What is the outlook for GMD?

GMD's 2Q21 net profit increased 38.4% YoY to VND142bn.

GMD’s 2Q21 net revenue increased 23.8% YoY to VND752bn thanks to strong container volume (30.0% YoY) following increasing sea freight demand. Its gross profit margin inched up 0.13% pts YoY regarding the mix of 1.81% pts YoY decrease in port services GM due to incurring costs related to Covid-19 prevention, and 7.66% pts YoY increase in logistics services GM thanks to in sea freight rates spike. Associates’ profit hiked 269.3% YoY as Gemalink was close to the breakeven point. Consequently, 2Q21 net profit increased 38.4% YoY to VND142bn, bringing 1H21 NP to grow 32.8% YoY, fulfilling 53.0% of VNDirec’s full-year forecast on GMD’s net profit.

This stock company expects GMD’s revenue to increase 16.6%/12.3%/5.5% in FY21/22/23F, respectively as follow factors:

First, in Hai Phong port cluster, GMD’s container volume throughput via this port is expected to increase 18%/3%/13% YoY in FY21/22/23F with a growth engine coming from Nam Dinh Vu phase 2 launching in FY23F.

Second, in the central region, GMD’s Dung Quat port cargo volume may increase 30.0% in FY21F as China’s import demand of commodities increases sharply but this port would hardly grow from FY22F as limit ed capacity.

Third, the HCM port cluster, GMD container volume throughput via these ports is expected to increase 40% in FY21F thanks to the relocation of Truong Tho port cluster, but would also hardly grow from FY22F as limit ed capacity. With a large contribution from Gemalink, which might operate at 80- 119% of its phase 1 designed capacity in FY21-23F, VNDirect expected GMD’s net profit would surge 61.2%/68.2%/24.5% YoY in the period.

VNDirect revised up its SOTP-based TP by 17.4% to VND52,700 following a 9.8% - 13.3% FY21-23 EPS upgrade. However, the recent share price rally has already factored in the strong outlook. Thus, it downgraded to “Hold” as the upside is limit ed. Upside risks to its forecasts including (1) higher-than-expected container volume and fee, (2) assets divestments at higher-than-expected prices, and (3) seaport fee increase proposal is approved by the government. Downside risks are uncertainties from the pandemic or geopolitical concerns hindering the growth of global trade, including Vietnam.

GMD has delivered impressive returns with its share price rising 49% since the start of this year thanks to its buoyant growth outlook in FY21-23F period. Due to the price rally recently, VNDirect downgraded to “Hold” rating with a higher SOTP-based TP of VND52,700 (17.4% vs its previous report) as it raised FY21/22/23F EPS by 9.8%/13.3%/11.1% on a brighter outlook on GMD’s port system. However, it still likes GMD for long-term investment for its system of seaports presented along the length of the country with outstanding capacity, which is integrated with GMD’s comprehensive logistics system. It believes GMD will benefit from the buoyant ocean trade of Vietnam in the coming years.

GMD will have upside risks that include higher-than-expected container volume and handling fee at GMD’s ports; assets divestments at higher-than-expected prices, and seaport fee increase proposal is approved by the government. However, GMD will face some downside risks that are uncertainties arising from the Covid-19 pandemic or geopolitical concerns hindering the growth of global trade including Vietnam.