Some major sectors’ earnings still look positive in 2021

Corporate earnings to go up

Risks still linger amid the return of Covid-19, prompting major players in certain
sectors (including GAS, PLX, POW, VNM, VJC, VRE) to provide cautious earnings guidance for 2021. Their recent sales growth targets are all lower than the consensus made by analysts two months earlier, said FiinGroup, adding, data was compiled management estimates (approved or yet to be approved by shareholders’ annual meetings) of 1021/1677 listed companies (which account for 92% of the marcap of non-financials on HOSE, HNX and UPCoM).

The latest forecast is slightly lower than those given in FiinPro Digest #7 (which was issued on March 19, 2021). Corporate sales and earnings were earlier expected to grow 20.7% and 23.2%, respectively.

The strong recovery of corporate earnings in Q1-2021 (140.2% YoY) led to a
remarkable improvement in trailing P/E at 18.8x vs. 21.6x at end-2020.

It is noteworthy that positive growth prospects for 2021 have almost been priced in
blue-chip stocks of Real Estate, Basic Resources, IT and Securities.

Non-financial stocks are trading at 2021 forward P/E of 20.1x (vs. trailing P/E of 18.8x) while their forward P/B ratio is 2.2x (vs. 2.5x trailing P/B).

Which sectors to emerge?

Here are FiinGroup’s forecasts on some major sectors’s earnings.

For Oil & Gas, earnings growth is targeted at 740.8%, led by Downstream companies (including BSR, PLX and OIL). In Q1-2021, BSR completed 213% of its full-year plan. It is noteworthy that management estimates of BSR and other oil & gas companies are based on the assumption of the average oil price of US$45 per barrel (while the current Brent oil prices hover above US$70/barrel). Midstream companies, however, predict their 2021 earnings to fall sharply in the context that drilling and production activities have not yet rebounded in Asia despite global oil price hikes.

Concerning the retail, gross profit margin expansion (by utilizing supply chains and operating costs) is expected to drive MWG’s earnings to grow faster than net sales (21.2% vs. 15.2%). DGW forecasts its earnings to rise 12.2% in 2021, but yet to include incomes that could be gained increasing SKUs with 2-3 more ICT brands and Xiaomi.

As for personal and household goods, clothing & accessories manufacturers expect earnings to grow 12.6% in 2021, led by leading players such as VGT, TNG, MSH, TCM and STK, thanks to the demand rebound in major export markets. The personal consumer goods subsector is followed with a 6.9% earnings growth, with top player PNJ projecting its earnings to rise 15%.

With regards to the real estate, growth outlook seems to be brighter than in 2020, with listed developers (including VHM, NVL, PDR, NLG, AGG) expected to step up property handover as well as record robust sales in the context that the property market is rife with speculative investors. Earnings growth is forecast at 22.4%, lower than the CARG of 24.7% in the 2016-2020 period.

For the banking sector, FiinGroup still see the acceleration of private banks including TCB (25.9%), VPB (27.9%), MBB (22.7%), HDB (25.3%), and TPB (32.2%).

Growth-supporting factors include (i) NIM remaining high, (ii) boosting lending after capital hikes, (iii) low pressure of provisioning for credit risk thanks to Circular 03 and (iv) income service activities constantly growing.

In fact, by the end of Q1-2021, banks have fulfilled 1/3 of the full-year earnings target, showing a high possibility that they can exceed the plan. Notably, VietinBank (CTG) has completed nearly 50% of the expected earnings for the whole year, but its profit target for 2021 is 2.3% lower than 2020.

It is worth noting that bank stocks have increased by 34.4% YTD, showing that the positive outlook has been partly reflected in the price, making their valuation less attractive against earnings prospects.

Based on valuation multiples of the overall market plus the risks of policy changes related to the banking sector, FiinGroup believes that investors should consider looking forward to 2022’s earnings prospects when seeking long-term investment opportunities in banking stocks.