators have long been
disadvantaged against foreign shipping lines due to the oversupplied and fragmented market. We think that market consolidation is a good way
for companies to complete logistic chains, build up bargaining power and reduce competition within the sector. Thus, M&A should be a theme
for years to come.
• Corporate earnings outlook: We expect that container shipping and logistics companies will be affected the most, both by weak demand and
increasing supply, however recovery could be expected in 2H 2023 if demand picks up. Seaport operators should hold up better given stable
service prices despite weak volume growth. Tanker shipping companies with exposure to charter market should benefit from the firm tanker
demand over the short to medium term, while those running on spot market would suffer from the strong volatility of the freight rates as
observed YTD. The dry bulk segment should get a boost from the reopening/recovery of China. Given that most companies are at reasonable
valuations, we give the sector a NEUTRAL rating. Major catalysts to watch include: the recovery of consumer demand by importing countries;
the Russia-Ukraine war; and the reopening/recovery of the Chinese economy.
Target Current Market Foreign

% Upside Price Price Cap (USD Ownership Net Profit Growth P/E ROE Dividend Yield (%)
Ticker
(VND) (VND) mn) (%)
in 1yr in 1yr 12/30/22 12/30/22 12/30/22 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F
GMD 26% 57,400 45,400 580 49% 65.0% 60.8% 82.7% 25.3 15.1 8.3 10.6% 14.8% 24.7% 0.0% 2.2% 2.2%
HAH 33% 42,800 32,250 96 14% 222.1% 87.6% -26.3% 7.7 2.8 3.8 34.0% 44.3% 23.5% 1.5% 3.1% 3.1%

Top picks: GMD VN
✓ As the largest private logistic service provider in Vietnam with a fully integrated logistic network across the country including seaports,
ICDs, distribution centers, warehouses, air cargo terminal, containerships, and trucks, GMD should benefit from Vietnam’s strong trade
activities over the long term.
✓ Gemalink is the largest deepwater port in Cai Mep, which is the fastest growing port cluster in Vietnam. Gemalink is expected to be the
main growth driver for GMD over the medium and long term.
✓ During 2023, the potential sale of Nam Hai Dinh Vu port should bring a significant one-off profit and allow a shift in focus to Nam Dinh Vu
port to enhance GMD’s competitive offering in the Haiphong area.
• Risk
✓ Weak demand over the near term due to economic weakness of trading partners.
✓ Competition remains high in the Haiphong area, where river terminals are losing market share to the deep-water port, Lach Huyen.
(VND bn) 2020 2021 2022F 2023F 2024F

Net revenue 2,606 3,206 3,757 3,597 3,797
YoY growth -1.4% 23.1% 17.2% -4.3% 5.6%
Pretax income 513 806 1,301 2,405 1,406
YoY growth -27% 57% 61% 85% -42%
Net income 440 721 1,158 2,140 1,251
YoY growth -28% 64% 61% 85% -42%
EPS (VND) 1,149 1,869 3,004 5,488 3,170
BVPS (VND) 19,582 20,967 22,971 27,459 29,629
ROA 4.4% 7.0% 10.4% 17.1% 9.0%
ROE 6.7% 10.6% 15.6% 24.7% 12.6%
Debt/Equity 0.29 0.27 0.27 0.24 0.22
P/E 41.17 19.29 15.11 8.27 14.32
P/B 2.42 1.72 1.98 1.65 1.53
EV/EBITDA 10.57 11.87 7.79 4.68 6.78

Appendix – Stock P/E vs. historical median
GMD TMS
VSC PHP
HAH VOS

Industrials – Aviation: Fast forwarding to full recovery

Top picks: ACV, AST
2022 Recap: Outperform on recovery story

Aviation outperformed the VN-Index during 2022, ending the year down
-11% YoY (vs. a VN-Index decline of -32% YoY). The outperformance 120%
was due to the recovery within the aviation sector, with largest name 110%
(ACV) only declining -2.3%. Airport retailer, AST, increased 2% over 100%
the period. Within the space, airlines performed worst with HVN 90%
declining -41% and VJC declining -13%. 80%
70%
60%
50%
40%
VNIndex Industrials Aviation
30%
• The global aviation sector recorded strong demand and yield recovery across the board, bringing global RPK (revenue passenger
kilometer) back to 70% of 2019 (without international flights to and from China). According to IATA estimates for all global commercial
airlines, global RPK (revenue passenger kilometer, a measure of demand for flying) recovered 70% YoY. Average load factor had also improved
11 percentage point to 78% (pre-Covid level was 81%). This leads to a 2022 global airline EBIT margin of near-breakeven point (-1.3%,
compared to -8.9% in 2021 and -29% in 2020), even with a much higher fuel costs. Asia-Pacific airlines (including China) profitability remains
in negative territory (-8.2%) while North America has gone back to positive profitability, with an EBIT margin of 2.4% in 2022, according to
IATA estimates.
• Global ASK (available seat kilometer, a measure of supply from airlines) improved 19% YoY, and at 74% of pre-COVID levels. According
to IATA, North America has nearly completed its flying network restoration work, with ASK only -6% lower than 2019 after two years of
reopening (from early 2021). This is in stark contrast to Asia-Pacific, with capacity still -49% lower than 2019, as many countries like Japan,
South Korea, China are still implementing some form of controls related to COVID-19, including: strict border control; limited capacity of airlines
and daily arrivals; quarantines; and testing requirements.

APAC Revenue Passenger Kilometers, RPK (Million) APAC Available Seat Kilometers, ASK (Million)
80,000.00 140,000.00
70,000.00 120,000.00
60,000.00
100,000.00
50,000.00
80,000.00
40,000.00
60,000.00
30,000.00
40,000.00
20,000.00
10,000.00 20,000.00
- -
8/1/2021
11/1/2022
1/1/2019
4/1/2019
7/1/2019
10/1/2019
1/1/2020
4/1/2020
7/1/2020
10/1/2020
1/1/2021
4/1/2021
7/1/2021
10/1/2021
1/1/2022
4/1/2022
7/1/2022
10/1/2022
2/1/2019
5/1/2019
8/1/2019
11/1/2019
2/1/2020
5/1/2020
8/1/2020
11/1/2020
2/1/2021
5/1/2021
11/1/2021
2/1/2022
5/1/2022
8/1/2022
Source: Bloomberg
• Vietnam has reopened both domestically and internationally from March 15, one of the earliest in Asia, bringing strong demand recovery
to domestic flying. During 2022F, despite fully operating for only nine months, the Vietnamese aviation industry has served 99 mn passengers.
In which, 12 mn were international passengers, equivalent to 30% of 2019 level, while 87 mn were domestic passengers (119% of 2019 level).
According to CAAV during 11M 2022, all airlines in Vietnam had completed 285K flights (equivalent to 92% of flights during the January-
November 2019 period).
Vietnam Domestic Passenger Vietnam International Passenger
100,000,000 45,000,000
90,000,000 40,000,000
80,000,000 35,000,000
70,000,000
30,000,000
60,000,000
25,000,000
50,000,000
20,000,000
40,000,000
15,000,000
30,000,000
20,000,000 10,000,000
10,000,000 5,000,000
- -
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: SSI Research, CAAV
• International recovery will take time with China‘s strict Zero Covid policy (ZCP). Our initial estimates were that international passenger
recovery for Vietnam would be slow, since key markets like China, Japan, South Korea continued to apply some form of COVID-19
measures at the beginning of 2022. Most of those measurements were not abandoned until mid/end of 2022, leading to international
passengers recovering to 30% of 2019 levels. Though tepid, it was still better than our initial assumption of 20%.
• Earnings recovery difficult for both airlines and airports given the lack of international passengers and low fleet utilization rates.
Since airport names (ACV, AST) rely on international passengers for a large portion of their revenue and profit, we expect that their earnings
would take a long time (around 2024F) to go back to 2019 pre-COVID level. Airlines are also expected to recover slowly, as the domestic
market does not have full fleet utilization. Vietnam Airlines (HVN) recently announced that it could record VND 9 tn (USD 400 mn) in pretax
losses for 2022F, an improvement over the 2021 loss of VND 13 tn. VJC also recorded a pretax loss of VND 570 bn on its parent financial
report through 9M 2022.
• Domestic recovery appears much more resilient than we had initially anticipated, surpassing pre-COVID levels by 20% YoY during
the first year of reopening. We initially expected that domestic travel would only fully recover by year-end 2022, but pent-up demand
and a high vaccination rates have led to a strong boom for summer holiday traveling, with peak recovery of +40% compared to pre-
COVID levels during July 2022. The resilience of domestic travel after two years of intermittent lockdowns is much stronger than we had
expected.
• Fuel cost increases placed a further burden on airlines and path of recovery. A1 jet fuel prices began the year at USD 102/barrel prior
to peaking during June 2022 at USD 173/barrel and normalizing between USD 120-130 /barrel at the year-end. This is a stark increase
compared to the 2021 average of USD 77/barrel and the 2019 average of USD 79/barrel. HVN estimates that it will incur a VND 9 tn pretax
loss during 2022 despite transporting 16 mn passengers throughout the year, which is only slightly lower than the 18 mn recorded during
2019. Among the reasons, the main causes for these losses are under-utlization of aircraft, high fuel cost, high interest rate and forex-
related costs, and too low international flight portion in the total destination mix.
• Large movement of foreign exchanges led to non-operating income/costs on capex-heavy names. In 2022, we saw USD appreciated
by 3.5% YoY, leading to forex loss in airlines and further adding to the financial burden. On the other hand, JPY depreciated by 10% against
the VND, leading to a large forex gain for ACV (approximately VND 1.3 trillion), boosting its recovery speed.
• Sector valuation:
• Airport: ACV’s share price has rebounded and surpassed pre-COVID levels at 2022. Its 2024 EV/EBITDA forward is 16x, and higher than
the 2019 trailing EV/EBITDA level of 11x. In the case of AST, its 2023F P/E forward is at 16x currently, on par with pre-covid average level
(ranging from 14x-20x). It will look more attractive if we look at 2024F PE of only 11x, thanks to 2024F earnings being estimated to
surpass precovid level.
• Airlines: We believe that valuations remain very high due to the weak earnings outlook. For HVN, we still expect to incur losses during
2023F though at a lower figure than 2022F due to reduced fuel costs and a higher fleet utilization rate.

• COVID-19 is now treated like an endemic for most of the world, so recovery should continue to be the main theme of 2023F. We now see
much the world, including China, having reduced the classification of COVID-19 to a lower level of severity. For example, most countries have
abandoned quarantine and pre-flight testing requirements, and most have abandoned testing upon arrival in 2022. For example, between Sep-
Oct 2022, Japan increased its daily arrival limit to 50,000 people/day (from 5,000 people/day), while South Korea abandoned antigen/PCR
testing requirement for all arrivals. China has also announced a reopening date of January 8, 2023, without inbound airline capacity restrictions.
• Global demand should continue to recover while China’s zero-covid policy is now scrapped, giving hope to Asia-Pacific regional and
intercontinental travel. China has abruptly abandoned most of its zero-COVID policy, especially related to compulsory quarantine for arrivals
and limits on airline capacity in/out of the country. From January 8, 2023, travelers to China are only required to present a negative PCR test
result within 48 hours of departure, and there is no quarantine required upon arrival. Despite the testing still being required, this is a significant
improvement to the very strict policies over the past three years, and it happens much earlier than market expectations (which was previously
between 2Q-3Q 2023).
Since China is a big market for both regional and long-haul travel, we expect that this change of policy will be impactful across the global
aviation market.
However, we may need to wait because COVID-19 cases have been spiking in China of late, and some countries like US, UK, France, Australia,
South Korea et al are imposing pre-departure testing for outbound travelers from China, or travelers who have recently visited China. Despite
these new developments, we believe that the biggest obstacles for the China market have been cleared, and we might see strong recovery
from the summer holiday season when three years of pent-up demand can finally be unleashed.
For Vietnam, this serves as a significant catalyst for the sector, as Chinese tourists accounted for 32% of international inbound Vietnam
air traffic during 2019 with China being the largest tourist destination for Vietnamese. However, we do not expect a quick turnaround in
Chinese tourists, as China has wide COVID-19 spread which likely will worsen during the Lunar New Year holiday during January 2023. After
a three-year lockdown, full reactivation is likely to take some time. As a result, we expect a gradual recovery in China inbound passengers to
Vietnam from 2Q 2023, prior to peaking during the 2023 summer holiday season. 2024 international traffic could ultimately surpass 2019
levels, which would mark a full recovery for the Vietnamese aviation industry.
However, achieving this target will be not without challenges given the three-year absence of international tourists. As such, we believe that a
recovery will take some efforts in terms of rehires and renovation of facilities. Another speedbump is Vietnam’s limited tourist visa-exemption
policy relative to other countries (15-day visa-exemption for 25 countries only). Thailand, Vietnam’s closest competitor, has a 45-day visa-
exemption for over 65 countries.
• Lower economic activity level and disposal income to limit flying demand. While the China reopening is positive, the industry also faces
several headwinds this year, including recessions in major economies like the US/EU/Japan, and a subsequent lower disposal income due to
higher unemployment and interest rates, make the 2023 outlook quite a challenge. However, we do see upside with the China reopening being
a very important theme.
• Airline earnings should be supported by lower fuel prices and higher utilization of fleets but should still remain in low to negative territory.
During 2023, we assume that Brent crude oil prices will average between USD 80-85/barrel, which is between 16%-21% lower than the 2022
average of USD 102/barrel. Our assumption remains between 15%-20% higher than 2019 prices but should reduce cost pressure on airlines
during 2023. However, we still expect airlines to incur losses during 2023F, although lower than 2022, as there may not be pent-up domestic
demand to travel and lower disposable income dampens international travel demand while price competition to recapture market share returns.
Also, some cost savings, like by-flying-hour depreciation during COVID-19 may no longer be effective if there is a recovery - another source
of cost pressure for airlines. We believe that airlines will be interesting to watch over the medium-term, as the revenue/earnings dynamic plays
out.

• Airport services (ACV, AST) earnings should be supported by a higher percentage of international passengers. Since we expect
international passenger volume to achieve 80% of pre-COVID levels during 2023F (from 20% this year), we expect a strong rebound in revenue
and earnings of airport tickers. For example, we expect ACV to record core 2023 PBT of VND 8.7 tn (improving from VND 7 tn during 2022),
equal to 85% of 2019’s level. For AST (airport retail and duty free), we expect 2023 PBT earnings to increase to VND 234 bn, up from breakeven
during 2022 and would be equivalent to 88% of 2019’s level. Earnings growth should be strongest during the summer holiday season (Q2-
Q3), when international passenger volume should beign recovering.
Thus, to get exposure to the China re-opening theme and international travelling recovery, we would prefer airport names thanks to their strong
earnings outlook, while airlines are not our favorite choice for 2023 as competition and fuel costs would still put heavy pressure on margin of
airline industry, whose margin has always been very thin even in normal times (2019 net margins of airlines in Vietnam were 3-7%). For
airlines, we would like to wait for higher mix of international flights to reduce price competion, lower funding cost and lower fuel cost risk,
which we do not believe would happen until end of 2023F. International flight resumption at the beginning might not be profitable or have low
profitability because of higher competition amongst airlines to recapture international market share while efficiency is lower than pre-COVID
due to low fleet utilization.
• Vietnam Ailines (HVN), who is currently listed on HOSE, is very likely to be delisted because of negative shareholder equity in 2022,
which might happen when audited financial statement for 2022 is released within 1Q 2023F. If it is to be delisted, it would be still traded
on UPCOM bourse, which is a centralized OTC trading platform. According to current HOSE requirements, to be able to list again on the main
bourse, the company needs to clear its negative retained earnings (around -VND 26 trillion at the end of 2022F in our estimates), which might
take many years of future earnings to completely clear out (around 10 years based on 2019 earnings level).
Domestic Airlines Operating Cash Flow Domestic Airlines PBT (VND mn)
15,000,000 6,000,000
4,000,000
10,000,000 2,000,000
-
5,000,000 (2,000,000) 2016 2017 2018 2019 2020 2021 9M2022
(4,000,000)
- (6,000,000)
2016 2017 2018 2019 2020 2021 9M2022 (8,000,000)
(5,000,000) (10,000,000)
(12,000,000)
(10,000,000) (14,000,000)
Vietnam Airlines Vietjet Bamboo Airways Vietnam Airlines Vietjet Bamboo Airways
Source: SSI Research estimates, VJC, HVN
• Upside catalyst: China international inbound/outbound recovery more rapid than expected, lower oil price
• Downside risk: Another strain of COVID-19, and a weaker economy than expected, weaker than expected global disposal income

