FPT Update- BUY

The stock price has fallen by 19% since our latest update due to AI disruption concerns in IT services and broader market selling amid Middle East tensions. It now trades at 13.5x 2026F earnings, in the range of -1SD and -2SD. However, we maintained our 2026 EBT projection at VND14,933bn (+14.5% YoY) considering stronger 2H2025 signed revenue, resilient growth in the largest market Japan, steady contribution from telecom services and a gradual shift to higher-value services despite a challenging race ahead. Our target price for the stock is VND118,100/share by YE2026, 3% lower than the prior update due to lower peer PERs, implying to a total return of 52.8%. BUY.

Net revenue and EBT (unaudited) climbed by 11.6% YoY and 17.8% YoY, to VND70,113bn and VND13,039bn in 2025, meeting 101% of our projections. A jump of 951% YoY in financial profit (thanks to interest income and exchange rate gain) along with 68% YoY growth in profits from affiliates (primarily thanks to FPT Retail – HSX: FRT) fortified the EBT substantially. Global IT and telecom services remain the company’s pillars.

The global IT services segment recorded a strong uptick of 48% YoY in signed revenue in 2H2025 (vs. 1H2025: +5% YoY), though 2025 net revenue and EBT growth – 14.3% and 14.6% YoY respectively – incurred deceleration due to previously low signed revenue. Digital transformation services (DX), the drivers occupying 47% of the segmented revenue, grew by 16.8% YoY in 2025.

The telecom services segment propped up the overall results throughout the year, generating an EBT rise of 21.9% YoY to VND4,168bn in 2025. Revenue growth of 10.6% YoY came as a result of a 13.7% YoY increase in broadband services, fueled by market share gain and price increases.

Other subordinate segments, such as domestic IT services and education reported mixed numbers. Domestic IT services delivered 11.5% YoY net revenue growth while EBT fell by 9.7% YoY. The segment witnesses an encouraging momentum in government and SOE projects, focusing on DX, not only basic but also AI-related works. The education business remained sluggish, as anticipated by the company, with weak enrolment attributed to rising competition from public schools.

Concerns on AI disrupting the IT services industry have intensified with lots of arguments. Yet, many share a collaboration model that human takes advantage of AI capabilities for implementation tasks and solving problems that were previously unsolvable, while devoting resources for higher-value works in the industry value chain. IT services providers may therefore find essential to refine their human resources as well as development strategies to adapt with this transformation, and the most adaptable ones in such an increasingly competitive environment are believed the winners.