FPT update – BUY

The company reported strong performance in 1H2022, driven by an almost 30% YoY growth in software outsourcing segment, and is expected to maintain positive growth momentum for the rest of the year. Maintain  BUY recommendation; target price: VND98,273/share.

FPT announced net revenue and EBT growth of 22.2% and 23.9% YoY, reaching VND19,826bn and VND3,637bn, respectively, in 1H2022.

Growth from financial revenue and affiliates continued to contribute to the company’s earnings growth. While financial revenue recorded an increase of 62.9% YoY (largely thanks to interest income and exchange rate gain), earnings from affiliates climbed by 11% YoY. FPT Digital Retail JSC (HSX: FRT) reported 55% YoY growth in net revenue with EBT achieving VND263bn from VND76bn in 1H2021; in which, impressive results in 1Q was bolstered by strong expansion of Long Chau stores, high demand for pharmaceutical and health care products amid COVID-19 outbreak, together with good performance from the mobile phone chain. 

In sum, for the whole year 2022, we expect FPT’s net revenue and EBT at VND43,003bn (+20.6% YoY) and VND7,896bn (+24.6% YoY), 2% lower than our earlier projections mainly due to slower growth in the domestic IT services segment. Using sum of parts approach to evaluate FPT stock (namely PER for Synnex FPT, DCF combined PER for FRT and DCF combined PER for the rest of FPT), our target price for the stock is VND98k/share, equivalent to a return of 16.2% at the end of this year.