Top picks: ACV, AST
1. ACV VN
✓ The sole operator of 22 airports in Vietnam, which makes ACV indirectly exposed to the tourism industry and overall economic growth in
Vietnam.
✓ ACV is a key beneficiary of the reopening theme, especially when international passengers are expected to recover to 2019 levels by
2024.
✓ The balance sheet remains strong after three years of COVID-19, and we expect that 2023 core PBT growth will be 24% YoY.
✓ Key catalyst would be international passenger growth and new changes to visa exemption policy.
• Risk: Lower than expected recovery in international passenger volume; and a new/more dangerous COVID-19 variant(s). Large capex for new
airports (Long Thanh international, Tan Son Nhat T3, Noi Bai T2 expansion…) with total capex of VND 120 trillion (USD 5 bn) can dampen
earnings in the first few years of operation (from 2025 forward).
(VND bn) 2018 2019 2020 2021F 2022F 2023F 2024F

Net sales 16,123 18,329 7,767 4,752 14,560 20,150 24,033
Net sales growth 16.6% 13.7% -57.6% -38.8% 206.4% 38.4% 19.3%
Gross profit 7,828 9,334 1,389 -785 6,417 10,675 13,699
Gross profit margin 48.5% 50.9% 17.9% -16.5% 36.7% 45.9% 49.6%
Financial income 1,363 1,920 2,231 3,254 2,728 654 523
Financial expense -756 -104 -968 -204 -83 -83 -83
SG&A -1,218 -1,386 -812 -1,316 -1,165 -1,411 -1,562
Net other income 65 9 13 9 28 39 47
Profit before tax 7,618 10,156 2,000 990 8,075 10,125 12,968
Net income 6,185 8,214 1,642 790 6,460 8,100 10,374
Net income growth 50.1% 32.8% -80.0% -51.9% 718.2% 25.4% 28.1%
Net income margin 38.4% 44.8% 21.1% 16.6% 44.4% 40.2% 43.2%
EPS (VND) 2,518 3,450 577 220 2,670 3,348 4,288
Source: SSI Research estimates, ACV

2. AST VN
✓ International flight recovery is accelerating, supported by the relaxed Covid measures in China. We expect Chinese tourists will significantly
recover in summer 2023 and international passengers could reach pre-Covid level by end of 2023.
✓ AST maintains a healthy balance sheet throughout the pandemic, with total cash and short term investments of VND 197 bn at 3Q22, and
net cash of VND 152 bn.
✓ The company actively expanded its business from 92 stores in 2019 to 105 stores in 2022 to gain market shares from competitors and
be ready to take advantage when market recovers.
• Risk
✓ International recovery might be slower than expectations in the scenario that Chinese tourists recover more slowly than expected, and if
global travel demand were to deteriorate more rapidly due to economic recession.
(VND bn) 2018 2019 2020 2021 2022F 2023F 2024F

Net revenue 865 1,141 359 154 723 1,212 1,622
YoY growth 31.2% 31.9% -68.5% -57.1% 369.1% 67.6% 33.9%
Pretax income 204 263 -49 -128 38 234 339
Net income 163 212 -52 -129 31 188 271
YoY growth 10.2% 30.1% -124.3% n.a n.a 513.0% 44.6%
EPS (VND) 4,336 4,114 -1,057 -2,545 593 3,597 5,142
BVPS (VND) 15,253 13,107 10,896 8,289 8,882 12,480 17,622
ROA 25.3% 27.6% -6.9% -22.8% 5.3% 24.0% 25.3%
ROE 31.9% 35.4% -8.7% -27.0% 7.0% 33.6% 34.7%
Debt/Equity 0.01 0.01 0.08 0.12 0.10 0.07 0.05
P/E 15.96 20.66 -54.33 -20.75 96.05 15.85 11.08
P/B 4.54 6.49 5.27 6.37 6.42 4.57 3.23
EV/EBITDA 10.35 11.68 -307.18 -25.71 32.37 8.84 6.37
Source: SSI Research estimates, AST
Stock under coverage
Market
Target Current
Cap
% Upside Price Price Net Profit Growth P/E ROE Dividend Yield (%)
Ticker (USD
(VND) (VND)
mn)
in 1yr in 1yr 30-12-22 30-12-22 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F
ACV 16% 98,000 84,600 7,810 -52.1% 718.0% 25.4% 395.5 31.7 25.3 2.1% 14.9% 17.2% 0.0% 0.0% 0.0%
HVN N.a N.a 13,900 1,305 18.7% -41.2% -63.2% (2.9) (4.0) (11.0) -405.4% 322.7% 74.5% 0.0% 0.0% 0.0%
AST 21% 69,000 57,000 109 140.8% -123.3% 495.0% (20.1) 96.1 16.1 -27.0% 6.5% 33.1% 0.0% 0.0% 0.0%
SCS -4% 71,900 75,000 299 21.4% 8.2% 6.9% 15.3 12.2 11.4 49.8% 42.0% 41.4% 1.9% 5.3% 5.3%

Industrials – Residential Construction: Operating cashflow improvement to be a focus

Top picks: N/A. On watch: CTD
2022 Recap: A year of volatility
The construction sector was pummeled -52% in 2022, Industry performance in 2022
underperforming the VN Index (-33%). CTD declined -70%, as did
120%
many other high profile names: HBC (-67%); HTN (-71%); PHC (-
110%
63%); and SRF (-38%).
100%
90%
Property sector suffered multiple challenges: tighter credit, more 80%
stringent regulations on corporate bond issuance, and higher interest 70%
rates. The construction sector is closely impacted, and contractors’ 60%
earnings contracted as well. 50%

40% VNIndex Construction
30%
• Multiple challenges for the property sector during 2022… The sector was faced with stringent regulations, government investigations of
land auctions or corporate bonds, tighter credit limits, and rising borrowing costs.
Fig.1: Rising lending rates to impact homebuyers’ income & property developers’ sales pipeline
Mortgage rate & deposit rate

25.0
20.0
15.0
10.0
5.0
Mortgage rate Deposit rate
Source: GSO, SSIRS compiled

• … real estate market achieved significantly fewer new approvals (-57% YoY), completion (-4% YoY), and available-for-sale condo
units (-31% YoY) through 9M22. Meanwhile, 9M22 condos rose 10% YoY and available-for-sales units declined -31% YoY per MOC’s
data.
Fig.2: New approvals to see a tightening policy and still restrictive credit
Fig.3: Ongoing condo units increased, mostly due to delay of policy
environment, which could likely lead to a gloomy new order book for
issues and credit crunch
construction companies
New condo approvals Ongoing condo units
250,000 1,200,000
200,000 1,000,000
800,000
150,000
600,000
100,000
400,000
50,000 200,000
- -
Source: MOC
Fig.4: As results of policy issues and tightening credit environment, completed and available-for-sales condo units took a dive
Completed condo units Condo units: Available for sales
60,000 90,000
80,000
50,000
70,000
40,000 60,000
50,000
30,000
40,000
20,000 30,000
20,000
10,000
10,000
- -
Source: MOC
• Governmental investigations of land auctions/corporate bonds, tighter credit limits, and rising borrowing rates could significantly
impact developer sale pipelines, and pose downside risk to contractors as a consequence. This is why contractors had to revise backlogs
at the end of 2022, as is the case of Coteccons. Coteccons reported that 2022 backlog was only approx. VND 17 tn (-32% YoY).
• Negative operating cashflow. Challenges from the property sector (delay in sales pipeline line, debt payment, potential bond defaults, etc.)
have resulted in longer receivable days and/or cash conversion cycles and negative operating cashflow for contractors (see figure 5 below).

Fig.5: Some big contractors like CTD & HBC posted negative operating cashflow
CTD's TTM Earnings quality HBC's TTM Earnings quality

10.0 370 15.0 500
320 10.0
- 400
270 5.0
(10.0) 220 - 300
(days)
(5.0)
(x)
(20.0) 170 200

(10.0)
120 (15.0)
(30.0) 100
70 (20.0)
(40.0) 20 (25.0) -
1Q14
3Q16
1Q19
3Q21
1Q12
3Q12
1Q13
3Q13
3Q14
1Q15
3Q15
1Q16
1Q17
3Q17
1Q18
3Q18
3Q19
1Q20
3Q20
1Q21
1Q22
3Q22
2Q14
1Q12
4Q12
3Q13
1Q15
4Q15
3Q16
2Q17
1Q18
4Q18
3Q19
2Q20
1Q21
4Q21
3Q22
CFO/NI (x-LHS) CCC (days) DSO (days) CFO/NI (x-LHS) CCC (days) DSO (days)
Source: Bloomberg, SSIRS
• Sector valuation during 2022: A year of multiple challenges in the construction sector caused a significant drop in earnings margins and
generally unattractive valuations.
Fig.6: Sector’s P/E multiple in 2022 was mostly far away from historical average and peak despite decline in pretax margin
TTM P/E vs. historical average TTM pretax margin vs historical
20.0
140.0
120.0
15.0
100.0
80.0
10.0
60.0
40.0 5.0
20.0
- -
CTD VN Equity HBC VN Equity SRF VN Equity PHC VN Equity
TTM P/E 2011-2012 avg 2011-2012 high 2011-2012 low (5.0)

T12M Pretax Mgn 2011-2012 avg 2011-2012 high 2011-2012 low

2016-2018 avg 2016-2018 high 2016-2018 low
2016-2018 avg 2016-2018 high 2016-2018 low

Fig.6: Sector ‘s P/B multiple in 2022 derated compared to historical as seeing ROE significant dip
TTM P/B vs. historical average TTM ROE vs historical average
5.0 60.0
4.5 50.0
4.0
40.0
3.5
30.0
3.0
20.0
2.5
10.0
2.0
1.5 -
1.0 (10.0)
0.5
(20.0)
-
TTM ROE 2011-2012 avg ROE 2011-2012 high ROE
TTM P/B 2011-2012 avg 2011-2012 high 2011-2012 low 2011-2012 low ROE 2016-2018 avg ROE 2016-2018 high ROE
2016-2018 avg 2016-2018 high 2016-2018 low 2016-2018 low ROE

What to expect in 2023: Time to improve cashflow rather than sales growth
• The property market should remain under pressure during 2023. Given new approval slowdowns during 2022, the new order book outlook
for contractors could be challenging. Coteccons has not provided guidance on a new order target. Per our discussion with other unlisted
contractors, however, the new order outlook is expected to decline between -30% to -40%.
• A slight correction of -5% YoY is assumed for construction steel price during 2023. This could be supportive to contractor profit margins.
However, China reopening could likely be an upside for construction steel price and thus a downside risk for contractors. Overall, we expect
gross margin for 2023 to be flat as compared with 2022.
Fig.7: Slowdown in new condo approvals could likely lead to a gloomy Fig.8: A slight correction by 5% YoY is assumed in construction steel
new order for contractors during 2023
Condo's new approvals Construction steel price

250,000 18,000
200,000 16,000
('000 VND/ton)
150,000 14,000
100,000 12,000
50,000 10,000
- 8,000
1Q16
3Q16
1Q17
3Q17
1Q18
3Q18
1Q19
3Q19
1Q20
3Q20
1Q21
3Q21
1Q22
3Q22
2016
2018
2020
2022E
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
9M20
9M21
9M22
Source: MOC, SSIRS
• 2023 – A year of lower bad debt provisions is needed to justify current valuation. CTD’s cumulative provisions (VND 961 bn) comprise
84% of total bad debt at Sept ’22 (VND 1.1 tn). The remainder of provisions during 2023 could approx. VND 185 bn. Due to high provision
booked in FY22, provisions in 2023 could be 60% lower YoY and an earnings rebound could occur. Having factored in reduced provisions
and an earnings rebound, CTD’s FY23 P/E is approx. 10% lower than the 2016-2018 period, while the FY23E pretax margin is likely be
compress, between 70%-74% lower than the 2016-2018 period historical mean & high.
Fig.9: CTD FY23 P/E was approx. 10% lower than 2016-2018 high while FY23E pretax margin is expected to experience 70-74% lower than the 2016-
2018 historical mean & high
CTD's FY23E pretax margin vs historical

CTD's FY23E P/E vs. historical
10.0 9.2
14.0 12.8
11.5 7.7
12.0 8.0 7.2
6.6
8.9 9.3
10.0 5.6
6.0 5.1
8.0
6.0
5.4 4.0
6.0
2.4
4.0 3.2
2.0
2.0 0.2
-
-
Source: MOC, SSI Research

Top watch: CTD
CTD VN: Lower bad debt provisions (or reversal) – a must to justify current valuation
• Current price: VND 32,900
✓ Due to high provision booked in FY22, provisions in 2023 could be 60% lower YoY, and earnings rebound could occur as a result.
✓ Having factored in soft provision expenses and earnings rebound, CTD’s current valuation could be considered fair. CTD FY23 P/E
was approx. 10% lower than the 2016-2018 period high, while the FY23E pretax margin is expected to compress, 70%-74% lower than
the 2016-2018 historical mean and high.
• Risk
✓ The assumption of no further bad debt amid a challenging property market could significantly affect our projections.
✓ Declining steel prices could unexpectedly change course, China reopening.
✓ Prolonged tightening policy over bond issuance or credit limit, severe rising lending rate could be challenges for both developer and
constractors.
Fig.10: CTD’s key metrics

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022F 2023F
(VND bn)
Net revenue 4,510 4,477 6,190 7,634 13,669 20,783 27,153 28,561 23,733 14,620 9,087 14,121 10,967
Gross profit 347 323 464 556 1,112 1,799 2,016 1,833 1,048 856 269 524 407
Gross profit margin 7.7% 7.2% 7.5% 7.3% 8.1% 8.7% 7.4% 6.4% 4.4% 5.9% 3.0% 3.7% 3.7%
Operating profit 221 201 249 341 761 1,533 1,653 1,425 593 173 (290) (128) 37
Pretax income 283 300 393 464 927 1,763 2,061 1,873 891 428 38 32 265
Pretax mgn 6.3% 6.7% 6.4% 6.1% 6.8% 8.5% 7.6% 6.6% 3.8% 2.9% 0.4% 0.2% 2.4%
Net income 211 219 280 357 733 1,422 1,653 1,510 711 335 24 20 212
Net mgn 4.7% 4.9% 4.5% 4.7% 5.4% 6.8% 6.1% 5.3% 3.0% 2.3% 0.3% 0.1% 1.9%
EPS (VND) 6,325 4,927 5,798 7,381 13,189 16,189 20,306 19,010 8,644 4,439 328 273 2,868
BVPS (VND) 45,344 49,320 54,647 59,982 69,298 80,974 95,469 105,493 110,305 110,768 110,925 111,199 114,067
ROE 29.4% 12.4% 12.8% 14.8% 25.4% 30.0% 24.4% 19.8% 8.7% 4.0% 0.3% 0.2% 2.5%
P/E 0.0 6.0 8.7 7.7 11.6 11.3 11.2 8.4 5.9 17.5 334.3 120.3 11.5
P/B 0.0 0.6 0.9 1.0 2.2 2.3 2.4 1.5 0.5 0.7 1.0 0.3 0.3

Technology & Telecom: Solid growth to be in store

Top picks: FPT, CTR
2022 Recap: Outperform, on back of resilient growth
• The technology and telecom sector declined -23% during 2022, Industry performance in 2022
outperforming the VN Index which declined by 32%.
• Excluding the underperformance of VGI (-39%) due to limited free 160%
float, the tech & telecom sector declined -8%. VGI had traded at a
140%
high EV/EBITDA between 2020-2021 of 18x-21x triggering
multiple downgrade and translating into 2022 full year 120%
underperformance.
100%
• Sector outperformance was in line with our view, with the top
mover being FPT (+1%), which comprises 40% of the domestic 80%
tech and telecom industry’s market capitalization. 60%
• Overall, multiple valuation declines were a key theme, due to rising

40%
interest rates during the year.
IT multiples derated in 2022 across market

VNIndex IT/Telecom
40.0 0%
IT/Telecom (excl. VGI) FPT
30.0 -20%
CTR
20.0 -40%
10.0 -60% Source: Bloomberg, SSI Research

- -80%
Tech & telecom sector's top movers & laggards in 2022
Overall avg.
FPT VN Equity
ELC VN Equity
US avg.
South Korea avg.

