What will drive business performance of listed companies in 2H22?

The energy sector would level off mainly due to the lower EPS of Petrolimex (PLX) after making provisions for inventory devaluation.

>> Most credit institutions upbeat about business performance in 2022

Following 1Q22's levels of 31.2% YoY and 21.1% YoY, the revenue and earnings of listed businesses in 2Q22 increased by 11.8% and 1.7% over the same period in the previous year, respectively.

The business performance of HSX-listed firms decreased in the second quarter of 2022 after experiencing exceptional growth in the first quarter after the economy reopened due to improved pandemic management. It was caused by both internal and external factors, including the ongoing Russia-Ukraine conflict, China's Zero-Covid strategy, the rapid rise in inflation in developed economies and the ensuing decline in consumer demand, the government's tighter regulation of the corporate bond market in conjunction with a less active real estate market.

Essential consumer goods (12.9% YoY), industry (129.9% YoY) due to the recovery of production and business activity following the removal of COVID-19 lockdowns, utilities (82%) due to an increase in electricity and water demand and favorable weather patterns, financial services (28.2% YoY); and IT (25.8% YoY) were the main contributors to earnings growth in 2Q22.

The State Bank of Vietnam (SBV) and the Government imposed severe credit controls over corporate bonds, which impacted the real estate sector (-49% YoY), particularly in the wake of the Tan Hoang Minh incident. Additionally, the materials sector (-33.4% YoY) declined as a result of a steep decline in demand, a slowing housing market, and a slowdown in public investment.

Mr. Tran Duc Anh, Head of Macro & Strategy at KB Securities, said the financial performance of listed companies would be negatively impacted in 2H22 by increased internal risks brought on by rising interest rates, constrained credit growth, and stringent corporate bond market regulation. The supply chain crisis, central banks' efforts to reduce inflation by rising interest rates and shrinking balance sheets, and global macroeconomic uncertainty brought on by recession worries would all make the situation worse.

Along with that, commodity and food price movements, despite a major fall from their peaks, are unpredictable. It is likely that the earnings growth of some industries, such as steel, fishery, wood, and textiles, has reached their medium-term peaks and will diminish in 2H22, while it continues to be a tough time for the real estate market for the next couple of months.

Despite a highly possible slowdown in business performance compared to the beginning of the year, many sectors may still post growth over the same period due to the low base seen in 3Q21 at the height of COVID-19. On the bright side, utilities, livestock, consumer goods, and IT are believed to see improved business results. The factors driving the profit growth of listed companies in the second half of 2022 should be the promotion of public spending disbursement, the continued implementation of support packages, as well as the recovery of production, consumption, and services.

"We forecast the average EPS growth of HSX-listed companies to reach 18.3% YoY by the end of 2022." In particular, utilities (63.6% YoY) should enjoy the highest growth on favorable weather conditions and ever-growing demand, followed by industry (37.9% YoY) thanks to the post-pandemic recovery in manufacturing and 2021 low, and IT (21.8% YoY)", said Mr. Tran Duc Anh.

Mr. Tran Duc Anh notes that the real estate group is set to grow on earnings growth from the low base of Vingroup (VIC) (VIC stocks constitute a large proportion of the local stock market). Besides, the energy sector would level off mainly due to the lower EPS of Petrolimex (PLX) after making provisions for inventory devaluation. Also, profit erosion of Masan Group (MSN) following its divestment from the animal feed segment to De Heus in 2021 will dampen EPS growth of essential consumer goods.