1Q23 earnings review: a weak start for 2023

Based on VNDirect’s estimates, 1Q23 aggregate earnings of listed companies on three bourses (HOSE, HNX, UPCOM) decreased by 18.1% yoy, lower than that in 4Q22 (-31.9% yoy). Among 60 companies under its coverage that have reported their 1Q23 results, 44% were in line with its expectations while 10% beat its forecasts and 46% missed its estimates.

Listed steel makers’ 1Q23 net profit (NP) dropped 93.3% yoy, significantly improved from 2 previous negative earnings quarters thanks to (1) recovery of steel selling price and (2) reversal of provision for devaluation of inventory. Chemicals producers extended the downward trajectory with 4Q22/1Q23 NP fell 22.5/71.9% yoy due to the deep slump of phosphorus and fertilizers prices. Brokerage firms witnessed another sharp shrink in earnings of 96.6% yoy in 1Q23’s earning as market liquidity contracted by 63.1% yoy in 1Q23. Together, Steel makes, Chemicals producers and Brokerage firms took away 13.5% of market’s 1Q23 NP growth.

During the tough time, property developers still posted 28.3% yoy in 1Q23’s NP growth, mostly thanks to the contribution of VHM (162.5% yoy) as a result of recording large bulk sale transactions. However, if excluded VHM, property developers’ earnings declined 40.4% yoy in 1Q23. Notably, travel and leisure sector was back on track, recorded positive earnings of over VND200bn for the first time since the Covid-19. This result was largely contributed by the fact that HVN, which posted a loss of VND103.6bn in 1Q23 (vs a loss of VND2,613bn in 1Q22). Together, real estate and travel & leisure sectors contributed 4.9% to market’s 1Q23 NP growth.

1Q23’s market gross margin (non-bank) slightly inched up 0.1% pts qoq for the first time since 3Q21 with the biggest improvement coming from Travel & Leisure (21.9% pts), Industrial Metals (7.0% pts), Construction & Materials (4.6% pts). Market (excl. bank) ‘s leverage ratio inched up for the first time since 1Q22 due to aggregate short-term debt edged up by 2.3% while total equity slumped by 2.0%. The market average cost of debt decreased from 6.0% to 5.9% as a result of lowering lending rates during the 1Q23.

It is noted that 14 corporates out of VN30 delivered positive earnings growth in 1Q23, led by VRE (171% yoy), VHM (162% yoy), and PLX (155% yoy). VRE benefited from lack of payment for a tenant support package as well as efficiency in cost optimization. VHM posted enormous growth in earnings thanks to (1) handing over Vinhomes Ocean Park 2 and (2) recording large bulksale transactions at Vinhomes Ocean Park 2 & 3 with total pre-tax profit of VND8.5tr, accounting for 56% of VHM's pre-tax profit in 1Q23. PLX recovered from a low base in 1Q22 thanks to a stable supply of petroleum from domestic refineries (mainly Nghi Son).

Conversely, in 1Q23, MWG’s NP plummeted 98.5% yoy, reflecting the adverse effects of falling consumer demand amid high interest rates, and several consumer finance companies are under investigation. Despite the slump of 95.2% yoy in 1Q23's NP, HPG still showed a good signal as the earnings was positive following 2 previous negative quarter thanks to (1) steels prices recovering, and (2) reversal of provision for devaluation of inventory. Notably, NVL realized a loss of VND337bn in 1Q23 (1Q22: VND1,079bn) due to market factors making real estate handover’s revenue weaken (-70.6% yoy).