PHR – All eyes on land compensation in 2H22 – Update

• PHR’s 1H22 revenue decreased by 19.9% yoy while net profit (NP) surged by 108.5% yoy, fulfilling 28.0% and 28.9% of our forecast, respectively.
• We expect PHR to book one-off gain about VND691bn in FY22F and VND207bn in FY23F from land compensation of VSIP III.
• Reiterate Add with a lower TP of VND78,100/share following the lower FY22F EPS forecasts.

2Q22 recap: no one-off gain from land compensation was recorded

PHR reported 2Q22 revenue dropped by 49.5% yoy due to the decrease of 51.4% yoy in rubber & wood segment revenue. Since China implemented “zero-Covid” and export restriction measures, PHR’s rubber consumption has been negatively affected. Moreover, there was no one-off income from land compensation has been recorded in 2Q22 due to slower-than-expected land clearance, causing a decrease of 32.6% yoy in the company’s 2Q22 NP. For 1H22, revenue decreased by 19.9% yoy while NP surged by 108.5% yoy, fulfilling 28.0% and 28.9% of our full-year forecast, respectively.

Change in FY22-23F earnings forecasts

We lower FY22/23F revenue by 6.5%/6.3% vs. previous forecast as we are concerned about the downward trend in both rubber’s consumption volume and average selling price (ASP) if China prolong “zero-Covid” policy. We revise down FY22F NP by 15% from previous forecast to VND1,040bn due to reducing one-off gain from land compensation of VSIP III to VND691bn. Following that, we raise FY23F NP by 16.7% vs. previous projection given the remainder of VSIP III land compensation carried over to FY23F.

FY22-24F outlook: Tailwinds subsiding

Although natural rubber prices have peaked out in Mar 2022, we still maintain positive view for PHR’s rubber business, underpinned by: 1) possible strong export recovery once China eases “zero-Covid” policy; 2) young rubber plantations in Cambodia to secure strong volume growth over FY22-24F. For IP business, we see the slowdown in land conversion to industrial process in the next couple quarters. We expect PHR to book one-off gain about VND691bn in FY22F and VND207bn in FY23F. We expect Tan Lap 1 IP will be into operation in 2024F. It leads to the growth on FY22-24F NP at 14.7% CAGR.

Reiterate Add with a lower TP of VND78,100/share

We lower SOTP-based TP of VND78,100 following lower FY22F EPS forecasts and higher discount to RNAV valuation to reflect the legal delay on approval of IPs conversion. Downside risks include 1) China prolongs zero-Covid; 2) slower-than expected land clearance.

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