Malaysia avg.
Japan avg.
India avg.
TTN VN Equity
Israel avg.
EU avg.
CMG VN Equity
ONE VN Equity
Vietnam avg.
ITD VN Equity
FPT
CMG
POT
FY21 P/E (x) TTM P/E (x) % derate (RHS)
TST
VTC
ITD
Towerco.'s multiples derated in 2022
ICT
70.0 0% ONE
60.0
-10% CTR
50.0
40.0 -20% VN-Index
30.0 -30% VGI
20.0
-40% ABC
10.0
- -50% ELC
VIE
TTN
LTC
CAB
FY21 P/E (x) TTM P/E (x) % derate (RHS)
-100% -80% -60% -40% -20% 0% 20%

What we have expected
• Earnings growth was in line with our expectation thanks to solid growth from FPT & CTR:
✓ FPT’s prelim pretax earnings growth in 2022 of 20.8% YoY was in line with expectations driven by global IT and telecom services segments
during the year, offsetting the declines in the domestic IT and online advertising segments.
✓ CTR’s prelim pretax earnings growth in 2022 was 18% YoY driven by most of its segment incl construction, telecom infrastructure
operation and leasing segments.
• Internet broadband subscribers grew at a low teen growth rate, as expected.
Fig.1: Internet boardband subscriptions
25 100%
mn sub.
20
20 18 80%
15 60%
10 40%
5 20%
- 0%
2015 2016 2017 2018 2019 2020 2021 Sep'22
FTTH Total %FTTH (RHS)
Source: MIC
*FTTH: fiber-to-the-home subscribers
*Total include xDSL, leased line, CATV, FTTH
What we did not expect
• Rising interest rates, a corporate bond market squeeze, and a slow investment approval process has impacted the banking and properties
sectors, which indirectly affect domestic IT demand. Negative PBT growth at FPT domestic IT and online advertising has occurred since
Oct’22. In 4Q22, PBT from domestic IT (-25% YoY) and online Advertising (-27% YoY) declined as a result of challenges in the property and
banking sectors.
• Challenges for JPY-denominated revenue amid JPY depreciation. Sales from the Japanese market comprised 39% of FPT’s 2022 global IT
sales. Japan market revenue growth remains mid teens due to solid organic growth offsetting JPY depreciation. The organic growth from Japan
market was much better than expected. Beside, the Yen has recovered 8.9% from its trough since Nov’22.
Fig.2: FX moves USD/VND EUR/VND JPY/VND

31-Dec-2022 vs trough 4.3% 10.4% 8.9%
%2022 YTD 3.5% -2.7% -9.9%
%YoY in 2022 avg. 2.2% -8.7% -14.0%
Source: VCB ask rate, SSIRS compiled

YoY change YoY growth of %Japan organic

Fig.3: JPY-denominated revenue growth for FPT
in JPY/VND Japan market growth
1Q22 -9% 9% 20%
2Q22 -15% 8% 27%
3Q22 -18% 19% 45%
4Q22 -14% 28% 49%
1H22 -12% 8% 23%
9M22 -14% 12% 30%
12M22 -14% 16% 35%
Source: Company, SSI compiled data
• The Russia – Ukraine tension led to energy price escalation and energy shortages, posing challenges to the EU market. A severe recession
for the EU could negatively impact FPT global IT revenue. However, FPT sales from the EU market have only accounted for 7% of Global IT
segment sales and only 3% of total sales in 2022.
Focused charts
Fig.4: FPT kept its leading position in terms of 9M2022 total sales and PBT among listed technology & telecom companies
Tech & Telco.'s 9M22 sales Tech & Telco.'s 9M22 PBT
FPT FPT
VGI VGI
Fsoft Fsoft
Ftel Ftel
CTR CTR
CMG CMG
CAB ITD
ABC ELC
ICT CAB
POT ABC
ITD TTN
ELC ICT
TTN POT
ONE ONE
VTC VTC
TST VIE
VIE TST
1,000 11,000 21,000 31,000 (500) 1,500 3,500 5,500

VND bn VND bn
Source: SSI compiled data

*VGI 9M22 PBT was removed the FX net gain

Fig.5: Resilient in sales & PBT growth and PBT margin
Tech & Telco.'s PBT margin %YoY growth in 9M2022 sales & PBT
25.0% 35.0%
30.0%
20.0%
25.0%
15.0% 20.0%
15.0%
10.0%
10.0%
5.0%
5.0%
0.0%
0.0%
Total (excl. IT F.Soft Telco (excl. F.Tel CTR Mix &
Total (excl. IT F.Soft Telco (excl. F.Tel CTR Mix &
VGI) VGI) others
VGI) VGI) others
%YoY in 9M22 sales %YoY in 9M22 PBT

9M21 9M22
PBT margin PBT margin
Source: SSIRS compiled

*Tech. sector include F.Soft (FPT Software), ONE, ELC, ABC
*Telco. Sector include CTR, F.Tel as FPT Telecom, POT, TST, VIE, VTC, CAB
*Mix & others include CMG, ICT, ITD, TTN
*We excluded VGI as an outlier given 2021 low base
Fig.7: Strong net cash position to shield from rising lending rate
Fig.6: Strong OCF to finance capex
impact
Tech & Telco.'s TTM CFO/Capex Tech & Telecom's Net cash
5.0 20,000 1,500

VND bn
VND bn
4.5
15,000 1,000
4.0
3.5 10,000
500
3.0 5,000
2.5
(x)
-
2.0
-500
1.5 (5,000)
1.0 (10,000) -1,000
0.5
(15,000) -1,500
-
3Q20
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22
Total Total (excl. VGI) Total Total excl VGI
Total (excl. FPT, VGI) CTR FPT VGI
FPT VGI CTR (RHS) Total excl FPT, VGI (RHS)

Fig.8: Abundant interest coverage ratio amid rising lending rate
Tech & Telco.'s TTM Adjusted EBIT/Interest exp Tech & Telco.'s TTM Adjusted EBITDA/Interest exp
16.0 20.0
18.0
14.0
16.0
12.0
14.0
10.0
12.0
8.0 10.0
(x)
(x)
8.0
6.0
6.0
4.0
4.0
2.0
2.0
- -
4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22
Total Total excl VGI Total Total excl VGI
Total excl FPT, VGI FPT Total excl FPT, VGI FPT
VGI VGI
Source: SSI compiled data
Sector valuation in 2022
We observed that both technology and the cell tower sector’s TTM valuation multiples have derated significantly vs. FY21, but remain higher
than the historical average despite profit margin improvement.
• IT sector: FPT’s TTM P/E has been derated 30% to 16x from 22.9x in the end of FY21 (which is in line with global IT peer of 35%) amid rising
interest rates and global/domestic recession concerns.
• Cell tower sector: CTR’s TTM P/E has been derated 40% to 13x from 22x in FY21 (compared to global cell tower peer derating 32%) due to
rising interest rates and slower growth for 2023.

Fig.9: Mostly IT sector’s TTM P/E derated vs. FY21 but remained higher than FY11-12 avg. in light of PBT margin improvement.
IT sector PBT margin: Improved margin to trigger multiples

IT sector multiple: TTM mostly derated FY21 but higher than expansion
45.0 FY11-12 avg. 30.0
40.0
25.0
35.0
30.0
20.0
25.0
(x)
15.0
(x)
20.0
15.0
10.0
10.0
5.0 5.0
-
-
TTM P/E 2011-2012 avg P/E 2011-2012 high P/E T12M Pretax 5y avg pretax mgn 2011-2012 Pretax mgn (%)
Mgn (%)
2011-2012 low P/E FY21 P/E
Source: Bloomberg, SSI compiled data
Fig.10: Mostly towerco.’s multiples derated vs. FY20-21 avg
Towerco P/E: TTM mostly derated vs FY20-21 avg. Towerco EV/EBITDA: TTM mostly derated vs FY20-21 avg
70.0
30.0
60.0
25.0
50.0
20.0
40.0
15.0
(x)
(x)
30.0
10.0
20.0
5.0
10.0
-
-
TTM EV/EBITDA 2017-19 EV/EBITDA 2020-21 EV/EBITDA

TTM P/E 2017-19 P/E 2020-21 P/E
Source: Bloomberg, SSIRS compiled

Fig.11: FPT improved profit margin to enjoy valuation multiple expansion compared to historical
FPT multiples change FPT profit margin change
25.0 22.9 20.0

17.7 17.6 17.8
18.0 16.8
20.0
16.0 15.8
13.8 14.4 16.0
15.0
14.0
(x)
9.9
10.0
(%)
7.1
5.5 12.0
5.0 9.8
10.0
-
8.0
6.0
T12M 5y avg 2011-2012 FY19 Pretax FY20 Pretax FY21 Pretax
Pretax pretax mgn Pretax mgn mgn mgn mgn
Mgn
Fig.12: CTR improved profit margin to trigger multiple expansion in TTM basis, compared to 2017-2019 avg
CTR multiples change CTR profit margin change

21.0 19.8 9.0 8.5
18.0 8.0 7.5
15.0 7.0
12.9 6.4
11.5 5.9
12.0 6.0
(x)
(%)
9.8
8.5
9.0 5.0 4.6
6.6 4.2
6.0 4.0
3.0 3.0
TTM P/E 2017-19 2020-21 TTM 2017-19 2020-21 T12M Pretax 2017-2019 2020-2021 T12M 2017-2019 2020-2021
P/E P/E EV/EBITDA EV/EBITDA EV/EBITDA mgn Pretax mgn Pretax mgn EBITDA EBITDA mgn EBITDA mgn
mgn

*It’s noted that CTR has pushed its telecom infrastructure leasing segment since 2020.
*CTR has been listed since 2017. It’s reason why we only compared to 2017-2019 period rather than 2011-2012.

2023 Expectation: Buy the correction for long-term return
Technology sector
• Global IT spend is forecast to post higher growth in 2023, according to Gartner. However, at FPT, we forecast FY23E PBT growth from the
global IT segment of +21% YoY, which is lower than the 28% YoY growth posited during FY22E. For the FY23E global IT segment, FTP’s
revenue growth is expected to grow at a slower pace for the EU (+10% in FY23E vs +27% in FY22E), US (+29% vs 48%), APAC (+35% vs
46%), and Japan (+15%).
Fig.13: Global IT spending is forecasted to post higher growth in 2023
Global spending for IT services GDP growth expectation across regions &
countries
12.7%
1,400 9.9% 7.0%
7.9% 6.0%
1,200 6.7%
5.0% 4.7% 4.2% 5.0%
2.9% 3.2%4.1% 3.0%
1,000 1.8% 4.0%
800 -2.7% 3.0%
-3.5%
-5.1% 2.0%
600
1.0%
400 0.0%
2013
2018
2008
2009
2010
2011
2012
2014
2015
2016
2017
2019
2020
2021
2022F
2023F
APAC Asia ex. Japan US EU
Japan
Value %YoY 2021 2022F 2023F 2024F
Source: Source: Bloomberg consensus

*Statista
*Gartner, “Gartner Forecasts Worldwide IT Spending to Grow 5.1% in 2023”,
by Meghan Rimol & Catherine Howley’s October 19, 2022 updates
• Low exposure to the EU market could offset some of FPT’s risk from a prolonged Russia – Ukraine war. To recap, revenue from the EU
market counted 7.6% of FPT’s global IT segment, and comprised 3% of FPT’s total sales during 2022, according to the most recently available
data. We are concerned about a prolonged Russia-Ukraine war, as well as a high energy prices and an energy shortage that could impact the
EU economy and EU global IT spend. However, Gartner’s recent forecast exhibits decent growth of +6% YoY in terms of EMEA 2023
spend for data center and IT services, compared to a decline of -0.6% YoY during 2022. According to the Gartner, CIOs could take on new
technology partners. Combined with cost control amid challenging inflation in developed nations, we also believe that EU corporations will
diversify and/or reallocate IT vendors. This opens the door for FPT to approach new clients, given its low cost advantage. We expect a low-
teens growth for FY23E from FPT sales to the EU market, which should be lower than the +27% level during FY22E.
Fig.14: FPT delivered quite low revenue weight from EU market compared Fig.15: Gartner forecasted +6% YoY in EMEA’s 2023 spending for DC &
to peers IT services compared to -0.6% YoY in 2022.
Source: Gartner, “Gartner Forecasts IT Spending in EMEA to Grow 3.7% in

2023”, by Laurence Goasduff ‘s Nov 09,2022 updates.

Fig.16: Vietnam - A low-cost advantage for hourly wages for IT

engineers.
Software development hourly rate (USD)

90
80
70
60
50
40
30
20
10
-
Vietnam China Asia India North US Canada Western Eastern
America EU EU
Source: FPT, SSIRS compiled
• A high interest rate environment, corporate bond market challenges, and a slow investment approval process could still pose challenges
for the banking and property sectors, as well as domestic IT demand. A contraction in FPT’s Domestic IT sector PBT has been occurring
since 4Q22. Between Oct-Nov’22, the domestic IT segment’s PBT has declined -2% YoY due to challenges in the property and banking sectors.
Under our base case, we expect a negative -4% YoY decline during FY23 PBT due to FPT’s domestic IT segment, compared to a 12% PBT
expansion during FY22E.
• Per our discussion with company and our view, FPT earnings growth likely could decline to low-teen growth range for 1H23 (due to negative
impact from Domestic IT & Online advertising segments and on 4Q22 and 1H22 high base), then expected to warm up during 2H23.
Telecom sector
• As a defensive sector, a low-teens growth rate for internet broadband subscribers is assumed which is in line with industry average. A low
teen rate could be due to recent high internet penetration in tier 1 cities (HCMC, Hanoi, Da Nang,…) while expansion into tier 2 & 3 cities could
be more costly.
• A positive development for the telecom sector (of which CTR is well positioned as a beneficiary) is that the law amendment for radio
frequency was passed during Nov’22, which could be the start of the frequency band auction for 4G and 5G for the 2023-2024 period.
Another target is gradually shuttering the 2G network through Sep’2024. While we await a new driver of the 5G deployment, the coming 4G
frequency upgrade and mobile market share expansion remains a growth driver for Viettel and Viettel Construction’s telecom infrastructure
leasing segment.

Fig.17: Viettel market share for mobile subscribers kept expanding
Mobile sub. market share

100%
90%
80%
70%
60%
50%
40%
30%
50.00% 52.20% 52.52% 54.00% 54.32%
20%
10%
0%
2018 2019 2020 2021 2022
Viettel VNPT Mobifone Others (Vietnam Mobile, Indochina, Gtel)
Source: MIC
*The market share data of VNPT, Mobile is not available in 2021-2022. The Viettel market share is based on MIC reports
Earnings estimates in 2023
IT sector
• Price correction is expected to factor slower growth in 1H23. FPT trades at a FY23 P/E of 13x on back of an expected +18% YoY FY23 EPS
growth (vs. global IT peer P/E of 15x and +11% EPS growth). We believe that the FY23 P/E for FPT has priced in the risk of slower growth for
1H23 as we note above. According to management, FPT’s earnings growth should decline to high single-digits during 1H23 due to the weak
performance of domestic IT & online advertising segments beginning 4Q22.
• Investors could be curious about the valuation comparison between FY23E and the 2011-2012 avg. We believe that it would be unfair to
compare both periods, as FPT has reported profit margin improvement as divestment from FPT Retail & FPT Trading. The FY23E PBT margin
for FPT is estimated at 17.7%, which outpaced 9.8% margin average during the FY11-F12 period. This triggered P/E expansion for FPT, to 13x
from the 7x average during FY11-Y12 period.
Cell tower sector
• CTR trades at a 14x FY23 P/E, reflecting a mid-teens growth rate of 15.5%. The law amendment for radio frequency was passed during
Nov’22, which should allow for the start of the frequency band auction for 4G during 2023. Along with Viettel’s mobile market expansion, this
could strengthen CTR’s telecom infrastructure operation and leasing segment, which would be positive for the shares.
• Valuation multiple expansion between 2018-2019 and FY23E due to profit margin improvement. We note that CTR has improved its
telecom infrastructure leasing segment since 2020, allowing for the pretax margin to increase from 4.6% during the FY17-FY19 period to
between 6.1%-6.3% during the FY21-FY23E period. CTR’s P/E has expanded to 14x from 10x during the FY17-FY19 period.

Fig.19: New driver from 4G/5G frequency band auction should be catalyst
Fig.18: FPT could still deserve undemanding valuation
for CTR
Global IT peers Global cell tower peers
35.0 35.0
30.0 Malaysia avg. 30.0 Italy avg.

