·         Reduction in outsourcing port operation and cutting operating cost has expanded VSC’s gross margin to 31.6% (+ 672 bps YoY) in 9M2021. An abnormal other income of VND 10 Bn additionally pushed up the growth rate of NPAT-MI in Q3/2021 by 69% YoY to reach VND 109 Bn. As the result, the NPAT-MI in 9M2021 was VND 258 Bn (+ 45.4% YoY). We expect that the NPAT-MI will reach VND 361 Bn in 2021F (+ 50.1% YoY). VSC is trading at P/E 2021F of 12.5x, comparing to a 3Y historical mean of 8.0x.  The fair valuation is still under review.

·         Revenue has grown in line with throughput growth in VIP Green and Green Port on the back of stable throughput growth in the Hai Phong area. In 9M2021, port throughput in VIP Green and Green Port increased by 14% YoY, driving the revenue to VND 1,386 Bn, increasing by 12.6% YoY. We expect that total throughput will reach 1,1 Mn TEUs in 2021F (+ 4% YoY) and revenue will reach VND 1,862 Bn (+ 10.3% YoY) in 2021F.

·         VIMC Dinh Vu (VSC’s associate since Sep 2021) and two deep-water port projects, namely Cat Hai in Hai Phong and Lien Chieu in Da Nang, are long-term stories, given that VIP Green and Green Port are operating at their designed capacity. However, we believe the earnings from these projects are rather elusive given limited competitive advantages of VIMC Dinh Vu to attract international shipping lines and pending investment planning approval as well as lack of capital for deep-water ports, including Cat Hai (in Hai Phong) and Lien Chieu (in Da Nang).