KDH – Stay tuned for a strong rebound in FY22F – Update

• KDH reported VND317bn in 3Q21 net profit (-12.4% yoy). For 9M21, NP inched up 2.4% yoy to VND788bn, forming 67.2% our full year forecast.
• We estimate FY22-23F presales value up 188.2% yoy/31.5% yoy on the back of four new project launches in HCMC’s sought-after locations.
• Reiterate Add with a higher target price (TP) of VND54,800.

Lackluster 3Q21 performance amid the stricter lockdown in the South

3Q21 revenue slid 31.7% year-on-year (yoy) to VND1,199.3bn as KDH delivered only 580 condo units of Lovera Vista and 1 low-rise unit of Verosa Park. 3Q21 blended gross profit margin (GPM) widened 8.8% pts yoy to 39.8%, from the low base of 3Q20. 3Q21 net profit (NP) dropped 12.4% yoy to VND316.6bn. For 9M21, NP slightly rose 2.4% yoy to VND788.1bn, in line at 67.2% of our estimate.

Presales value likely to bottom out in FY21F

For 9M21, KDH sold only 24 units at both Verosa and Lovera projects with value of c.VND200-250bn, down 85-90% yoy, due to strict movement control in the South during Jun-Sep. Thus we lowered FY21F presales value forecast by 54.1% to VND2,359bn (-3.3% yoy) and expect KDH to resume the sales and marketing activities since Oct. We project a 188.2% yoy surge in FY22F presales value and +31.5% yoy for FY23F.

We lower FY21-23F earnings forecasts following sluggish presales

We revised down FY21F NP forecast by 7.0% to VND1,173bn (+1.7% yoy) to reflect the lower-than-expected 9M21 performance. We also cut our FY22-23F NP by 19.3%/13.5% vs. previous forecasts, following the construction pause in 3Q21 and sluggish presales in FY21F. We estimate GPM to improve 15.3% pts yoy to 59.6% in FY22F and 63.7% in FY23F, thanks to the contribution of higher margin from low-rise units of Cassia and Clarita projects. Consequently, FY22-23F NP are expected to grow 45.6% yoy/38.9% yoy from the low base of FY21F.

Reiterate Add with a higher TP of VND54,800

We revise our TP for KDH up by 20.4% to reflect 1) sooner-than-expected Le Minh Xuan IP launch, 2) housing price acceleration in HCMC and 3) we remove RNAV discount for projects that are likely launched in the next 2-3 years. Potential upside catalysts in the short term could come from higher-than-expected average selling price for Armena, Clarita, 11A, 158 An Duong Vuong projects; our mid- to long-term investment thesis is dependent on whether KDH can clear legal hurdles to start its Tan Tao project. Downside risks are 1) delays in obtaining permits for new launches and 2) upward trend in construction material prices.

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