India avg.
25.0 25.0
FY23E EPS growth (%)
FY23 EPS growth (%)

20.0 FPT VN 20.0
Equity CTR VN
15.0 India avg. 15.0
South Korea Overall Equity Overall ex. Malaysia avg.
avg. avg. US
10.0 10.0
US avg. Indonesia avg.
EU avg. Japan avg. Overall
5.0 China avg.
Israel avg. Japan avg. 5.0 avg.
Philippines
- avg.
-
10.0 12.0 14.0 16.0 18.0 20.0
- 5.0 10.0 15.0 20.0 25.0 30.0
FY23E P/E (x)
FY23 P/E (x)
Source: Bloomberg, SSIRS estimated & compiled
Top picks
Fig.20: Top pick’s key metrics

Target price Current price
% Upside PBT growth (%) P/E (x) ROE (%) Dividend yields (%)
Tickers (VND) (VND)
in 1yr in 1yr 12/30/2022 2020 2021 2022F 2023F 2020 2021 2022F 2023F 2020 2021 2022F 2023F 2020 2021 2022F 2023F
FPT 24% 95,400 76,900 12.8% 20.4% 21.0% 18.2% 14.4 22.9 15.3 13.0 25.0% 26.7% 28.0% 27.4% 3.4% 2.2% 2.6% 2.6%
CTR 41% 71,100 50,400 44.0% 36.7% 17.9% 15.5% 20.9 25.4 16.8 14.5 28.4% 31.7% 30.6% 29.2% 3.8% 1.8% 1.8% 1.8%
Source: SSIRS estimated & compiled
FPT VN
• Share price (30-Dec-22): VND76,900; 1Y Target price: VND95,400 (+24% upside) & Outperform rating
✓ A low-cost advantage could benefit the FPT global IT segment during a recession. IT staffing costs for FPT are between approx. 25%-30%
below competitors from India. Cost control likely will be a priority in 2023.
✓ FPT has the lowest exposure to the EU market compared to peer, and we believe that FPT Global IT could be less impacted than competitors
in the event of a more prolonged Russia-Ukraine war.
✓ Foreign-denominated debt is fully hedged.
✓ Shielded from rising lending rates due to abundant net cash and strong interest coverage.
✓ Buy the short-term dip. We believe that the weaker expected growth for 1H23 has been priced in, however, we still continue to believe
that solid double-digit growth could be still in store for FPT over the long-term.
• Risk: More severe-than-expected global recession could negatively impact global IT spend, and could impact our assumptions for FPT and its
global IT segment growth. Further, prolonged domestic challenges in the property market could be of concern. Our worst case scenario is
+13% EPS growth during 2023, which translates into a 1Y TP of VND 80,900 (+5% upside).

Fig.21: FPT's key metrics 2018 2019 2020 2021 2022F 2023F
Net revenue 23,214 27,717 29,830 35,657 43,832 50,482
Gross profit 8,723 10,712 11,814 13,632 17,088 20,328
Pretax income 3,852 4,665 5,263 6,337 7,666 9,065
Net income 3,228 3,912 4,424 5,349 6,593 7,796
EPS (VND) 2,298 2,746 2,973 4,054 5,013 5,918
BVPS (VND) 20,325 20,584 20,083 19,767 23,174 27,601
DPS (VND) 2,000 2,000 2,000 2,000 2,000 2,000
ROA 11.8% 12.4% 11.8% 11.2% 11.6% 12.5%
ROE 23.0% 24.8% 25.0% 26.7% 28.0% 27.4%
Dividend yield 4.7% 3.4% 3.4% 2.2% 2.6% 2.6%
Net cash/Equity (x) 0.2 0.2 0.3 0.5 0.3 0.3
P/E (x) 10.9 13.8 14.4 22.9 15.3 13.0
P/B (x) 2.1 2.8 2.9 4.7 4.0 3.4
CTR VN
• Share price (30-Dec-22): VND50,400; 1Y Target price: VND71,100 (41% upside)
✓ CTR is the only listed company to be a beneficiary of the coming 4G/5G new band auction. The law amendment for radio frequency was
passed during Nov’22, which could be an opportunity to start the frequency band auction for 4G during 2H23.
✓ The 4G new band, coupled with Viettel Group’s mobile market share expansion should be the growth engines for CTR’s telecom
infrastructure operations and leasing segment.
✓ CTR did well to tap into the B2C residential construction segment. The fragmented B2C market could be a chance for CTR to capture new
market share. The residential construction segment’s sales increased 61% YoY pushing gross profit 41% higher YoY through September
2022. Sales from residential construction counted approx 17% total sales. Despite a flat forecast for 2023, this segment should keep
expanding in longer-term.
• Risk: A worse-than-expected domestic recession could impact the 4G/5G new frequency band auction pipeline, negatively impacting
disposable income, lowering the average revenue per user (ARPU), and slowing new mobile subscribers. This could affect our forecast for
CTR’s telecom infrastructure operation & leasing segment.
Fig.22: CTR's key metrics (VND bn) 2018 2019 2020 2021 2022F 2023F
Net revenue 4,277 5,100 6,359 7,454 9,390 10,496
Gross profit 259 304 475 626 790 931
EBITDA 196 282 436 634 842 1,083
Net income 147 189 274 376 461 527
EPS (VND) 1,067 1,385 2,025 3,395 3,386 3,868
BVPS (VND) 14,962 14,282 14,779 14,128 17,295 21,056
DPS (VND) 1,700 1,600 1,000 1,000 1,000 1,000
ROA 7.1% 7.9% 8.7% 9.6% 10.1% 9.0%
ROE 20.0% 23.0% 28.4% 31.7% 31.6% 29.6%
Dividend yield 19.3% 7.8% 3.8% 1.8% 1.8% 1.8%
Net cash/Equity 0.5 0.9 0.4 0.4 0.1 (0.1)
P/E 8.3 14.8 20.9 25.4 16.2 14.1

Materials - Steel: Profit margin can improve thanks to price stabilization, but uncertainty
remains on the demand side
Top picks: HPG, HSG
2022 Recap: Underperform, due to sharp earnings correction

After stellar runs during 2020 and 2021, the steel industry corrected -
51% in 2022, underperforming the VN Index by 18%. Most shares 120%
experienced declining prices between 60%-70%, while HPG - the best 110%
performer – also witnessed a price decline of -49%. 100%
90%
80%
70%
60%
50%
40%
VNIndex Materials Steel
30%
Demand declined due to weak exports: Total sales volume of finished steel products through 11M 2022 dropped -3.8% YoY due to declines in
the export channel.
Sales volume of construction steel and steel pipe (of which the domestic channel contributed between 80%-90% of total sales) increased between
4%-5% YoY thanks to 2021 low base.

Export of finished-steel products (ktons)

However, the volume of galvanized steel dropped -22% YoY
due to the sharp -37% decline in exports, which accounted for
400
63% of galvanized steel sales during 2021. The decline in
350
exports is due to slowing global demand, especially in the US
300
and EU. According to the World Steel Association, global 250
demand is estimated to decrease -2.3% during 2022 after 200
recovering 2.8% during 2021. Demand from the EU is 150
estimated to drop -3.5% for 2022 after increasing 18.1% 100
during 2021, while the equivalent demand growth for the US 50
is estimated to decelerate from 21.3% for 2021 to 2.1% for 0
2022.
Construction steel Steel pipe Galvanized steel
Source: VSA, SSI Research
Domestic sales volume

Domestic demand also experienced significant weakness
during the second half: Domestic sales volume reached
1,400.0
their peak during March in terms of both absolute value and
1,200.0
YoY growth. Such volume came about due to the pent-up
1,000.0
demand and the increase in steel prices which encouraged
distributors to accumulate inventory. However, demand 800.0
tended to decelerate more rapidly than expected from the 600.0
second half of 2022, due to the increase in interest rates, as 400.0

well as the crackdown in the property market. Specifically, 200.0
after growing 15% YoY during 1Q22, sales volume of
-
finished-steel products between Apr to Nov fell -4% YoY
despite the low base during 3Q21. Volume during 2Q22 and
between Oct-Nov 22, which is usually the high season, Construction steel Steel pipe Galvanized steel
dropped by 19% and 12% YoY, respectively. Compared to

pre-covid levels, domestic sales volume through 11M22 Source: VSA, SSI Research
dropped 8.2% from the same period in 2019.
Chinese steel inventory and price (USD/ton)

Steel prices soared during the first quarter before
significantly correcting through the end of the year. The
USD/ton
thousand tons
HRC price advanced 20%, with the price of construction
2,000 1,000.00
steel increasing over 15% during 3M 2022 thanks to pent-
1,800
up demand and the recovery in global price fueled by a 1,600
900.00
supply disruption resulting from Russia-Ukraine conflict. 1,400

800.00
However, from peak during March, the price of 1,200
1,000 700.00
construction steel and HRC have declined 22% and 35%,
800
respectively, due to weakening demand and high 600.00
600
inventories. 400
500.00
200 China steel inventory China steel price
- 400.00
12/20/2019 12/20/2020 12/20/2021
Source: Bloomberg

Earnings of steel company deteriorated and posted a historical loss in 3Q due to declining volume and a sharp price correction: Earnings of
nearly all steel companies post a considerable decline through 9M22, and historically high loss during 3Q22 due to the rapid decline in market
demand and the fall in steel price that led to substantial inventory provision. We expect most companies would still incur negative earnings in
the final quarter of 2022.
Revenue Gross profit PBT

9M21 9M22 3Q21 3Q22 9M21 9M22 3Q21 3Q22 9M21 9M22 3Q21 3Q22
HPG 104,969 115,584 38,674 34,103 31,521 17,649 11,861 1,001 29,018 12,001 10,979 -1,300
HSG 39,627 32,777 15,797 7,939 7,318 2,794 2,467 (231) 4,166 (393) 1,043 (997)
NKG 19,393 18,771 7,531 4,424 3,212 1,691 1,296 -159 2,049 354 706 -476
POM 9,588 11,132 3,104 2,978 626 -219 120 -578 226 -706 4 -715
TVN 29,447 30,378 9,090 8,589 1,993 371 357 -271 1,231 -383 59 -585
TIS 9,634 9,525 3,085 2,605 800 262 186 45 142 22 15 -23
SMC 15,163 18,949 4,141 5,672 1,359 338 234 -67 1,061 -52 163 -217
Source: Companies

2023 Expectation
Domestic demand may continue to be weak given the stagnant property market and tight monetary policy. According to the Ministry of
Construction, the number of new apartments being licensed during the first three quarters of 2022 dropped -41% YoY. In addition, the progress of
outstanding projects can also be delayed, due to developer liquidity issues.
The household channel (which used to be more resilient) can also be affected by the slowdown in the overall economy, higher unemployment and
interest rates. We expect that domestic demand of finished steel can experience a single digit decline in 2023. For historical reference, this has
occurred previously in the Vietnamese steel industry. Construction steel sales volume dropped -7% YoY during the 2012 trough year. However, an
acceleration in public investment could help to partially offset the drop in steel demand from the residential channel.
Steel prices may experience less volatility during 2023 due to stabilizing Chinese demand: After falling between 2%-4% during 2022, Chinese
demand is expected be flat or recover slightly between 1%-2% during 2023, fueled by the reopening during the first months of the year.
Demand in China can remain weak, given the decline in new housing sales since 2H21, but would be supported by recent government’s supportive
measures for developers’ liquidity and infrastructure investment. In addition, steel production of the world’s largest producers has also declined, as
mills had to cut output after a long period of loss. After reaching the 2022 peak in May at 96.6 mn tons, Chinese steel production has decreased
gradually to 74.5 mn tons in Nov, which struck a balance between supply and demand.
Such factors can enable regional steel prices to be more stable during 2023. Nonetheless, it would be a surprise for steel prices to attain a strong
advance, as the reopening in China would also lead to an increase in supply. In addition, the current price has already been higher than pre-covid
levels by 20%-40%. Weak demand in Vietnam could also make it difficult for producers to increase pricing at the same rate as the regional price.
Export market remains tight due to recession, with possible recovery at year end:
According to the World Steel Association, steel demand is expected to recover 1% YoY to 1.8 bn tons for 2023, after contracting 2.3% during 2022.
Demand in both the US and EU is expected to decelerate next year given the economic slowdown.
ASEAN demand is expected to remain solid during 2023, after growth of between 4%-6% during 2022. However, exports to longstanding trade
partners may still be affected by the capacity ramp-up in the recent years in neighboring countries like Malaysia, Indonesia, and Philippines.
Accordingly, we expect that the export of finished steel products could drop over -10% YoY during 2023.
Company earnings could recover from 2022 but high risk remains: A more stable price of steel and raw-material could stabilize steel company
earnings during 2023. However, weak demand could result in a low utilization rate of between 60%-75% (compared to over 80% for 2022 and over
90% for 2021), placing pressure on company revenue, cash flow, and profit margins for the year ahead. In addition, the narrower gap between the
Vietnam’s price and other markets should make export margins less attractive compared to the 2020-2021 period.

HRC price (USD/ton)
2500
Vietnam US EU
2000
1500
1000
500
Source: Bloomberg
We believe that earnings of steel industry will continue to contract during the first half but gradually recover at year end thanks to possible recovery
in overall demand in both domestic and export market.
Sector valuation
The 2023 forward P/E for the sector has stood between 10x-20x, much higher when compared to the historical average of between 8x-10x, and
even the range of between 10x-13x during market downturns.
On the other hand, the P/Bs of key stocks such as HPG, HSG and NKG are now between 0.6x-1x, lower than the historical average by 20% but still
higher relative to the lows seen during previous bear markets (2011 or March 2020) by between 20%-30%. We do not expect the P/B of steel
companies to rebound significantly in the short term, as ROEs likely will be around historical lows during 2023.
Current
Target
price Net profit growth PE ROE Dividend yield
Ticker price
(VND)
(VND)
(*)
2021 2022E 2023F 2021 2022E 2023F 2021 2022E 2023F 2021 2022E 2023F
HPG 18,000 18,000 155.6% -70.4% 7.1% 6.0 11.4 10.6 46.0% 10.8% 10.8% 1.1% 2.8% 2.8%
HSG 11,000 12,650 274.0% -94.2% 35.5% 5.3 35.3 22.2 49.5% 2.3% 3.1% 0.0% 0.0% 0.0%
NKG 10,000 13,400 653.6% -99.6% 1994.5% 3.8 424.2 20.3 50.0% 0.1% 2.8% 2.6% 0.0% 0.0%
Source: SSI Research, (*) Current price is based on price on 30 Dec 2022

Most preferred/Watch: HPG & HSG
1. Hoa Phat Group JSC (HPG VN)
✓ The leader in the Vietnamese steel industry, with substantial advantages of economies of scale, production cost, and financial position.
✓ Market share could increase over the long-term during a market restructuring, as smaller and inefficient companies could get wiped out
of the market. HPG could have the best positioning to benefit from a market recovery.
• Risk
✓ Low utilization rate during 2023 could negatively affect profit margin
✓ The reopening of China could become a double-edged sword as weak demand in the domestic market would make it more difficult for
HPG to increase its sales price to the regional price, especially for construction steel.
2018A 2019A 2020A 2021A 2022F 2023F

Net income (VND bn) 8,601 7,578 13,506 34,521 10,217 10,947
NI growth (%) 7.3% -11.9% 78.2% 155.6% -70.4% 7.1%
EPS (VND) 4,036 2,726 4,060 7,708 1,704 1,826
ROE (%) 23.6% 17.1% 25.2% 46.0% 10.8% 10.8%
Debt/Equity (%) 59.8% 76.8% 91.4% 63.0% 57.1% 47.1%
Dividend yield (%) 0.0% 2.1% 1.2% 1.1% 2.6% 2.6%
P/E (x) 7.7 8.7 10.2 6.0 11.4 10.6
P/B (x) 1.2 1.0 1.5 1.4 0.8 0.9

2. Hoa Sen Group (HSG VN)
✓ The leading company in galvanized steel in Vietnam, with a market share of 29% at 11M22.
✓ Debt balance reduced 60% over the past four years due to low capex and strong operating cash flow. This has reduced the D/E ratio to a
safe level of 0.35x at FY 2022 - compared to a peak of 2.3x at FY 2018.
✓ Earnings during FY2023 could recover by around 35% to VND 340 bn due to the depletion of high-cost inventory and a decrease in interest
expense. Earnings growth could rebound from the second half of FY2023.
• Risk
✓ Prolonged weak demand could result in lower-than-expected sales volume and capacity utilization rate.
✓ Price volatility can bring challenges to inventory management
2019 2020 2021 2022 2023F

Net revenue 28,035 27,531 48,727 49,711 30,334
Net income 361.4 1,153.0 4,312.8 251.1 340.1
Net income growth -12% 219% 274% -94% 35%
EPS (VND) 853 2,594 8,740 420 569
ROE (%) 7% 19% 50% 2% 3%
D/E 1.77 1.24 0.63 0.38 0.24
Dividend yield (%) 0% 0% 0% 0% 0%
P/E (x) 14.82 6.03 5.32 35.25 22.24
P/B (x) 0.98 1.06 2.12 0.81 0.68
EV/EBITDA (x) 6.05 4.61 4.53 7.14 6.34

Materials – Cement: Brighter earnings outlook

Watch: HT1
2022 Recap: Underperform, due to high coal input price

The cement sector tumbled -53% during 2022, underperforming the
VN Index by 20%. Sector performance was weaker than expected; 130%
earnings were unable to return to pre-COVID levels in 2022. The two 120%
main reasons for the NPAT decline were: (1) low cement demand in 110%
100%
both domestic and export markets; and (2) higher coal prices.
90%
80%
70%
60%
50%
40%
VNIndex Materials Cement
30%
• Global thermal coal prices have soared 66%-138% during 2022. Coal accounts for approximately between 30%-40% of cement production
costs. Australia coal prices cooled to USD 404/ton in Dec’ 22 after peaking at USD 458/ton (+170% YTD) during Sept ‘22. EU coal prices also
decreased by 30% from Sept’ 22. The rollercoaster ride of thermal coal prices owes to: (1) the Ukraine-Russia war driving energy prices; (2)
the imposition of sanctions on Russia forced Europe to expand use of alternative energy, particularly coal; and (3) the economy reopening post
Covid-19.
Vietnam's cement volume Global thermal coal prices
70.0 66.3 500

