At present, there are a few listed automobile companies, of which some stocks would be attractive in the coming time, said VNDirect.
According to VNR500 2020, which is the ranking of the 500 largest private enterprises in Vietnam in 2020, there are 15 enterprises whose main industry is automobile production and business. However, there are only 7 listed automobile companies and some supporting businesses such as Danang Rubber JSC (DRC VN) and Ha Noi Plastic JSC (NHH VN). Whereas, 3 largest automobile manufacturers, including VinFast, Truong Hai Auto JSC (THA VN), and Thanh Cong Group are currently unlisted. VNDirect estimated most listed companies are dealers and joint venture partners (accounting for 1.5% market capitalization) which is not fully represented for the big industry picture.
Automobile listed companies showed robust growth in 1H21 thanks to PC manufacturers launching many new models or facelifts and implementing many promotional policies to attract more customers. However, listed PC companies’ earnings in 3Q21 were hit hard by Covid-19. The outbreak of Covid-19 in 3Q21 caused many provinces and cities to implement social distancing. VAMA estimated that more than 200 automobile dealerships belonging to VAMA members have closed in August and September 2021. However, except Hang Xanh Motors Service Joint Stock Company (HoSE: HAX), others automobile listed companies’ earnings still posted positive growth YoY in 9M21 thanks to robust growth in 1H21.
VNDirect believed that five trends to shape Vietnam’s auto market outlook would have a positive effect on automobile distributors, such as SVC, Viet Nam Engine And Agricultural Machinery Corporation (UPCoM: VEA), CTF, HAX, and Vinfast. Besides, the supporting industry also takes advantage of the strong growth of VinFast.
This stock company expected HAX to take benefits from a preferential policy from the Government as most of HAX’s car model is assembled in Vietnam. While Toyota Cross and Toyota Raize are the key drivers of VEA’s earnings growth in FY22F thanks to a rising consumer preference for CUV and Hybrid Electric Vehicle.
Furthermore, HAX and VEA are trading at TTM P/E of 14.3x and 10.1x, respectively, which are attractive with lower than 12.5% and 39.5% of the regional peer average. However, investment risk is the worsening of the Covid-19 outbreak may hit automobile listed companies’ s performance directly.