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KBC – The 4th wave hindered 2Q21 NP growth – Earnings Flash

Company Note 11/08/2021    155

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  • In 2Q21, KBC recorded its revenue of VND749.8bn (+337.2% yoy) and net profit (NP) of VND34.4bn (vs. 2Q20 net loss of VND3.0bn).
  • In 1H21, KBC posted net profit of VND633.6bn, higher than 11 times yoy, fulfilling 33.9% of our full-year forecasts.
  • We expect 2H21F net profit increases strongly, in the context of Bac Ninh and Bac Giang’ industrial parks (IP) reopening since Jul 2021.

Market Price

Target Price

Dividend Yield

Rating

Sector

VND35,800

N/A

0%

N/A

PROPERTY

2Q21 net profit growth slowed down due to COVID-19 outbreak

  • KBC has closed three of its industrial parks in Bac Giang and Bac Ninh provinces for two weeks in late-Jun during the 4th wave.
  • In 2Q21, KBC leased out 14.1ha of IP land (+335.1% yoy), in which Quang Chau IP (7.8ha) and Nam Son Hap Linh IP (6.3ha); sold 10 factory/warehouse units from Quang Chau IP (8 units) and Que Vo IP (2 units) and handed over 0.86ha residential land from Trang Due project.
  • 2Q21 revenue surged 337.2% yoy to VND749.8bn from the base 2Q20, higher than 260.2% yoy of 1Q21.
  • 2Q21 net profit recorded VND34.4bn (vs. net loss VND3.0bn of 2Q20), much lower than VND599.2bn of 1Q21.

1H21 net profit recorded a significant increase of 11x yoy

  • In 1H21, KBC leased out 80.7ha of IP land (+353.4% yoy), in which Quang Chau IP (40.7ha), Tan Phu Trung IP (21.9ha) and Nam Son Hap Linh IP (16.6ha); handed over 2.2ha residential land from Trang Due project; sold 5.4ha land for warehouse/factory from Quang Chau IP and Que Vo IP.
  • KBC posted 1H21 revenue of VND2,751.8bn (+278.3% yoy), net profit of VND633.6bn, higher than 11 times yoy, from the low base 1H20 (-87.0% yoy), coming in at 40.6%/33.9% our full-year forecast.
  • Interest expense rose 185.8% yoy to VND240.9bn in 1H21 due to a sharp increase in FY20 total debt, given its investment activities in mega projects such as Trang Cat project and land bank expansion strategy.
  • We deem the 1H21 results in line as we expect a large revenue boost in 2H21F from the signed contracts in FY20 and 1H21, in the context of Bac Ninh and Bac Giang’ IPs reopening since Jul 2021.

Robust outlook remains intact
We expect revenue to grow 182.5% yoy and 0.5% yoy in 2H21F and FY22F, respectively, driven by: 1) the delivery of more than 100ha IP land signed in FY20 and 1H21, in the context of Bac Ninh and Bac Giang’ IPs reopening since Jul 2021 and 2) the strong handover in residential projects namely Phuc Ninh and Trang Due after tackling bottlenecks. We project KBC’s FY21F NP of VND1,868bn (+734.7% yoy) and FY22F NP of VND2,052bn (+9.8% yoy).

Investment risks
Potential upside risks could come from faster IP or residential land sales and whether KBC can clear legal hurdles to start its new IPs. Key downside risks to our call: 1) worse-than-expected IP land sales, 2) regulatory delays in Trang Cat project and Trang Due 3 IP, and 3) delays in booking revenue from residential projects.

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