What is the outlook for 2Q24 earnings?

>> ACB’s earnings growth may slow down

Banking sector's profit may slightly decrease

The Net Interest Margin (NIM) will remain under downward pressure as lending rates are expected to fall further, while deposit rates have marginally increased at most institutions. Credit growth in Q2 is predicted to be more positive than in Q1 (4.17% as of June 20, 2024, up from 0.26% at the end of Q1/24), but still lower than the same period last year. As a result, MBS believes that net interest income will continue to expand slowly. Non-interest revenue is low and has yet to improve, relying mostly on fee-based activities and debt settlement.

Foreign exchange and securities trading operations are not projected to rise much due to increasingly difficult market circumstances. Provisions for bad debts may grow further as non-performing loans (NPLs) show indicators of expanding again in Q2. Rising NPLs and declining Loan Loss Reserves (LLRs) are a frequent trend in the sector.

Overall, MBS stated that net profit after tax (NPAT) for banks will not expand significantly, with considerable gains in banks with strong loan growth such as LPB, VPB, and HDB. Some banks, such as STB and BID, would record negative NPAT growth because they had high NPAT in the same time the previous year.

Residential property sector is recovering

The residential property sector's business performance will not improve in Q2 due to a lack of projects for handover and no change in the legal status of projects prior to the passage of associated laws (August 1, 2024). Lower borrowing rates and selling expenses will help boost Q2 profitability.

"The net profit of the entire industry is projected to stay flat, owing mostly to VHM, which has projects being handed over with clear legal status and infrastructural development. Some other firms, such as KDH and DXG, may witness a 50-70 percent fall in income from project handovers compared to the high base in Q2 2023," MBS stated.

Industrial property sector's earnings are declining

Overall, the industrial real estate sector's Q2/24 business results were lower than the same time last year, when businesses reported higher profits (SZC, KBC, IDC, PHR). BCM's earnings climbed dramatically as a result of the low base in Q2/23. In the first five months of 2024, implemented FDI capital climbed by 7.8% year on year, showing robust demand for industrial land. The southern region's land supply is improving as a result of the conversion of rubber land, which was made possible by the settlement of legal concerns with the enactment of the modified Land Law.

Materials sector continues to recover

MBS predicts that the materials industry will retain its recovery pace in the second quarter, with steel firms leading the way. The steel group has exhibited strong profit recovery compared to the same period last year, as lower raw material costs have a beneficial influence on gross profit margins.

Coal and iron ore prices have fallen by 18% and 20% year on year, respectively, while steel prices have only fallen by 7%, allowing the gross margin to rise to an average of 12% (compared to 5% in 2023). Raw material prices may continue to be low due to steady supply and a dramatic drop in raw material inventory demand in China (due to lower steel output).

In addition, consumption volume has increased as domestic demand recovers. The rebound in demand and domestic spending volume is predicted to continue as real estate supply increases beginning in Q3.

Upstream segment of O&G sector to show a bullish outlook

In Q2 2024, the oil and gas industry may continue to show earnings divergence across enterprises. "Upstream equities such as PVD and PVS may expect strong profit growth due to higher work volumes. PVS, in particular, benefits from offshore wind turbine pedestal manufacturing operations. PVD's earnings may not differ much from the previous quarter because to consistent rental prices for JU rigs and no contributions from new rental rigs yet. MBS predicted that middle-stream equities such as GAS and PVT will retain similar earnings to the same period last year.

Profit differential is obvious in the downstream sector, with PLX expected to maintain constant earnings from a high base compared to the same period last year, but BSR's output and profits may be significantly impacted owing to maintenance activities in the second quarter.

Power sector is promising

Gas-fired power output increased in Q2/24 compared to the low levels in Q1/24. Most plants use Southeastern gas, such as Nhon Trach 1&2 and the Phu My cluster restarted operations, albeit with a little decline from the same period last year. Profits for gas-fired power providers are expected to increase from Q1 due to restarted operations and high market energy rates of roughly 1800-1900 VND/kWh in Q2. Hydropower output increased significantly from late May to early June as water accumulated in Q1. Northern and Central hydroelectric reservoirs maintained adequate water levels, allowing for electricity generation as needed.

>> 10-15% earnings growth forecast in 2024 for listed companies

However, MBS believes that income for many major hydroelectric facilities may not have increased in proportion to output due to reduced selling prices, particularly for those with lower contract energy pricing. Coal-fired power output has trended lower since June. However, it remained reasonably constant in comparison to the same era. It is expected that coal-fired power output in Q2/24 would increase owing to effective deployment in late Q4 and early Q5/24, boosting profit growth in this sector.

In Q2, numerous regulations went into force, including the new retail electricity pricing system, which paved the way for EVN to raise power rates in the second half of the year. Furthermore, during this time, the electrical sector accelerated the implementation of key regulations such as the pricing system for liquefied natural gas (LNG) electricity and the direct power purchase agreement (DPPA) mechanism for big users.

Retail sector is recovering from a low base

ICT-CE Retail: Slow growth continues, with the electronics sector exhibiting double-digit growth as bright sunshine increases demand for air conditioning systems. Retailers have boosted their base pricing, which is likely to boost gross profit margins and thereby greatly increase net earnings in the ICT-CE market.

Jewelry Retail: Gold prices changed dramatically in Q2/24, climbing by 27% year on year and 15% from Q2/24 to Q5/24, increasing demand for gold ring transactions. Consequently, retail jewelry sales are predicted to climb by 12% year on year. However, MBS stated that increasing raw material prices and the amount of gold pieces and rings sold will have an impact on jewelry retail enterprises' gross profit margins, with a projected 3% decline year on year.

Pharmaceutical Retail: The number of pharmacies is growing, which will contribute to higher year-over-year revenue increase in pharmaceutical retail. Long Chau is planned to establish an additional 83 shops, increasing the total to 1,670, with a 34% year-on-year growth rate. An Khang will retain its total number of pharmacies, and overall pharmaceutical retail income is predicted to rise by around 57% year on year.