2. Infrastructure development will be back to center stage

Figure 70: Commodity prices outlook in FY22F and their impact on related industries/stocks (continued)

Commodity

Sugar

Rubber

Fishery FY22F outlook

We believe global sugar price will keep increasing in 2022F as global demand recovers strongly after the pandemic, while the world sugar market in the 20212022 crop year is forecasted to be undersupplied with a shortage of 3-4m tons. In addition, compared to the domestic market sugar price in the region (including ASEAN countries and China), Vietnam's sugar price is still at a lower level. Thus, we expect domestic sugar price will increase following the global uptrend in 2022F. Besides, from Sep 2021, the Ministry of Industry and Trade officially investigated the sudden increase in sugar imports from ASEAN countries after Thai sugar was subject to an anti-dumping tax. In our view, anti-dumping tax and investigations of smuggled sugar will keep supporting domestic sugar prices in the coming year. In our view, sugar producers like QNS can take advantage of the sugar price upward trend and expand GPM of its sugar business as QNS has the second largest scale in sugarcane materials for sugar production. Besides, QNS is also well-positioned to capture the increasing demand domestic sugar. In Jul 2021, QNS has put the refined extra sugar (RE sugar) production line into operation which has a higher selling price than Refined Sugar (RS). In addition, QNS also expects sugarcane input to reach 1.2m tons in 2022F (+40%, per our estimate) as the increase in sugar prices in 2021 will create an impetus for farmers to restore planting sugarcane area. Thus, we forecast sugar revenue to grow 35% yoy in 2022F, contributing 25.6% to QNS’s total revenue. QNS

Impact on related industry/stocks Stock picks

Rubber prices in Asia continued to rise sharphy in 3Q21 owing to a supply deficit. We estimate a 329,000 tons global rubber shortfall in 2021. Rubber's ascent was further supported by the rapid rise in oil prices, as well as the expectation of economic recovery after the Covid-19 pandemic was under control. The averagre export price of natural rubber in 3Q21 increased by 23% yoy. Overall, the average export price of natural rubber in 9M21 increased by 29% yoy. When the energy crisis is under control in China and production activities are restored, we forecast that China will import 2-2.2 million tons of natural rubber to make up the gap between January and April 2022. This is also a factor that helps Vietnam's rubber export prices maintain a high level until the end of 1Q22. Besides, rubber prices will be boosted by oil prices which are forecasted to remain high in 2022. Leading rubber companies will benefit, especially those with high rubber export sales like GVR, PHR. GVR, PHR

From January- August, Chinese rice imports volume have doubled from 1.52m tons in 2020 to 3.2m tons in 2021. The reason is that Chinese importers want to make a profit on the basis that the price of China domestic rice is US$585/tons, much higher than the price of high-quality rice is US$445/tons and US$465/tons in Vietnam and Thailand, respectively (data in August 2021). In 2022, USDA forecasts China’s rice import volume will increase 12.5% yoy to 4.5m tons. Meanwhile, Vietnam is the second largest exported to the Chinese market, up to 22% of total China rice imports volume in 2021. We expect Vietnam's 5% broken rice export price in 2022 to decrease slightly but remain high compared to 2015-2019. As the result, Vietnamese rice exporting companies through the Chinese market will benefit in 2022. Companies exporting rice to China will benefit after the pandemic with the expectation that supply chains will recover, freight rates will decrease and demand recovers.

We expect average selling price (ASP) of fishery products will keep stepping up until 1Q22F thanks to both favourable external and internal environment. In external side, demand is expected to strengthen in 4Q21 and FY21F due to service channel (restaurant, hotel…) which accounts for a large proportion in seafood and fishery product distribution will keep recovering to pre-Covid level. On the other hand, supply is being tightened due to supply chain disruption following some negative impact in short-term such as shortage in raw material and under-full capacity production. In 2022, when the Covid-19 situation will be under control, the recovery of export markets, the efforts of businesses and farmers should boost the export output and turnover of fishery sector. Moreover, transportation costs are on a downward trend after hiking in 9M21, leading to seafood exporters saving on SG&A cost. These factors will help seafood exporters increase their revenue together with net profit margin, promising a bright time ahead for this sector, especially for the market leaders like VHC. Source: VNDIRECT RESEARCH

#2. Infrastructure development will be back to center stage

Industrial infrastructure to ride on the new investment wave

We see Vietnam speeds up increasing supply to fulfill the growing demand. In 5M21, Vietnam established 25 new industrial parks (IPs), added 7,300ha industrial land area, the highest increase in land area since 2015. As of May 2021, Vietnam has 394 IPs established, with a total industrial land area of 80,900ha (+9.9% vs. end-20). Of which, 286 IPs with 57,300ha industrial land area are in operation, 108 IPs with 23,600ha are under construction, ensuring future supply. We see both large domestic and international developers plan to enter the industrial park market such as Vingroup with two IPs in Hai Phong and

Thailand’s WHA Industrial Development Group, Fraser, Capitaland, reaffirming the potential of this market.

Figure 71: Vietnam established 25 IPs with 7,300ha industrial land area in 5M21, the highest yoy increase since 2015 Figure 72: We believe occupancy rate remains high at 72-74% in 2021-22F when demand continue to outpace supply

Sources: VNDIRECT RESEARCH, MPI, CBRE

Figure 73: Industrial land supply in the South is expected to rise further of c.5,000ha in 2021-22F Figure 74: The new supply likely moves to Hung Yen, Hai Duong due to limited land bank in major industrial hubs

Sources: VNDIRECT RESEARCH, CBRE Sources: VNDIRECT RESEARCH, MPI, CBRE

Sources: VNDIRECT RESEARCH, CBRE

Seaport infrastructure investment to ramp up for trade growth

In 10M21, despite difficulties from two Covid-19 outbreaks, Vietnam’s total container volume throughput still recorded impressive growth of 12.0% yoy. According to the approved master plan on Vietnam seaport system development until 2030F, Ministry of Transportation (MOT) expects total container volume throughput to reach 47m TEUs in FY30F, implying a CAGR of 8.0% in FY2130F. In order to meet this demand growth rate, MOT estimates total investment for the seaport system in FY21-30F of VND312,440bn, in which the majority of investment capital (95%) is mobilized from corporate sector while the rest comes from state budget. Most prioritized projects in the master plan includes: construction of berths in Hai Phong International Gateway Port and Cai Mep –Thi Vai, launching Lien Chieu port (Da Nang), relocation and conversion of berths on Cam river in Hai Phong port cluster and Sai Gon river in Ho Chi Minh port cluster in order to satisfy the local development.