63.4 62.7
57.2 450
60.0 400
50.0 45.7 350
USD/tonnes
300
mn tonnes
40.0 33.8 250

31.6
28.9 200
30.0
150
20.0 100
50
10.0 -
-
2019 2020 2021 11M2022
Domestic Export EU 6000 kcal/kg Australia 6000 kcal/kg China 5500 kcal/kg
Source: VNCA, SSI Research Source: Bloomberg

Domestic cement consumption in 2022 up to November reached 57.2 mn tonnes (+4% YoY). Domestic demand has worsened due to the
downward cycle in the real estate market (since 2Q22). Domestic cement consumption increased 3.3% YoY during 1Q22, then decreased -5.1%
YoY during 2Q22. During 3Q22, domestic consumption grew 29.2% YoY, owing to the 3Q21 low base amid Covid-19 lockdown. During the first
two months of 4Q22, cement consumption decreased by 1.8% YoY and 4.1% QoQ. In 2020-2021, domestic cement consumption increased by
5%-30% QoQ in the fourth quarter.
Domestic cement consumption Export cement & clinker
20.0 14.0
18.0
12.0
16.0
14.0 10.0
12.0
mn tonnes
mn tonnes
8.0
10.0
8.0 6.0
6.0 4.0
4.0
2.0
2.0
- -
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2020 2021 2022 2020 2021 2022
Source: VNCA, SSI Research Source: VNCA, SSI Research
• In 2022, cement and clinker exports for the year declined -29% YoY, with export volume reaching 31.7 mn tons. Per data through
November 2022, cement exports totaled 14.8 mn tonnes (-3% YoY), while clinker exports totaled 14.1 mn tonnes (-48% YoY). China is
Vietnam's largest clinker export market, accounting for 53% and 27% of the export market in 2021 and 2022, respectively. However, cement
exports to China fell -64% YoY during 2022 due to a sluggish housing market and China's zero-COVID policy. As a result, competition for cement
producers in north and central Vietnam has been fierce.
Table: Vietnam cement top export countries (tonnes)
2019 2020 2021 2022 2022/2021 YoY growth

China 16,560,270 22,225,607 24,405,569 8,708,705 -64.3%
Philippines 5,030,676 6,345,366 7,547,508 7,803,424 3.4%
Bangladesh 3,345,050 1,859,756 3,486,911 4,438,499 27.3%
Total export 31,581,231 33,790,227 45,701,077 31,685,479 -30.7%
Source: General Department of Vietnam Customs
• Cement producer earnings continue to decline due to rising production costs. As production costs continue to rise, company profits declined.
The cost of producing cement rose significantly in 2022 as coal prices hiked, but cement prices only inched up slightly (5%-10%) due to harsh
competition and weak consumption. Hence, cement producer GPM remains low at between 4.2%-8.4% in 3Q22. As a result, cement companies
during 3Q22 either incurred a loss or just broke even. During 3Q22, HT1 and BCC net profit were VND 36 bn and VND -36 bn, respectively.

Gross margin of cement companies
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
HT1 BCC
Table: Revenue and net profit of key cement companies (mn VND)
Ticker Exchange 9M22 Sales 9M21 Sales 9M22 sales growth 9M22 NPAT 9M21 NPAT 9M22 NPAT growth
HT1 HOSE 6,602,918 5,039,983 31.01% 203,795 316,541 -35.62%
BCC HNX 3,298,815 3,125,994 5.53% 93,471 93,702 -0.25%
Total VND mn 9,901,734 8,165,977 21.26% 267,266 410,243 -27.54%

2023 Expectation
• We expect thermal coal prices will see a reasonable correction in 2023 as: (1) the impact of the Russia – Ukraine war softens; (2) other
energy prices (oil, LNG) become more stable; and (3) China increases its coal production target. The National Development and Reform
Commission (NDRC) of China predicted that annual coal production would increase to 4.6 bn tonnes by 2025 (compared to 4.1 tonnes during
2021). As a result, Fitch Solution forecasts thermal coal (Australia) prices will be USD 200/ton (-45% YoY) at the end of 2023 while the World
Bank forecasts USD 240/ton (-34% YoY). Australia and EU coal prices decreased by 10%-30% in Dec’ 22 after peaking during Sept’ 22.
• For 2023, we expect domestic cement consumption to be flattish compared to 2022 due to the weaker real estate segment. On a positive
note, the public investment plan for 2023 is estimated to expand 25% YoY in term of value, acting as a driving factor to support domestic
cement consumption. During 2012, a year when both the real estate market and public investment declined, domestic cement consumption
decreased by only 8% YoY.
• The export market can recover during 2H23 due to China’s reopening. This might help reduce competitive pressure on businesses in north
and central Vietnam. During 4Q22, we saw a sign of recovery in cement export, as cement exports increased 32% QoQ. However, the channel
can be slightly affected by the increase in export tariffs for clinker rising from 5% to 10% on Jan 1, 2023, in order to discourage mineral
exports, according to recent Decree No. 101/2021/ND-CP.
Capacity and utilization rate of Vietnam cement

• Domestic competitive pressures may increase as capacity
ramps up: Domestic capacity increased between 3%-10% during 110.0 109.1 110%
109.0
the 2022/2023 period. We estimate that the utilization rate of 105%
108.0
106.6
cement sector decreased from 95% during 2021 to 89% during 107.0 100%
mn tonnes/year
106.0
2022. When combined with weak consumption and a sharp 104.3 104.3
105.0 95%
decline in the export market, this resulted in increased competition 104.0
103.0 90%
in northern and central Vietnam, where most new projects are
102.0 85%
located and have a higher export rate. As a result, we expect 101.0
100.0 80%
cement prices during 2023 to be flat or slightly decline by 1-3%
2019 2020 2021 2022F
compared to 2022 levels.
Capacity Utilization rate
Source: VNCA, SSI Research
Table: New cement production line in 2022-2023
Company Capacity (tons/year) Province Commencement year

Long Son – production line 4 2.5 Thanh Hoa 2022
Xuan Thanh – production line 3 4.5 Ha Nam 2022-2023
Dai Duong – production line 1 2.3 Thanh Hoa 2022-2023
Long Thanh – production line 1 2.3 Ha Nam 2023
Source: VNCA, SSI Research
• Expecting better gross profit margins for cement producers in 2023: We believe that gross margins of cement companies will improve
between 2%-3% YoY due to the correction in coal prices. We believe that price of imported coal prices in Vietnam may be even lower in 2023;
however, there is usually a time lag between the movement in global coal and Vietnamese coal prices. Furthermore, at 3Q22, listed cement
companies such as HT1 and BCC had a low debt-to-equity ratio of 0.34/0.31. As a result, we expect 2023 earnings of cement companies to
recover between 50%-90%, with most of the growth expected during 2H 2023.
• Valuation might reflect signs of the earnings recovery: Cement P/E for domestic tickers have dropped dramatically from between 22x-24x
in 2021 to between 11x-15x in 2022, but still higher than the 10-year average of between 7x-10x. This reflects a decline in cement company
earnings in 2022. If earnings rebound from the 2023 coal price correction, the sector P/E ratio is expected to approach the upper end of its

historical range at around 10x. As a result, we believe that potential earnings recovery was partly factored into valuation. Hence, we recommend
investors to wait on the sidelines for signs of the thermal coal correction and stock prices drop further to provide some valuation support.
PE of HT1 and BCC
25.0
20.0
15.0
10.0
5.0
0.0
HT1 BCC
Source: Fiinpro, SSI Research
Watch: HT1 VN
• Share price (31/Dec/2022): VND 10,350; 1Y Target price: VND 12,300
✓ HT1’s main market is in southern Vietnam - less competitive pressure due to the supply shortage. Therefore, consumption volume remains
at a high level.
✓ Expecting a better gross profit margin for cement producers in 2023, as thermal coal prices come decline.
✓ A healthy financial structure, coupled with a stable cash flow.
• Risk
✓ Faster/slower-than-expected recovery in demand for cement.
✓ Input thermal coal prices rise less/more than expected.
(VND bn) 2018 2019 2020 2021 2022F 2023F

Net income (VND bn) 634 741 608 412 261 509
Net income growth (% YoY) 30.4% 16.9% -17.9% -32.2% -36.8% 95.3%
EPS (VND) 1,661 1,940 1,593 1,080 629 1,227
ROE (%) 12.2% 14.1% 11.3% 7.8% 5.0% 9.4%
Dividend yield (%) 8.8% 8.0% 4.2% 2.7% 4.8% 4.8%
Debt/Equity (%) 0.74 0.59 0.44 0.31 0.22 0.21
P/E (x) 8.22 7.71 17.93 20.70 15.07 8.43
P/B (x) 1.01 1.07 2.02 1.64 0.69 0.71
EV/EBITDA (x) 4.54 4.30 7.59 8.12 4.65 5.34

Materials – Fertilizers: High net cash position to cushion the share price drops
Top picks: N.a
2022 Recap: Outperform due to record high earnings

The fertilizer sector declined -16% YTD, outperforming the VN Index
(which sank -32% YTD) due to record high earnings. Among the 170%
shares, DPM was the least weak with its share price declining only -
150%
4% YTD due to a generous dividend policy (70% on par value or 16%
dividend yield) and solid earnings growth. Worst performers were the 130%
NPK producers (BFC and LAS dropped -43% and -61% YTD, 110%
respectively) companies which have been struggling with a rising cost 90%
dynamic of imported raw materials in 2022.
70%
50%
VNIndex Materials Fertilizers
30%
✓ Urea prices to peak in 1H22, along with the natural gas and coal price trend. At the beginning of 2022, we expected the coal shortage
in China and the natural gas shortage in Europe to weigh on urea production, anchoring urea prices at an elevated level during 1H22. For
2H22, we expected this would decline, as the coal and natural gas shortage issues gradually were resolved.
✓ Urea export was tight during 1H22 but increased during 2H22. China export suspension lasted through the end of June 2022, and
export limits by Russia lasted until May 2022. China continued to restrict urea exports until the end of 2022 but did not specify the cap
on export volume. According to Nitrogen Market Reporter, China’s urea export volume during 1H22 was 303k tons and 421k tons,
respectively. During 3Q22, China urea export volume surged to 849k tons despite the country applying export restrictions. Russia also
continued to apply export limits for nitrogen fertilizer (consisting of mainly urea) between July and December 2022, but the limit has
increased to 8.3 mn tons (vs 5.9 mn tons for the December 2021-May 2022 period). As both China and Russia gradually increased urea
exports, this exerted downward pressure on global urea prices.
✓ The Russia-Ukraine war has disrupted the natural gas flow. This pushed fertilizer feedstock (oil and natural gas) higher. As a result,
energy-intensive industries in the EU like fertilizer had to curtail production, raising urea prices. The urea supply shortage in the EU was
met by imports from other countries (Middle East, Morocco and Egypt). Vietnamese urea producers do not export to the EU, given long
transport distance but still benefited from charging a higher price in export markets (India and ASEAN countries).
✓ EU sanctions on Russian goods has changed the trade of coal, indirectly causing coal prices to increase. Russian coal was banned
by the EU beginning August 2022. According to the World Bank, Russian coal has been rerouted from the EU to other countries, including
India and Turkey. Meanwhile, the EU imports more coal from Columbia, South Africa, the US, and Australia. China meanwhile continues
to look for a switch from buying Australian coal, and shifted to US and Russian coal. This increased the transport distance and
transportation costs, forcing coal producers to pass along rising costs onto customers. In addition, power generators in the EU used more
electricity from thermal power plants to compensate for the natural gas shortage, pushing coal prices higher.
As a result of the Russia-Ukraine war, urea prices took a longer to cool.
Chart: Urea spot price (USD/ton)
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Black Sea urea prill Egypt urea Indonesia urea China urea prill
Resilient urea sales volume growth for 2022 due to exports. According to GSO, urea production in Vietnam on average rose 7% YoY between
Jan-Nov ‘22. We estimate that urea sales volume of DPM and DCM increased 9% and 8% YoY, respectively, during 2022. Urea prices
increased between 40%-45% YoY during 2022. Despite high urea selling prices, urea producers still managed to post resilient sales volume
growth due to strong exports (+131% YoY during 9M 2022 – according to the Department of Custom Vietnam) could compensate for the demand
destruction on the domestic market.
• Corporate earnings results and valuation
DPM: Management expects 2022 revenue and PBT of VND 19.4 tn (+52% YoY) and VND 6 tn (+58% YoY), respectively. PBT for 9M 2022
jumped 200% YoY, with the strongest growth occurring during 1Q22. During 4Q22, earnings could drop between -60% to -70% YoY, along
with the decline in urea prices. As earnings peaked in 2022, P/E at 2022 dropped to 3.6x, which is the lowest level over the past ten years.
DCM: During 9M 2022, revenue and PBT were VND 11.5 tn (+90% YoY) and VND 3.5 tn (+308% YoY), respectively, with the strongest
growth occurring during 1Q22. We estimate that 4Q22 PBT will drop -46% YoY, along with the drop in the urea sales price. With record
earnings during 2022, P/E as of 2022 dropped to 4.1x, which is the lowest level since listing (2014).
LAS: During 9M 2022, revenue and PBT were VND 2.5 tn (+24% YoY) and VND 85 bn (+15% YoY), respectively. Phosphate and NPK sales
volume declined by -14% and -28% YoY due to demand destruction, while the company does not have export market. The gross profit margin
deteriorated from 14.6% in 9M21 to 12.8% in 9M22 as the company was under pressure to maintain sales volume.
BFC: 9M 2022 revenue and PBT were VND 6.78 tn (+14% YoY) and VND 212 bn (-8% YoY) respectively. We estimate NPK sales volume of
BFC decline at double-digit pace in 9M22 due to demand destruction and little exposure to overseas market. The gross profit margin deteriorated
from 11.2% in 9M21 to 10.5% in 9M22 as the company was under pressure to maintain sales volume.

2023 Expectation: High net cash position to cushion the share price drops
The urea price may plunge in 2023 due to the following reasons:
• Urea exports from Russia and China should recover. We note that both China and Russia relaxed export restrictions during 2H22 compared
to 1H22. We expect this trend to stretch into 2023.
• Input trend: According to the World Bank, coal production is expected to surge to meet the unfilled demand from thermal power plants. The
projected increase in supply and weakening demand due to the global economic downturn should weigh on coal prices during 2023. As for
natural gas prices, the EU’s reliance on natural gas during 2023 may not be as significant as 2022, as the bloc taps other sources of energy,
such as coal and renewable energy. This, together with dampened demand due to recession, should likely drag down the natural gas prices
during 2023.
China coal price (USD/ton) TTF natural gas Europe (EUR/MWh)
300.00 400
350
250.00
300
200.00
250
150.00 200
150
100.00
100
50.00
50
0.00 0
1/13/2020 1/13/2021 1/13/2022 1/2/2020 1/2/2021 1/2/2022 1/2/2023
Source: Bloomberg
• Demand for urea could weaken during 2023, given concerns over the global recession and the correction in prices of agricultural
commodities. Q4 is normally considered to be the high season. However, urea prices did not rally during 4Q22. This reflects the weakening
demand and could continue to worsen in 2023.
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Corn future (USD/bu) Wheat future (USD/bu) Thailand white rice (USD/ton Brazil soybean (USD/ton)
Earnings decline should be most significant during 1Q23 for urea producers. We note that both DPM and DCM secured export orders are at an
exceptionally high level (>USD 900/ton compared to current price of VND 480/ton) during January 2022, and that urea price formed another peak

at March 2022 due to Russia-Ukraine tensions at the time. We therefore expect that earnings of DPM and DCM to decline the most during 1Q23.
We estimate DPM and DCM net income at VND 3 tn (-39% YoY) and VND 2.26 tn (-41% YoY) in 2023, but still much higher than the pre-COVID
level of VND 700 bn and VND 600 bn respectively.
Our view: Given the projected earnings decline for 2023, we recommend to UNDERWEIGHT on the fertilizer sector.
• However, high net cash position and high dividend may help to lessen the share price drop. 3Q22 net cash of DPM and DCM accounts for
50% and 55% of the current market capitalization. DPM has the most generous dividend policy (70% on par value / 16% dividend yield for
2022). The company could announce a dividend payment during January 2023.
• DCM’s urea plant should be fully depreciated around September 2023, and we expect DCM’s earnings decline to ease from 4Q23. This could
be a turning point for the shares.
Target
Current Price
Ticker (VND)
(VND)
DPM -10% 38,600 42,950 351.9% 56.7% -38.6% 6.7 3.6 5.9 33.4% 42.6% 23.4% 10.0% 16.3% 11.6%
DCM -8% 24,300 26,500 189.9% 97.3% -40.5% 11.3 4.1 6.9 27.6% 43.8% 22.5% 4.9% 9.4% 9.4%
Risks: Sudden disruption on natural gas and coal exports caused by the Russia-Ukraine war may revert the natural gas and coal price downtrend.

