PHR – Robust earnings growth in FY22F – Update

• In FY21, PHR’s revenue grew 19.3% yoy to VND1,950bn while net profit (NP) plunged 55.9% yoy to VND477bn, fulfilling 118.5% of our forecast.
• We expect FY22F net profit to rise sharply by 156.2% yoy thanks to VND898bn of land compensation from VSIP III.
• Reiterate Add with higher TP of VND88,000.

FY21 recap: riding on rubber price spike, no one-off income
FY21 revenue rose by 19.3% yoy to VND1,950bn, mainly driven by rubber, wood sale (+25.6% yoy to VND1,693bn). FY21 gross margin widened 2.7% pts yoy following a 24.4% yoy rubber selling price spike. However, no land compensation was recorded in FY21 while PHR recorded VND860bn from receiving land compensation in FY20, resulting in a decrease of 55.9% yoy to VND477bn in FY21 net profit, fulfilling 118.5% of our forecast.

Robust FY22F earnings growth driven by one-off gain
Global natural rubber prices accelerated 39% since 2Q21 following the oil price hike and natural rubber supply shortage. We expect the supply shortage could linger into 2022 due to wet weather impact on Southeast Asia’s rubber plantation. Thus, we forecast PHR average rubber price to reach VND43.6m/tonne (6% yoy) in 2022, bringing FY22F rubber revenue to grow 5 % yoy to VND1,529bn. We estimate PHR will record VND898bn one-off gain from VSIP III’s land compensation, accounting for ~84% of FY22F pre-tax profit. However, FY23F NP is forecasted to drop 29% yoy due to the absence of one-off gain.

Industrial park business outlook
PHR aim to continues convert 5,600ha land bank into IP. We see four potential IPs, equivalent to 2,600ha, might be put into operation in the next three years. Tan Lap IP has completed basic construction and targeted to be put into operation in 2023. We expect this IP will contribute about VND450bn, accounting for 87.5% of PHR’s FY23F IP revenue. The expansion of Tan Binh IP is still on the list to be added in Binh Duong province’s IP master plan. We expect this Tan Binh IP will be launched in early 2024.

Reiterate Add with higher SOTP-based TP of VND88,000
We reiterate Add with SOTP-based TP of VND88,000 (+23% vs previous forecast) on the back of (1) a valuation rollover to 2022 and (2) we lower discount from 20% to 10% in order to reflect brighter business from all segments. Upside catalyst could come from 1) higher-than-expected hike in rubber price, 2) the amount of land compensation is larger than expected, the legal progress for Tan Binh expansion was approved earlier than expected. Downside risk could come from 1) rubber price may drop due to the recovery of rubber supply, 2) the slowdown of China rubber demand.

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