Listed firms post lower than expected Q3 profits: broker VNDirect

Total profits posted by companies listed on the Ho Chi Minh Stock Exchange (HoSE) in the third quarter of 2023 decreased by 9% year-on-year, according to Vietnam’s leading securities broker VNDirect.

The total net profit of the whole market, including the HoSE, the Hanoi Stock Exchange (HNX) and the Unlisted Public Companies Market (UPCoM), fell 5.5% in Q3 compared to the same period last year, it said.

The profit growth of large-cap stocks in Q3 and the first nine months of 2023 contracted 3.2% and 8.8% year-on-year respectively, much lighter than the mid-cap group (-14.8% and -31%) and the small caps (-24.6% and -60.6%).

Optimism resulting from Q2/2023 business results was not repeated in Q3 due to higher expectations for the second half of 2023, leading to recent massive selloffs in the market.

The VN30 group, which features 30 largest caps or blue chips, recorded a reduction of 3.1% year-on-year and 3.8% from Q2 in total net profit. Statistics from VnDirect showed that only 14 businesses in this basket posted after-tax profit growth, including PLX of Petrolimex (646% year-on-year), VJC of low-cost carrier Vietjet (+232%), SSI of broker Saigon Securities (+111%), and VRE of Vincom Retail (+66%).

Petrolimex (PLX) reported a strong profit growth of VND738 billion ($30.34 million) thanks to its divestment from PGBank as well as a more stable domestic petroleum distribution market compared to Q3/2022. VJC recorded impressive results thanks to a strong recovery in international tourists.

Saigon Securities's (SSI) Q3 net profit skyrocketed 111% as the stock market recovered from its bottom set in Q3/2022 and strong transactions boosted trading fees.

Meanwhile, Vincom Retail's (VRE) net profit soared 66% thanks to its real estate revenue increasing from VND136 billion in Q3/2022 to VND1,304 billion ($53.6 million) from the handover of projects in the central province of Quang Tri and the northwestern province of Dien Bien.

Steel, oil and gas were the leading growth contributors. The steel industry had a positive financial statement season with total net profit three times higher than Q2/2023 thanks to reduced input costs.

Similarly, the oil and gas group’s profit increased by 2.1% over the same period thanks to increased crack spread as a result of tightening global supply and tensions in the Middle East, and the more stable domestic gasoline distribution market.

On the contrary, the chemicals, electricity and real estate groups disappointed investors. The net profit of chemical companies in Q3/2023 plunged 77.3% year-on-year due to a sharp decrease in fertilizer prices, while gas prices remained high.

Similarly, the electricity industry saw a sharp profit decline of 66.7% as hydropower plants recorded losses due to unfavorable weather and electricity generation prices in the competitive market, where Vietnan Electricity purchases electricity from generators, dropped 30%. In total, the chemicals, electricity and retail groups pulled down after-tax profit growth of the entire market by 7.1% in Q3.

According to VNDirect, businesses’ interest costs on the three exchanges in Q3/2023 reached 6.8%, up 0.2% from Q2. This showed that the interest rate cuts by the State Bank of Vietnam (SBV) had not had an impact on company profits.

The broker expected interest costs to decrease in the coming quarters as banks start to lower lending interest rates. In addition, the financial leverage ratio reached a record low of 60.7% in Q3, 0.3% lower than the previous quarter, as companies focused on debt repayments.