Materials – Construction stone: Increased demand from infrastructure projects

On Watch: DHA
2022 Recap: Underperform, due to slump in demand

The construction stone segment declined -44% in 2022,
underperforming even the VN Index by -33% due to: (i) the supply at 120%
main mines near the central area in Binh Duong running out of reserves; 110%
(ii) demand for construction stone not recovering at a time when the 100%
disbursement of public investment and civil construction remains low. 90%
80%
The best performer was NNC (-24%), as Binh Duong Materials and 70%
Construction JSC increased its ownership from 37.7% to 43.2%. DHA 60%
(-28%) has a cash dividend payout ratio of 30% per share. 50%
VNIndex Materials Construction stone
40%
Worst performer is VLB (-50%) due to huge retrospective tax payment 30%
(2014-2019) leading to big loss in 2022.
According to Decision No. 1469/QD-TTG issued by the Prime Minister in 2017 on the development planning of the building materials industry,
total capacity of construction stone is 181 mn m3/year, of which northern Vietnam accounts for 54% of total capacity. Central Vietnam accounts
for 18.7% of capacity. By contrast, the quarries in southern Vietnam account for 26.5% of capacity. The quarries in the north and central regions
are scattered in many provinces, whereas the quarries in the south are 90% concentrated in Dong Nai and Binh Duong. We focus our attention
on quarries in Dong Nai and Binh Duong in our report.
• The demand for construction stone is weak due to a lower public investment. Demand for construction stone for the construction
of bridges, roads, and other transportation infrastructure accounts for between 65%-70% of the total demand for construction stone.
According to the Ministry of Finance, disbursement during 2022 is estimated at VND 436 tn (18.3 bn USD), equivalent to 67.3% of
plan.
During 2022, demand for road and bridge construction might grow between 10%-12% YoY according to our observation.
According to the Ministry of Construction, the price of construction stone during 2022 has increased 7.6% YoY due to the increase in
gasoline and oil prices which impact mining and transportation costs.

Mining capacity of construction stone in key areas (mn m3/year) Selling price of 1x2 stone (VND/m3)
2022 CAGR (%) average growth (%)

400
80 10%
70 350
60 8.4% 9%
8.1% 300
50
7.6% 7.7%
40 7.3% 8% 250
30 7.0%
200
20 7%
10 150
0 6% 2017 2018 2019 2020 2021 2022
Northern Red river North Central Highlands South East Mekong
Midlands and delta & Central Delta Hà Nội TP HCM Đồng Nai
Mountains Coast
Đà Nẵng Bình Dương
Source: SSI collected data
• Supply is limited, compounded by the following: (i) planning of building materials exploitation between 2021-2025 issued by the
Prime Minister, is not yet approved; (ii) renewal of old construction quarries to face legal challenges and environmental impact
assessments; (iii) mines near the central area of Binh Duong, including Tan Dong Hiep and Nui Nui, have run out of reserves; and (iv)
compensation challenges for site clearance, at a time when land prices have increased sharply.
• During 9M 2022, revenue and NPAT for construction stone sector (VLB, KSB, NNC, DHA, LBM, C32) reached VND 3.2 tn (+23.8%
YoY) and VND 312 bn (-18.1% YoY), respectively. Revenue growth was due to: (1) demand recovering off of a low base during 3Q21,
as sales volume increased between 9%-18% YoY; and (2) average sales prices increasing 7% YoY.
In addition, NPAT for VLB recorded a loss of -VND 224 bn when paying the cost of mining rights for the 2014-2021 period for Thanh
Phu 1, Tan Cang 1 and Thien Tan 2 quarries.
NPAT for KSB during 9M 2022 decreased -21% YoY, compounded by: (i) gross profit margin decreased to 38%, when the higher
margin Dat Cuoc Industrial Park area let only two ha (-80% YoY); (2) dividends from associate companies decreased -49% YoY; and
(3) Interest expense increase of 59% YoY.
Revenue and NPAT of listed industrial parks, Q1-Q3 2022
1000 50%
800 0%
600 -50%
400 -100%
200 -150%
0 -200%
DHA C32 KSB VLB LBM NNC
-200 -250%
-400 -300%
Revenue Net income % growth NI
Source: Finnpro
• P/E and P/B of listed construction stone companies were 10.5x (except VLB, due losses) and 1.4x for 2022 - down slightly from 10.6x and
1.2x, respectively, in 2021 due to the stock price drop of -33% YoY, while profit declined -18% YoY. At the same time, compared with the period
of 2018-2020 of 6.1-7.4x, P/E in 2022 is higher as during 2018-2020 (net income of construction stone companies grew strongly due to lower
exploitation cost).
• Investment demand is forecast to increase due to public investment projects. The public investment plan for 2023 is expected to be VND
726 tn (USD 30.5 bn; vs USD 27.2 bn for the revised 2022 plan). Key projects include: the North-South expressway; the various Ring Road
projects in Hanoi and HCMC; the Long Thanh Airport; etc.
However, according to the Aviation Corporation of Vietnam (ACV - the investor of Long Thanh airport), the terminal construction bidding
package has not yet found a bidder, as the terms and condition are not attractive enough. Therefore, it is likely that the demand for construction
stone from the Long Thanh Airport project can only increase from 2Q23 as the earliest as it will take time to change the bidding terms and
conditions.
Public investment plan and actual (bn VND)
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022F 2023F
Actual Plan
Source: MoF
We realize that demand for construction stone is very large for public investment projects. According to the Ministry of Transport, demand
volume for construction stone is about 21.5 mn m3 in 2023-2025. In greater detail, the project of Long Thanh Airport, Bien Hoa Vung Tau
Expressway, and Ring Road 3 are expected to utilize 2.04 mn m3, 738 thousand m3, and 5.2 mn m3, respectively, of construction stone.
Volume of construction of key public investment project in 2023
Total capital (VND tn) Expected completion time Estimated volume of building stone (thousand m3)
Long Thanh Airport (Phase 1) 109.9 2025 2,040
12 North-South expressway sub-projects 147
Bai Vot - Ham Nghi 7.4 692
Ham Nghi - Vung Ang 10.2 1,000
Vung Ang - Bung 11.8 496
Bung - Van Ninh 10.5
Van Ninh - Cam Lo 10.6 2,204
Quang Ngai - Hoai Nhon 20.9 2025
Hoai Nhon - Quy Nhon 12.5
Quy Nhon - Chi Thanh 12.3 2,950
Chi Thanh - Van Phong 10.6 N/A
Van Phong - Nha Trang 12.9 876
Can Tho - Hau Giang 9.8 2,000
Hau Giang - Ca Mau 17.5 N/A
Ring Road 4 (Hanoi) 85.8 2027 N/A
Ring Road 3 (HCMC)* 75.4 2027 5,200
Chau Doc – Can Tho – Soc Trang 45.1 2025-2026 600
Khanh Hoa – Buon Ma Thuot 21.9 2025-2026 878
Bien Hoa – Vung Tau 17.8 2025 738
* Included sand and construction stone; Source: SSI Collect
• Limited supply, mainly supplied by areas in close proximity to projects. Most construction quarries are distributed across the country, and
transportation costs are a major factor affecting the cost of construction stones. Therefore, most construction contractors will choose quarries
near the project. We believe that the supply of construction stone will remain limited.
(i) The new construction stone quarry planning for the 2021-2025 period has not been completed, especially for provinces and cities which
are the "hub" of construction stone for south Vietnam, including Binh Duong and Dong Nai provinces.
(ii) The compensation price of land in the quarries sites increased (+20% in HCMC, +15% in Hanoi, +1.5x – 3x in Dong Nai, +20% -
45% in Binh Duong, +50% - 2.73x in Ba Ria – Vung Tau, +84% in Binh Phuoc, +40% in Bac Ninh, +60% in Long An, +36% in Bac
Giang and +39% in Hung Yen province).
• Tan Cang construction stone quarries - main supply for Long Thanh Airport project, Ring Road 3, and others. There are nine quarries in
the Tan Cang area, including listed companies such as DHA and VLB. We estimate demand at Tan Cang quarries will grow +28% YoY as a
result of supplying the Long Thanh Airport project, infrastructure projects in Dong Nai, and Ring Road 3. Construction stone prices are expected
to increase 8% YoY, offsetting the fuel price and environmental protection cost increase for mining. The gross profit margin at Tan Cang mines
was maintained at between 28%-30% (lower than the average at other quarries such as the gross profit margin of Tan Dong Hiep and Thanh
Phu at 45% and 32% respectively) due to the high cost of loading/unloading soil layers (height of soil layer between 10m-12m).
Reserve (million m3) of Tan Cang quarries (Dong Nai)
• Thanh Phu construction stone quarries - main supplier for projects in Southwest Vietnam. There are nine quarries in the Thanh Phu area,
including listed companies (CTI, KSB, VLB, DHA, and DND). We estimate demand at Thanh Phu quarries will grow between 15%-16% YoY
when supplying projects in southwest Vietnam such as Can Tho - Hau Giang, Hau Giang - Ca Mau expressway. Stone construction pricing is
expected to increase 7% YoY.
Reserve (million m3) of Thanh Phu quarries (Dong Nai)
Source: SSI Collect
• Profits of listed construction stone companies should grow during 2023. We forecast NPAT of listed companies will grow 16% YoY during
2023. Stone volume is forecast to increase 15% on average, with the sales price set to increase between 7%-8% YoY. NPAT for KSB, VLB,
and DHA is estimated to reach VND 208 bn (+16% YoY), VND 165 bn (+100% YoY), and VND 90 bn (+25% YoY), respectively.
• We put DHA in watch list due to: (1) DHA has 3 mines ready to be exploited in the Southern region; (2) Upside from higher ASP as the
exploitation cost is already fixed with an average GPM of 39%; (3) Stable dividend payment and no debt.

Information on quarries of listed construction stone companies
Companies Quarry Location Mining capacity (m3 ) Mining expiration date

KSB Tan Dong Hiep Di An Binh Duong 2,341,858 12/31/2019
Tan My Bac Tan Uyen Binh Duong 1,500,000 8/28/2029
Phuoc Vinh Phu Giao Binh Duong 1,200,000 1/13/2023
Thien Tan 7 Vinh Cuu Dong Nai 280,000 1/29/2035
DHA Thanh Phu 2 Vinh Cuu Dong Nai 818,000 9/30/2026
Tan Cang 3 Bien Hoa Dong Nai 490,000 3/31/2024
Nui Gio Hon Quang Binh Phuoc 300,000 8/31/2025
NNC Nui Nho Di An Binh Duong 2,000,000 12/31/2017
Mui Tau Tan Lap Binh Phuoc 1,000,000 12/31/2032
DND Tan Cang 5 Bien Hoa Dong Nai 1,000,000 1/1/2023
Thien Tan 5 Vinh Cuu Dong Nai 750,000 1/1/2026
C32 Tan Dong Hiep Di An Binh Duong 762,738 12/31/2019
CTI Thien Tan 10 Vinh Cuu Dong Nai 2,000,000 12/31/2033
Xuan Hoa Dong Nai 1/31/2030
VLB Thanh Phu 1 Vinh Cuu Dong Nai 1,800,000 2/8/2023
Thien Tan 2 Vinh Cuu Dong Nai 1,500,000
Tan Cang 1 Bien Hoa Dong Nai 1,500,000
Soklu 2 Thong Nhat Dong Nai 400,000
Soklu 5 Thong Nhat Dong Nai 500,000
Soklu 6 Thong Nhat Dong Nai
BMJ An Binh Phu Giao Binh Duong 800,000
DGT Tan Cang 4 Long Thanh Dong Nai
• Risks. (1) The licensing progress for new mines is to be delayed; (2) Environmental protection costs are set to increase during 2023. According
to the decree regulating environmental protection fees for mineral exploitation, replacing Decree No. 164/2016/ND-CP may occur during 2023.
This would increase the fee for construction stone 50% relative to current regulations. We estimate that the gross profit margin will decrease -
0.8% from this fee increase; (3) Receivables of construction stone companies are likely to increase when projects are delayed.

Utilities – Electricity: Thermal power heat

Top picks: POW, QTP and Top watch: PC1, NT2
2022 Recap: Hydropower outperformed

The electricity sector declined 25% in 2022, slightly outperforming the
VN Index (-33%).
190%
170%
Best performers were hydropower companies, helped along by a La
150%
Nina weather pattern cycle. Outperformers included REE (+20%), VSH
130%
(+13%), SHP (+18%), CHP (+11%). NT2 – gas fired company
110%
(+17%) may be the exception amongst thermal companies. NT2’s
90%
outperformance is attributed to upbeat contracted volume, CGM price,
70%
and a healthy balance sheet.
50%
Worst performers were thermal power companies, led by PGV (-50%), 30%
POW (-39%), PC1 (-41%), PPC (-46%). This underperformance was

due to FX risk, rising interest rate and negative earnings growth. VNIndex Utilities Electricity REE NT2
• Lower than expected nationwide power demand due to slower IIP during 2H22. At the beginning of 2022, nationwide power demand was
expected at 280 bn kwh (+9.2%yoy) with the 2022 result being 268 bn kwh (+6.2% YoY) - fulfilling 96% expectation.
Fig.1: Slower exporting activity and IIP growth slowdown to weaker power demand
Source: GSO

• Hydropower conditions were favorable during 2022. We had not at the beginning of the year expected hydropower to do so well, citing NOAA
forecasts. But nationwide hydropower sales volume in 2022 turned to be better than expected, and climbed 21% YoY. This is why hydropower
companies outperformed during 2022.
Fig.2: Nationwide 2022 power consumption
Utilization
2022 Generation vol. (GWh) %YoY %Weight Capacity (MW)
rate (%)
Hydropower 95,054 21% 35% 22,349 49%
Coal-fired 104,921 -11% 39% 25,820 46%
Gas+oil-fired 29,619 13% 11% 8,977 38%
Thermal subtotal 134,540 -7% 50% 34,797 44%
Solar subtotal 25,530 -2% 10% 16,428 17.7%
Others+imported 4,091 87% 2% 975 47.9%
Wind + biomass 9,231 152% 3% 4,667 22.6%
Total 2022 268,446 6.2% 79,216
Source: EVN, GSO
• A less precise projection of hydropower conditions has forced ERAV to utilize a higher-than-expected Qc from thermal power plants amid
the coal & gas price hike… Less favorable hydropower conditions were assumed by ERAV (Electricity Regulatory Authority of Vietnam) in
the beginning of 2022. On the other hand, a higher Qc should help thermal power plants absorb the coal & gas price escalation. For example,
we saw an increase +10% YoY in NT2 Qc (3.47 bn kwh), +7% YoY in QTP Qc (5.5 bn kwh) and +3.4% YoY in HND Qc (6.2 bn kwh). In
combined with fancy CGM price, these thermal power plants post a strong 9M22 NPAT: NT2 (VND 724 bn, +75% YoY); QTP (VND 745
bn, +88% YoY) and HND (VND 578 bn, 2x YoY).
• …ERAV had increased the cap of CGM pricing by 23% YoY from VND1,693/kwh to VND2,081/kwh. Combined with high Qc and CGM
pricing, this helped thermal power companies enjoy more upbeat earnings for 2022. Nevertheless, this does pose a challenge for EVN’s 2022
result. We believe that retail electricity prices might increase during 2023.
Fig.3: CGM price in 2022 (VND/kWh)
2021 2022E
SMP cap 1,503 1,602
%yoy 12% 7%
CAN - average 152 376
%yoy 153% 148%
Actual/est CGM price 1,001 1,523
% YoY 13% 52%
CGM price - average 1,655 1,978
CGM price - low level 1,616 1,874
CGM price - upper level 1,693 2,081
Source: ERAV
• USD appreciation led to FX loss. During 3Q22, the VND depreciated 3% against USD. For example, PC1 also recorded a VND 100 bn FX loss
during 3Q22. The USD appreciation decelerated to 1% during 4Q22. We believe that PC1 could post a VND 37 bn FX gain. However, the 3-
month and 6-month LIBOR (interest rate benchmark for PC1’s USD-denominated debt for wind projects) also increased approx. 100 bps
during 4Q22.

Fig.5: 3M & 6M Libor continued to climb approx 100bps during

Fig.4: USD lifted 3% in 3Q22 but then cooled down 1% in 4Q22
4Q22
USD/VND Libor
10%
8.0000
8%
6.0000
6%
4.0000
4%
2.0000
2%
-
0%
-2%
Libor USD 3M Libor USD 6M
Source: VCB ask rate Source: Bloomberg
Hydropower company earnings growth was better than expected due to the unexpectedly favorable La Nina pattern during 2022 while
earnings from coal-fired and gas-fired companies were slightly better than forecast due to higher CGM prices and higher Qc.

