FPT update – BUY

FPT CORPORATION (FPT VN)

A BUY recommendation on FPT is maintained, underpinned by vivid growth projections for 2022. Target price: VND119,806/shr.

FPT announced net revenue and EBT growth of 19.5% and 20.4% YoY, reaching VND35,657bn and VND6,337bn, respectively, in 2021. This vibrant momentum extended in early months of 2022 as its revenue and EBT surged by 27% and 30% YoY, respectively, in 2M2022.

Although financial expenses rose by 108.8% YoY because of provisions for investments in start-ups, an increase of 54.6% YoY in financial revenue (largely thanks to interest income and exchange rate gain) contributed to support the company’s earnings. Earnings from affiliates skyrocketed by 120% YoY, according to FPT’s 2021 income statement, after experiencing a deep drop in 2020. FPT Digital Retail JSC (HSX: FRT) reported 53% YoY growth in net revenue with EBT jumping to VND554bn from VND28bn in 2020. Advances in both network expansion and business results made Long Chau – FRT’s pharmacy chain – a highlight, while the mobile phone chain’s performance was bolstered by high demand for laptops/PCs serving working from home/online learning and recovery in consumption of other ICT products after the end of social distancing stage. 

We expect FPT’s 2022 net revenue and EBT at VND44,203bn and VND8,080bn, up by 24% and 27.5% YoY, respectively, surpassing the company’s business plan of VND42,420b (+19% YoY) of revenue and VND7,618bn (+20,2% YoY) of EBT. Our projections are driven by high double-digit growth rates in all divisions; in which, the technology division plays the most important role.  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 VND120k/share, equivalent to a return of 16.1% at the end of this year.