VSH_BUY_TP 35,000 VNĐ_Upside 26.6__Growth motivation from Thuong Kon Tum_BSC Company Update

Valuation

§  BSC recommends BUY for VSH with a target price of VND 35,000/share for 2022 (equivalent to 26.6% upside compared to September 30, 2021) based on valuation method EV/EBITDA = 9.0x (equivalent to EV/EBITDA = 9.0x). average rate of enterprises in the same industry).

Forecasting business results

§  n 2021: BSC forecasts revenue and net profit of VND 1,563 billion (+359% yoy) and VND 379 billion (+101% yoy), respectively, EPS FW 2021 = VND 1,603/share base on assumptions: (1) Output Electricity produced in 2021 can reach 1.75 billion kWh (+213% yoy), of which Thuong Kon Tum contributes 870 million kWh and (2) The PPA electricity price in 2021 of Thuong Kon Tum factory can reach VND 914 /kWh.

§  In 2022: BSC forecasts revenue and profit after tax of VND 1,813 billion (+16% yoy) and VND 420 billion (+11% yoy) respectively, equivalent to EPS = VND 1,777/share based on assumptions: (1)  Electricity production in 2022 can reach 1.85 billion kWh (+6% yoy), of which Thuong Kon contributes about 1.04 billion kWh (+20% yoy) and (2)  Negotiate electricity price of Thuong Kon Tum successfully, the PPA electricity selling price from 2022 can reach VND 1,097/kWh (+20% yoy).

Investment Thesis

§  VSH's business results have favorable prospects thanks to the stable hydrological situation until mid-2022.

§  Thuong Kon Tum Hydropower Plant is a very important contributor to VSH's business results.

Risks

§  Risk of weather disrupting production activities of VSH.

Company Update

§  Net revenue and NPAT in 1H2021 reached VND 689 billion (+656% yoy) and VND 237 billion (75 times yoy%) respectively, thanks to (i) favorable hydrological situation which helps in production +323% yoy and (ii) hydrological situation. Thuong Kon Tum power (220 MW) has been operating since the beginning of Q2, increasing the amount of operating capacity for VSH.