2023 Expectation: Thermal power heat
• Low power demand growth is expected at 5.4% during 2023 on back of 2023 GDP growth projected between 6.0%-6.2%. To recap, the
2022 projection for power demand and GDP growth were 6.2% and 8.0%, respectively.
Fig.6: Nationwide 2023 power demand projection
Utilization
2023 Generation vol. (GWh) %YoY %Weight Capacity (MW)
rate (%)
Hydropower 87,768 -8% 31% 22,681 45%
Coal 116,624 11% 41% 28,452 48%
Gas 33,815 14% 12% 8,977 43%
Thermal subtotal 150,439 12% 53% 37,429 46%
Solar farm before Jun-19 8,586 3% 5,159 19%
Solar farm Jul-19 to Dec-20 5,849 2% 3,514 19%
Solar rooftop Jul-19 to Dec-20 12,907 5% 7,755 19%
Solar subtotal 27,343 7% 10% 16,428 19%
Imported & others 4,091 0% 1% 975 48%
Wind & others RN 13,370 45% 5% 7,124 29%
Total 2023 283,011 5.4% 84,636
Source: EVN, MOIT, GSO, SSIRS
• Hydropower power conditions should remain positive through 1Q23, and possibly turn less favorable during 2H23, according to NOAA.
Higher probability of less favorable hydropower conditions is assumed for 2023, with sales volume from the hydropower plant to see negative
growth of -8% YoY during 2023. We believe that it might not be positive for REE, as over half of REE’s NPATMI is driven by the hydropower
segment.
Fig.7: Higher prob for El Nino since 2H23 per NOAA prediction
ENSO forecast
100% 0%
5% 0% 0% 4%
90% 16%
28%
80% 40% 39%
46% 51%
70%
60% 73%
82%
50% 95% 74%
40% 62%
51%
30% 60% 44% 38%
20%
10% 27%
14% 10% 10% 10% 10% 11%
0%
Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23
La Niña Neutral El Niño
Source: NOAA
• Higher utilization of thermal power plants should be supportive to CGM prices, and offset lower power demand growth. We expect flat
CGM pricing during 2023. CGM prices include two parts of CAN and SMP. SMP could be driven by power demand and the cap lift of 11% YoY.
However, the 2023 CAN is set to decline 20% by ERAV/MOIT. We have learned that ERAV/MOIT want to control input costs. If weak power
demand were to occur, CGM pricing could cause downside, similar to what was seen during 2020.

Fig.8: CGM price (VND/kWh)
2019 2020 2021 2022E 2023E

SMP cap 1,319 1,342 1,503 1,602 1,779
%yoy 2% 12% 7% 11%
CAN - average 144 60 152 376 300
%yoy -58% 153% 148% -20%
Actual/est CGM price 1,208 887 1,001 1,523 1,523
-27% 13% 52% 0%
Actual/est. SMP 1,065 827 850 1,148 1,223
Gap between actual/est SMP vs. SMP cap 255 515 654 455 556
Source: ERAV, SSI Research
*SMP – System marginal price is the highest auction price needed to be employed in order to balance the system
load/demand. SMP cap is set higher to factor higher cost from gas-fired & coal-fired plants & power demand
recovery.
*CAN – Capacity add on price is the extra price paid for the best new entrant power plant to break-even (Thang Long thermal)
• Gas price to decline approx 12-15% YoY which should be positive for gas-fired power plant.
Fig.9: Gas price assumption
FO Brent NT2 (SVDN Ca Mau (12.7%Brent

(USD/ton) (USD/bbl) + 46%FO) + 90%FO)
2021 393 71 7.8 8.2
2022 487 100 9.4 10.2
2023 430 85 9.2 9.1
• EVN loss during 2022 should be a challenge for power generators. Further, the contracted volume (Qc) for power generators has not been
allocated. Per our discussion with some thermal power plants, we learned that the Qc could be assigned monthly instead of at the beginning
of year. This should help EVN to strictly control production costs (rather than during 2022). By contrast, it should be tough for power generators
to set the volume, sales, and earnings targets.
• 2023 valuation. Vietnam power peer FY22E EV/EBITDA softened 19% compared to FY21. Looking toward FY23E EV/EBITDA, our top four
preferred stocks (including NT2, QTP, POW, PC1) are expected to post an average of 4.9x, which is 39% lower than regional peer and 30%
lower than these top 4 historical average during 2017-2019. Further, our dividend play stocks (QTP and NT2) should offer a greater FY23E
dividend yield compared to peers.

Fig.10: Valuation multiples and dividend yield comparison among electricity peers
EV/EBITDA comparison Dividend yield

25.0 14.0
12.0
20.0
10.0
15.0 8.0
10.0 6.0
4.0
5.0
2.0
- -
FY21 EV/EBITDA FY22 EV/EBITDA FY23 EV/EBITDA FY21 Div yield FY22 Div yield FY23 Div yield
• Upside surprises
✓ We await Power master plan 8. However, per the Resolution 01/2023, which outlined the 2023 socio-economic action plan, there does
not appear to be a set timeline yet despite the delays. As such, we believe that the deadline will carry over at least until 2023. If passed,
the plan could be a catalyst for PC1’s grid construction segment.
✓ A mild recession would be positive for power demand and CGM price.
✓ Eased tension or sudden ceasefire between Russia and Ukraine could cause oil & gas prices to soften, and indirectly reduce coal
demand/prices.
• Downside risks
✓ Unexpected appreciation of USD could pose challenges for debt-intensive power generators and EVN. Consequently, EVN’s performance
should indirectly impact power generators via receivables and a delay in repayment of realized FX losses.
✓ More severe than expected recession could negatively impact power demand. Combined with unexpected favorable hydropower
conditions, CGM prices could be lower than expected. Under the case of favorable hydropower condition than our expectation, REE could
be potential stock for 2023.
✓ We see downside risks for existing renewable (RE) projects, due to competition from upcoming new RE projects with lower sale prices.
Considering weaker nationwide demand, EVN should lower the utilization for high cost energy sources (i.e, old RE projects with high sales
price).

Fig.11: Post FIT schemes, we see lower ASP for solar and wind new projects
Existing vs new ASP of RE projects

2,500 2,313
2,207
1,978 2,006
2,000 1,816
1,674 1,587
1,508
1,500
1,185
1,000
500
Source: MOIT, EVN
✓ Technical issues & aging power plants. Pha Lai has been the most aging coal-fired power plant. It’s reason why we don’t recommend
PPC though we think that company could see earnings rebound in 2023 thanks to 2022 low base as technical shutdown. The aging issue
or technical issues could lead to unexpected technical isues, uncertain cashflow and unstable dividend yield.
Fig.12: Power plant’s operating years
Operating years
45
40
35
30
25
20
15
10
5
-
Source: MOIT, EVN

Top picks: POW, QTP and Top watch: PC1, NT2
We like POW as it likely operates off a 2022 low base, and QTP for its dividend yield. Any correction to offer higher yield could be suitable for NT2.
Regarding riskier taste, PC1 could be an option as awaiting for the construction approval for property projects and grid construction rebound if
seeing final power master plan 8. In light of less favorable hydropower assumption, REE is not in our top pick due to negative earnings growth.
Fig.13: Top picks/watch’s key metrics
Target Current Foreign

Market cap
% Upside price price Ownership NPAT growth (%) P/E (x) ROE (%) Dividend yields (%)
Tickers (USDmn)
(VND) (VND) (%)
in 1yr in 1yr 12/30/22 12/30/22 12/30/22 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F 2021 2022F 2023F
POW 39% 14,800 10,650 1,058 5% -23.7% -4.7% 23.2% 24.8 16.8 12.6 6.4% 5.9% 6.9% 1.1% 1.9% 1.9%
QTP 32% 17,100 13,000 248 1% -63.5% 43.3% 12.5% 17.9 8.9 7.9 7.8% 11.3% 12.7% 8.4% 11.5% 12.3%
PC1 29% 26,100 20,200 232 4% 40.4% -33.5% 37.8% 14.9 14.8 11.1 13.8% 7.8% 9.9% 0.0% 0.0% 0.0%
NT2 -1% 28,500 28,850 352 17% -15.1% 67.9% -4.6% 14.7 10.2 10.7 12.4% 20.6% 19.2% 6.7% 8.7% 8.7%
Top pick 1: POW VN
• Share price (30-Dec-22): VND10,650; 1Y Target price: VND14,800 (+39% upside, BUY rating)
✓ Vung Ang’s plant 1 could be re-fired during 2Q23. Counting for 40% of pretax earnings during 2023, Vung Ang could be a growth driver
for NPATMI (VND 2.1 tn, +33% YoY)
✓ Downtrend in gas prices and softened thermal coal prices could be a positive for POW.
✓ POW is expected to post a 4.1x FY23E EV/EBITDA, which is a 50% discount to regional peer. At our 1Y TP of VND14,800 derived from
both DCF & EV/EBITDA methods, the implied FY23E EV/EBITDA is still at an attractive 29% discount to peer.
• Risk:
✓ Worse than expected recession could post a challenge to the CGM price
✓ Unexpected change in hydropower conditions.
✓ Delay in Vung Ang pipeline.
✓ Unexpected bad debt linked to EVN.
Fig.14: POW key metrics (VND bn) 2018 2019 2020 2021 2022F 2023F
Net revenue 32,663 35,374 29,732 24,565 26,276 29,277
Gross profit 4,218 5,138 4,580 2,543 2,710 3,248
EBITDA 7,448 7,451 6,481 5,613 5,558 6,327
Pretax income 2,221 3,165 2,875 2,319 2,211 2,724
Net income 2,052 2,855 2,663 2,032 1,937 2,387
EPS (VND) 716 1,072 939 706 635 848
BVPS (VND) 10,464 11,481 12,186 12,659 13,093 13,742
ROE 7.5% 10.1% 8.8% 6.4% 5.9% 6.9%
Total equity 26,815 29,509 31,267 32,133 33,490 35,259
Total asset 58,111 55,696 54,050 52,950 57,806 60,942
Debt/Equity 0.7 0.6 0.4 0.3 0.3 0.3
P/E 22.4 10.7 13.5 24.8 16.8 12.6
P/B 1.5 1.0 1.1 1.4 0.8 0.8
EV/EBITDA 7.2 5.2 5.6 4.6 4.6 4.1

Top pick 2: QTP VN
• Share price (30-Dec-22): VND13,000, 1Y Target price: VND17,100 (+32% upside, BUY rating)
✓ Defensive play with attractive dividend yield of 12%. Given EVN’s huge loss, EVNGENCO1 could push the QTP cash dividend payment
higher. Under this scenario, QTP’s FY22E dividend yield could be higher than our current forecast of 12%.
✓ Decreasing debt balance and lower interest expenses. During FY23E, interest expenses could decline by 42% YoY. At 3Q22, the total debt
balance was VND 1.8 tn, lower than the VND 2.1 tn at 2021 and VND 3.2 tn at 2020. To recap, 9M22 interest expense were 66% higher
YoY.
✓ QTP posted attractive FY23 EV/EBITDA of 3.8x, which is 50% lower than peer. At our 1Y TP derived from both DCF & EV/EBITDA methods,
the implied FY23 EV/EBITDA is 37% lower than peers.
Fig.15: QTP debt balance
QTP net debt/equity ratio

12,000 4.00
VND bn
10,000 3.50
3.00
8,000 2.50
6,000 2.00
(x)
4,000 1.50
1.00
2,000 0.50
- -
4Q18
1Q20
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
1Q19
2Q19
3Q19
4Q19
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
Short-term borrowings Long term borrowings Net debt/equity (x-RHS)
Source: Company
• Risk: Severe recession and unexpected favorable hydropower conditions could impact sales volume and CMG pricing.
Fig.16: QTP key metric (VND bn) 2018 2019 2020 2021 2022F 2023F
Net revenue 9,018 10,127 9,182 8,455 10,176 10,108
Gross profit 1,203 1,271 1,834 709 841 1,008
EBITDA 2,803 2,997 2,833 1,669 1,813 1,850
Pretax income 275 660 1,375 502 719 809
Net income 275 651 1,306 477 683 768
EPS (VND) 612 1,447 2,901 1,059 1,465 1,647
BVPS (VND) 9,145 10,878 13,530 13,487 13,452 13,499
DPS (VND) 0 200 1,000 1,600 1,500 1,600
ROE 7.0% 14.4% 23.8% 7.8% 11.3% 12.7%
Dividend yield 0.0% 1.8% 8.5% 8.4% 11.5% 12.3%
Net debt/Equity 1.7 1.0 0.4 0.2 0.3 0.2
P/E 17.8 7.9 4.1 17.9 8.9 7.9
EV/EBITDA 4.2 3.4 2.7 5.7 3.9 3.8

Top watch 1: PC1 VN
• Share price (30-Dec-22): VND20,200, 1Y Target price: VND26,100
✓ Construction and investment approval for four properties projects (Dinh Cong, Gia Lam, Vinh Hung and Thang Long). We have not factored
the revenue from Dinh Cong and Gia Lam fin 2023 due to the current tightening environment. These properties project could be put into
projection until seeing the final approval.
✓ Nickel project is planned to kick off since 2Q23 which has been factored in our projection and will be earnings growth driver for 2023.
Due to volatility, the 2023 nickel price assumption is conservatively set at USD21,000/ton which is 20% lower than current price. China
reopening could be supportive for nickel price and it could be upside surprise.
✓ Power master plan 8 could serve as a driver for PC1’s grid construction pipeline.
• Risk: PC1’s high debt/equity ratio could be challenging amid rising interest rates (both domestic lending and global interest rates via Libor).
PC1’s net debt/equity is 1.2x while peer is 0.5x.
Fig.17: PC1 key metrics (VND bn) 2018 2019 2020 2021 2022F 2023F
Net revenue 5,084 5,845 6,679 9,813 8,288 10,138
Gross profit 866 819 1,162 1,145 1,407 1,739
EBITDA 881 769 1,174 1,564 1,713 2,094
NPATMI 467 358 513 691 369 491
NPATMI adjusted 467 358 513 429 369 491
EPS (VND) 3,248 2,021 2,507 2,645 1,437 1,910
BVPS (VND) 23,494 21,578 20,856 19,968 21,405 23,315
ROE 16.1% 10.8% 12.9% 13.8% 7.8% 9.9%
Debt/Equity 0.6 0.8 0.8 1.4 1.3 1.1
P/E 7.6 8.7 8.9 14.9 14.8 11.1
P/B 1.1 0.8 1.0 1.0 0.9 0.9
EV/EBITDA 5.1 17.4 11.4 8.6 7.8 6.4

Top watch 2: NT2 VN
• Share price (30-Dec-22): VND28,850, 1Y Target price: VND28,500
✓ Being debt-free could prevent NT2 from rising lending rates and FX risks.
✓ Gas price downtrend could be supportive.
✓ Price correction could offer more attractive dividend yield.
• Risk: More severe than expected recession, and favorable hydropower conditions could impact sales volume and CMG pricing.
Fig.18: NT2 key metrics (VND bn) 2018 2019 2020 2021 2022F 2023F
Net revenue 7,670 7,654 6,031 6,046 8,288 8,470
Gross profit 1,015 974 891 670 989 905
EBITDA 1,628 1,581 1,396 1,263 1,631 1,599
Pretax income 824 797 659 560 932 890
Net income 782 754 621 528 886 845
EPS (VND) 2,638 2,540 2,018 1,679 2,823 2,694
BVPS (VND) 12,795 14,336 14,928 14,706 15,149 15,457
DPS (VND) 2,400 2,500 2,000 1,650 2,500 2,500
ROE 18.0% 19.3% 14.8% 12.4% 20.6% 19.2%
Dividend yield 9.8% 11.5% 8.1% 6.7% 8.7% 8.7%
Net debt/Equity 0.8 0.3 0.2 0.0 0.1 (0.0)
P/E 9.3 8.5 12.2 14.7 10.2 10.7
EV/EBITDA 6.1 4.7 5.6 5.8 5.0 5.1

Utilities – Water: Active M&A dynamic amongst water companies

On watch: TDM
2022 Recap: Outperform, due to demand for water recovery post-reopening

The water sector increased in value by 7% during 2022, outperforming
the VN Index by 39% due to due to strong increase in profits. Best 130%
performers include: LAW (+173% YoY; due to a reduction in the cost 120%
of prepayment to buy clean water); BDW (+48.9% YTD; as profit after 110%
tax increased 66% through 9M 2022 due to improved demand). 100%
90%
BDW plans to upgrade its listing from UPCOM to the HNX, and exhibits 80%
positive demand from new areas, such as Becamex Binh Dinh Industrial 70%
Park. Profit after tax of BDW through 9M 2022 increased 106% YoY 60%
VNIndex Utilities Water
due to the recovery of water consumption demand in industrial zones 50%
and a stable water loss rate. In addition to M&A deals with Gia Tan 40%
water (Dong Nai) and Can Thoi water, the shares of BWE improved
11.3% during 2022.
By contrast, SII, CLW, THW, and TNW decreased in value between -
16% - -42%. SII continues to be loss making due to low water
distribution efficiency. CLW has old pipes and the water loss rate is
higher, as a result operating efficiency is lower.
• Supply: According to the Ministry of Construction, Vietnam had 750 clean water plants in urban and rural areas in operation during 2022,
with a total capacity of 11.2 mn m3/day. The planning of water plants is regulated by the Ministry of Construction in Circular 01/2021/TT-
BXD, which is consistent with the planning of each local area where private companies are allowed to participate in. Meanwhile, the
distribution system is managed by each province’s water and environmental company.
• Demand for household water use grew 5% YoY. Household water consumption (accounting for 71% of total clean water demand) grew
5% YoY in rural areas and between 3%-4% YoY in urban areas. During 2022, average water consumption increased between 3%-6% YoY
due to an increased urbanization rate.
• Demand for industrial water use increased between 5-8% YoY. Industrial water consumption demand (accounting for 18% of total
water demand) growth returned after Covid. Specifically, water consumption in Binh Duong, Dong Nai, Bac Ninh, Bac Giang (industrial
parks hub) increased 6%, 7%, 5%, and 8% YoY, respectively, during 2022.

