CTG – Positive signals for the second half of the year
• 1H-2024 pre-tax profit (LNTT) increased by 3% YoY, despite a 15% YoY growth in total core operating income (excluding net gain from other activities). This modest growth was due to a significant 20% YoY increase in provisioning expenses, following a large new bad debt in Q2-2024 (net bad debt formation increased by nearly VND 15 trillion during the period). However, the positive news is that this bad debt was brought under control and reclassified to standard debt in July.• We have revised our forecast for 2024 pre-tax profit upward by 3% to VND 295 trillion (+182% YoY), based on expectations of reduced provisioning pressure, given the positive signs in CTG's asset quality, such as a decline in bucket 2 debts and adjusted net NPL formation in Q2-2024.
• We foresee multiple growth drivers for CTG in the second half of 2024, including a promising credit growth outlook compared to last year (most credit disbursements in 2023 occurred at the end of the year, whereas this year’s credit growth has been relatively stable throughout the months this year), effectively controlled operating costs, bad debt recovery, and reduced credit cost pressures. Our current pre-tax profit forecast suggests an approximately 32% YoY growth for 2H-2024.
• We have raised our target price for CTG by 12% to VND 41,500, reflecting an expected total return of 17% as of September 9, 2024. We reiterate our ACCUMULATE recommendation.
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