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KDH – Solid earnings growth over FY21-23F ─ Update

Company Note 02/03/2021    241

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  • FY20 NP grew 25.9% yoy to VND1,152bn, in line at 97.4% of our estimate.
  • We expect FY21F presales to bounce back strongly, driven by the potential launch of Armena and Clarita project in Thu Duc City.
  • Reiterate our Hold call with a higher TP of VND35,100

Market Price

Target Price

Dividend Yield

Rating

Sector

VND 32,500

VND 35,100

1.67%

HOLD

PROPERTY

4Q20 net profit subdued on shrinking gross margin

KDH reported 4Q20 revenue rising 35.6% yoy to VND1,291bn, mainly from the delivery of Safira and Verosa Park projects valued at a combined VND1,277bn. 4Q20 gross margin (GM) narrowed by 9.7% pts yoy to 51.7% due to low-margin Safira condo properties. This dragged down 4Q20 net profit (-5.5% yoy) to VND383bn. For FY20, KDH posted VND4,532bn (+61.1% yoy) in revenue and VND1,152bn (+25.9% yoy) in net profit.

FY21F outlook: strong presales in sight

In FY20, due to the impact of COVID-19 and supply shortage, presales activities were delayed in 1H20. Therefore, for the whole FY20, presales only reached 464 units in volume (-72.7% yoy) and VND1,904bn in value (-62.9% yoy), in our estimate. In FY21F, we expect presales to return to its strong trajectory with VND6,818bn in value (+258.1% yoy), driven by the launch of two potential projects in Thu Duc City namely Armena and Clarita.

Revise FY21-22F NP +5.4%/-20% upon new handover schedules

We raise our FY21F NP forecast by 5.4% to VND1,261bn (+9.4% yoy) to factor in the higher-than-expected contribution of high-margin Verosa landed properties. We reduced our FY22F NP forecast by 20% to VND2,115bn (+67.8% yoy), as management delayed launching Armena project to FY21F (from 2020 in previous forecast), which is likely to take advantage of rising land prices in Thu Duc City, in our view. We expect FY23F NP to reach VND2,585bn (+22.3% yoy), mainly driven by delivery at Clarita, Armena, and Corona projects.

Maintain Hold with a higher TP of VND35,100

We maintain our Hold rating with a higher RNAV-based TP of VND35,100 as we
1) update our DCF-based valuation for Le Minh Xuan IP expansion (109.9ha);
2) increase average selling prices (ASP) by 10% to VND115-130m psm for Clarita and Armena project in FY21F.

Upside risks in the short term could come from higher-than-expected ASP for Armena and Clarita projects in Thu Duc City; our mid- to long-term investment thesis depends on whether KDH can clear legal hurdles to start its Tan Tao project. Downside risks are delays in obtaining permits for new launches.

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