• The average selling price (ASP) of water increased 3% YoY. Water market prices are mandated by each provincial People's Committee.
In particular, the ASP of water in Ho Chi Minh City and Binh Duong increased 5% YoY during 2022. By contrast, Hanoi and Haiphong,
Dong Nai, and Ba Ria Vung Tau did not increase prices during 2021.
Sales price, water, by province (VND/m3) in 2022
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
-
Average water price Min Max
Source: SSI Research compiles
• Less water loss rate, improved operation efficiency. The average water loss rate in Vietnam is 17.5% in 2022- down from 18.7% in
2021. We estimate a 1% reduction in water loss will lead to a 1.1% improvement in the gross profit margin.
• Strong growth will come from M&A Demand for water consumption grew steadily at 5-8% YoY per year, but companies with strong
financial potential and expertise could attain higher than industry-average growth via M&A. During 2022, DNP continued to expand water
plants in local areas with the expectation of stable cash flow when operating. REE maintains its investments in water plants in Ho Chi
Minh City, having ample demand, high consumption rates, and stable operations. BWE acquired Can Tho Water Supply Joint Stock
Company, with the expectation of expanding inter-regional water supply in the Mekong Delta, Gia Tan Water Plant to supply remote areas
in Dong Nai, and source water from the Dong Nai River.
Authorized capital (bn % Capacity

Company Water plant and distribution Water distribution area
VND) owner (m3/day)
DNP Phan Thiet, Ham Thuan Nam - Binh
Binh Hiep 80 70.70% 51,250
Water Thuan
Dong Tam 389.2 52.66% 90,000 My Tho, Go Cong - Tien Giang
NS3 79.2 59.97% 50,000 Hoan Kiem, Ha Noi
Long An Water Supply and Sewerage
122 37.15% 50,000 Long An
JSC
Thua Thien Hue Water Supply and
876 2.86% 200,000 Thua Thien Hue
Sewerage
Binh Thuan Water Supply and Sewerage 79.7 44% 700,000 Phan Thiet, La Gi, Bac Binh
Can Tho 2 Water Supply and Sewerage 280 34.60% 940 Can Tho city
DNP Quang Binh 193 100% 15,000 Ba Don- Quang Binh
Ninh Hoa Urban JSC 267 30,000 Ninh Hoa - Khanh Hoa
Chau Thanh Urban JSC 17.57 5,000 Chau Thanh - Long An
Tay Ninh Water Supply and Sewerage 172.7 49,420 Tay Ninh
Binh Phuoc Water Supply and Sewerage 422 35,000 Dong Xoai- Binh Phuoc
DNP Bac Giang 1000 60.000-80.000 Bac Giang
Thu Thua, Ben Luc, Can Giuoc - Long
DNP Long An 786 60,000
An
2,7, 9 district, Thu Duc, Nha Be -
REE B.O.O Thu Duc water plant 42% 300,000
HCMC
Thu Duc III Water plant 40% 300,000 ThuDuc, Binh Thanh - HCMC
Authorized capital (bn % Capacity

Company Water plant and distribution Water distribution area
VND) owner (m3/day)
Tan Hiep II Water plant 32% 300,000 HCMC
Viwasupco 750 36% 300,000 Ha Noi
TDW 85 44.17% 82 2,9 District, Thu Duc - HCMC
NBW 109 20.02% 69 4,7 District, Nha Be - HCMC
GDW 95 20.05% 52 Binh Thanh, Phu Nhuan- HCMC
KHW 286 44% 115,000 Khanh Hoa
BWE DNW 1200 18.53% 450,000 Dong Nai
Can Tho Water Supply and Sewerage 280 24.64% 90,000 Can Tho
Can II Water Supply and Sewerage 111 48.86% 52,500 Can Tho
Gia Tan Water Supply and Sewerage 785.3 32% 40,000 Dong Nai
• During Q1-Q3 2022, revenue and profit of water listed companies reached VND 21 tn (USD 882 nm) (+10.4% YoY) and VND 3.1 tn
(+10% YoY), respectively, whereby GDW increased its profit 95% YoY when: (1) sales volume increased 26.6% YoY; (2) the water sales
price increased 8.5% YoY; and (3) the water loss rate decreased between 2.5% to 14.0%. Between Q1-Q3 2022, BWE net revenue reached
VND 2.4 tn, profit before tax reached VND 639 bn, up 16% and 11% YoY, respectively, as the sale price and water consumption increased
5% YoY. The rate of water loss reached 5% - the lowest level relative to other companies in the industry. The expansion of the water
supply network for Nhon Hoi Economic Zone (4,500 m3/day) and VSIP Becamex Binh Dinh Industrial Park (2,900 m3/day), cost control,
and reduced water loss enabled profit after tax at BDW to increase 66% YoY through 9M 2022.
On the contrary, due to not receiving dividends from BWE (TDM owns 29.93%), TDM’s NPAT decreased -22% YoY. Low operating
efficiency resulted in SII continuing to record a loss of VND 46 bn through 9M 2022.
• P/E of listed companies has dropped sharply from 12.0x in 2021 to 8.3x during 2022 due to de-rating across sectors triggered by rising rates.
Revenue and net income (VND bn) of listed water companies, Q1-Q3 2022
4,500 150%
4,000
3,500 100%
3,000
2,500 50%
2,000
1,500 0%
1,000
500 -50%
0
SAWA
THN
DNA
DNW
BWS
BDW
STW
HTW
CMW
DBW
BWE
GDW
VCW
CLW
VAV
PMW
KHW
LDW
HGW
DNN
NS2
BTW
NDW
NQT
NQB
NQN
LAW
SII
TVW
QNW
HPW
DWS
LWS
HWS
HDW
TDM
TNW
BGW
PWS
TDW
NBW
CTW
NBT
BNW
VLW
GLW
-500 -100%
Revenue Net income % NI growth
Source: Fiinpro

2023 Expectation
We divide water companies into two groups: (i) companies which own a water distribution network (BWE, DNW, Sawaco, Hawaco, CTW, HPW,
DNA, BWS, HDW, NBW, GDW, LKW, BDW, NAW, NQB, PJS, TAW, VPW, etc.); and (ii) companies which own water processing plants (DNP, TDM,
VCW);
Water industry value chain
SOURCE TREATMENT DISTRIBUTION
Household
Sediment filter system Industrial

River, lake
Companies which own and operate a water distribution network
The companies which have their own water distribution systems are under the administration of the Provincial People's Committees, implying a
natural monopoly. Operational efficiency of water supply companies depends on their water loss rate, as well as the population density in the
distribution area.
For these companies, we estimate that revenue grew 8% YoY in 2023. In particular, average water consumption increased 6% YoY, while average
retail APS increased 3% YoY, whereby:
• Water demand grew steadily by 5% YoY. According to the Vietnam Water Supply and Sewerage Association (VWSA), the total capacity of
water treatment plants in Vietnam reached between 11.2 mn m3 and 11.5 mn m3 per day. On the other hand, demand for household water
use was estimated to reach between 8.2 mn m3 and 8.6 mn m3 per day (+6% YoY) in 2023. Specifically, we forecast that the demand for
water consumption in Hanoi will increase 12% between 2025-2030, , and for an average increase of between 6%-8%/year in Ho Chi Minh
City.
According to the master plan of the water industry through 2030, water consumption per capita should increase from 105-110 liters/person/day
in 2021 to 120 liters/person/day by 2030. The percentage of the rural population supplied with water through the water supply system is
estimated to increase from 43.5% today to 47% by 2030.

Water demand (nm m3/day)
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
-
2016 2017 2018 2019 2020 2021 2022 2023F
Household Industrial Others
Source: Vietnam Water Supply and Sewerage Association (VWSA)
• Operational efficiency of water distribution companies continues to improve. We expect this trend to continue over the medium-term. The
average rate of water loss is expected to decrease from 17.5% in 2022 to 16.5% in 2023, as water companies adopted an improved water
leakage detection system, on top of improvements in water pipeline networks for end users.
Wastewater rate in 2022, by province
30% 30.00%
25% 25.00%
20% 20.00%
15% 15.00%
10% 10.00%
5% 5.00%
0% 0.00%
• Retail ASP of clean water increased between 3%-5% YoY. We forecast that the ASP of clean water will increase between 3%-5% depending
on the city/province. In particular, Hanoi and Ho Chi Minh City likely will increase the retail ASP 5% during 2023, and Binh Dinh likely will
increase ASP 3% in 2023. As for Binh Duong, Haiphong, and Dong Nai, these regions likely will not increase the price sold to market during
2023. We expect that water prices for industrial clients will continue to rise, given the increased demand by quality industrial parks, such as
FDI investors.
• Pollution treatment has impact on water company operating efficiency. The Law on Water Resources and Environment should be passed
in 2023, which clearly stipulates that the source of water used for exploitation, and the cost of environmental resource tax will be calculated

according to the exploitation output instead of the capacity output. Therefore, we expect higher costs for water companies. The cost of raw
materials accounted for between 30%-35% of operating costs of water enterprises. Chemicals accounted for 21% of raw material costs.
Moreover, the natural resource tax in various provinces ranged between VND 48 – 50/m3 in 2023. We forecast gross margin decrease by
0.2-0.4% as the cost of raw materials and tax on water resource increases.
Companies which own water plants
• Factors affecting the efficiency of water treatment plants include: (i) investment of water plants; (ii) distance from the factory to the material
source (surface water or groundwater); and (iii) output volume and sales prices for distribution companies.
• The net margin of existing water plants reached between 35% -40%.
• The investment unit cost for clean water treatment plants has increased over time. According to various listed water companies, the
investment unit cost for clean water treatment plants at some listed water companies between the 2022-2023 period should reach VND 5,300
/m3 - higher than the VND 4,600 VND/m3 average over the 2020-2021 period.
Investment unit cost in water supply and treatment plants (VND/m3)
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
Thu Duc III Tan Hiep II Thien Tan Saigon Can Suoi Dau BOO Phu Ninh Dong Xoai Song Duong Song Da Thu Dau Mot DNP Bac
Stage2 Tho Giang
Source: SSI Research collected data
We recommend to watch TDM because (1) Stable water consumption (~10% YoY growth) in Di An and Bau Bang area; (2) 2023 NPAT is forecast
to grow 38% YoY thanks to both organic growth and dividend payment from BWE; (3) Growth driver from M&A deal with Can Tho Water from
2023; (4) Low leverage with D/E at 0.12x.

ANALYST CERTIFICATION
The research analyst(s) on this report certifies that (1) the views expressed in this research report accurately reflect his/her/our own personal views about the
securities and/or the issuers and (2) no part of the research analyst(s)’ compensation was, is, or will be directly or indirectly related to the specific recommendation
or views contained in this research report.
RATING
Buy: Expected to provide price gains of at least 10 percentage points greater than the market over next 12 months
Outperform: Expected to provide price gains of up to 10 percentage points greater than the market over next 12 months.
Market Perform: Expected to provide price gains similar to the market over next 12 months.
Underperform: Expected to provide price gains of up to 10 percentage points less than the market over next 12 months.
Sell: Expected to provide price gains of at least 10 percentage points less than the market over next 12 months
DISCLAIMER
The information, statements, forecasts and projections contained herein, including any expression of opinion, are based upon sources believed to be reliable but
their accuracy completeness or correctness are not guaranteed, Expressions of opinion herein were arrived at after due and careful consideration and they were
based upon the best information then known to us, and in our opinion are fair and reasonable in the circumstances prevailing at the time, and no unpublished price
sensitive information would be included in the report. Expressions of opinion contained herein are subject to change without notice. This document is not, and
should not be construed as, an offer or the solicitation of an offer to buy or sell any securities, SSI and other companies in the SSI and/or their officers, directors
and employees may have positions and may affect transactions in securities of companies mentioned herein and may also perform or seek to perform investment-
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SSI - RESEARCH & ADVISORY CENTER

SSI.COM.VN Visit SSI Research on Bloomberg at SSIV<GO> Page 1

2023 Market Outlook: Pounce Selectively

SSI.COM.VN Visit SSI Research on Bloomberg at SSIV<GO> Page 2

Key catalysts to watch in 1H2023

• High inflation (expected to peak in 1Q23) to have negative impact on consumption.

• Revision to Decree 65 on corporate bonds to be approved in 1Q per our assumption

• Vinfast IPO after Lunar New Year

• Weak property market

Sector Industry 2023 Outlook Top Picks On Watch

SSI.COM.VN Visit SSI Research on Bloomberg at SSIV<GO> Page 3

2023 Global macro trends: Pivotal year ...............................................................................................................................................5

2023 Vietnam Outlook: A year to test the fundamental strength ...........................................................................................................7

Appendix 1: 2022 Macro Recap: Reshaping economic fundamentals .................................................................................................14

Appendix 2: Corporate Bond Market: Liquidity bottleneck clear-up? ..................................................................................................16

2023 MARKET OUTLOOK: POUNCE SELECTIVELY .....................................................................................................................................20

2023 Market Outlook: Pounce Selectively ..........................................................................................................................................24

SECTOR OUTLOOK .....................................................................................................................................................................................26

Retail: Navigating the trough ..............................................................................................................................................................30

Fisheries: 2023E EPS decline given high base ...................................................................................................................................41

Banking: More questions than answers ..............................................................................................................................................62

Brokerage: A turnaround theme in late 2023 ......................................................................................................................................83

Residential Developers: Struggles persist ..........................................................................................................................................89

Healthcare: Normalized earnings growth .........................................................................................................................................109

Seaports & Logistics: Bracing for headwinds in a downcycle ...........................................................................................................114

Aviation: Fast forwarding to full recovery .........................................................................................................................................122

Residential Construction: Operating cashflow improvement to be a focus .......................................................................................129

Technology & Telecom: Solid growth to be in store ..........................................................................................................................135

Cement: Brighter earnings outlook ...................................................................................................................................................154

Construction stone: Increased demand from infrastructure projects ................................................................................................163

Electricity: Thermal power heat ........................................................................................................................................................168

Water: Active M&A dynamic amongst water companies ..................................................................................................................179

CONTACT INFORMATION .........................................................................................................................................................................186

SSI.COM.VN Visit SSI Research on Bloomberg at SSIV<GO> Page 4

2023 VIETNAM MACRO OUTLOOK: TESTING BEFORE BLESSING

2023 Global macro trends: Pivotal year

As the world enters 2023, three questions are raised repeatedly:

1) Whether the world can pull off a soft landing?;

3) When will central banks pivot toward rate cutting?.

Soft landing or mild recession?

Global GDP forecast by region (% YoY) US PCE movement by Category (% YoY)

Source: Bloomberg, as of Dec 2022 Source: CEIC

SSI.COM.VN Visit SSI Research on Bloomberg at SSIV<GO> Page 5

The pace of falling inflation

S&P Goldman Sachs Spot Commodity Index (point, Jan 2022=100)

Source: CEIC, SSIR

Fed Funds Rate projection (%)

Source: SSI Research

SSI.COM.VN Visit SSI Research on Bloomberg at SSIV<GO> Page 6

2023 Vietnam Outlook: A year to test the fundamental strength

2023 Key macro indicators forecast

2019 2020 2021 2022 2023F

Source: SSI Research

2023 Vietnam macro scenarios

Best case Base case Worst case

SSI.COM.VN Visit SSI Research on Bloomberg at SSIV<GO> Page 7

Public investment set to be a key growth driver for 2023