CTD [SELL -31.8%] - High financial income to support 2023F earnings; valuation running ahead of fundamental progress - Update Report

- We downgrade CTD to SELL from MARKET PERFORM despite maintaining our target price at VND43,400/share as the company’s share price has rallied 33% over the last two months and has increased 95% YTD. We believe the strong performance of this stock was driven by market expectations for a strong earnings recovery in H2 2023 from the potential of new projects being signed.
- CTD reported Q1 2023 NPAT-MI of VND22bn (USD0.9mn; -24% YoY & +17% QoQ), which was supported by financial income and minimal provision for doubtful receivables in the quarter. However, CTD’s Q1 2023 EBIT remained negative due to a strong compression in gross margin and slow revenue recognition. CTD’s Q1 2023 results were in line with our expectations.