MORE ROOM FOR IT STOCKS TO GROW FURTHER

Despite mixed results in the first half of the year, investors still see appealing prospects for technology stocks in the long term.

In the first half of the year, the revenue of digital technology enterprises was more than VNĐ1.44 quadrillion (US$59.6 billion), down 10.35 per cent year-on-year and reached 38.87 per cent of the 2023 plan, according to a report by the Ministry of Information and Communications.

Export turnover of hardware and electronics is estimated at $51.51 billion, a decline of 9.56 per cent on-year and equal to 37.88 per cent of the yearly plan.

The fall in revenue is due to the economic recession in many countries leading to a decrease in the information technology (IT) consumer market and low growth prospects. This directly impacts the demand for IT services.

The software export segment, on the other hand, still maintained good growth thanks to strong investment trends in digital transformation, especially in Japan and Asia Pacific markets.

Mixed business results

In the second quarter's consolidated financial statement, FPT Corporation posted a net revenue of over VNĐ12.4 trillion, a gain of 23.7 per cent over last year, while its profit after tax increased by 21 per cent to more than VNĐ1.5 trillion.

For the first six months of the year, FPT's net revenue and profit after tax rose 21.9 per cent and 18.2 per cent year-on-year, respectively, to nearly VNĐ24.2 trillion and VNĐ3.7 trillion.

The company said that in the first half of the year, the technology segment recorded a revenue of VNĐ14.2 trillion, a gain of 25.1 per cent year-on-year, with profit before tax up 26.3 per cent to over VNĐ2 trillion.

The IT services for the foreign market, in particular, achieved a revenue of more than VNĐ11.2 trillion, up 30.2 per cent, and profit before tax of VNĐ1.8 trillion, a 34.6 per cent increase. The gains were driven by high demand for digital transformation.

Similarly, CMC Investment JSC also reported net revenue of the first quarter of 2023 (accounting period April 1 to June 30, 2023) increased by 3.6 per cent over last year to VNĐ1.7 trillion. The group's profit before tax advanced by 3.3 per cent year-on-year to VNĐ109.6 billion. Deducting expenses, the business earned VNĐ96.7 billion in net profit, up 5.2 per cent.

In contrast, Elcom Technology Communications Corporation recorded a fall of 79 per cent year-on-year in net revenue in the second quarter to VNĐ35.3 billion, with its gross profit down 63 per cent to VNĐ14.7 billion. Excluding expenses, the company's profit after tax halved to over VNĐ5 billion.

For the first six months of 2023, ELcom's net revenue dropped 67.7 per cent on-year to VNĐ121.2 billion, while net profit fell 64.8 per cent to VNĐ8.4 billion.

Elcom said that the declines in business results in the second quarter and the first half of 2023 were mainly due to a slow in site clearance of some large projects, in disbursement of capital, and in bidding procedures, which led to the slow implementation of these projects, causing sales revenue and profit after tax to decrease over last year.

Viet Nam Technology & Telecommunication JSC is another company witnessing poor performance in the second quarter, with a decline of 55.4 per cent in profit after tax to VNĐ5.3 billion. For the six months of the year, its net profit reached VNĐ11.1 billion, down 28.8 per cent.

Bright outlook

Although business results of the whole industry fluctuated, stock prices of the IT group experienced positive movements.

From the beginning of the year to August 28, shares of FPT Corporation (FPT), CMC Investment (CMC), Elcom Technology Communications Corporation (ELC) and Viet Nam Technology & Telecommunication (TTN) all ticked higher. Of which, FPT soared 37.2 per cent, CMC jumped 44.4 per cent, ELC gained 123.1 per cent, and TTN advanced 18 per cent.

BIDV Securities JSC (BSC) said that the IT group on the market would have positive business results in the second half of 2023 thanks to factors such as growth in software exports to Japan and Asia, offsetting the slowing down in the US market.

The group would also be supported by the trend of digital transformation and public investment in smart transportation, the revised Telecommunications Law (expected to be submitted to the National Assembly for approval in October 2023) with many new contents.

Meanwhile, KB Securities Vietnam JSC said that difficulties in the US and European markets would continue to affect Việt Nam's IT industry. However, the securities firm still had a positive view on the prospect of software export in the mid- and long-term.

KBSV believes that information technology businesses will continue to maintain double-digit growth in 2023.

Source: VNS