SZC – Solid earnings growth momentum in 4Q21 – Earnings update

• In 4Q21, SZC recorded its revenue of VND147.7bn (+108.9% yoy) and net profit (NP) of VND68.1bn (+186.7% yoy).
• For FY21, net profit grew 74.0% yoy to VND323.6bn, mostly from the contribution of Chau Duc IP, above 18.2% our forecast.
• We expect FY22F NP to grow 41.0% yoy, driven by a rise in revenue from the industrial property and residential projects

Robust 4Q21 NP fueled by solid land leased and rental prices surge
● SZC leased 8.9ha to Industrial Urban Development JSC No. 2 (D2D) in Oct 2021.
● SZC’s 4Q21 revenue surged by 108.9% yoy to VND147.7bn, mostly from industrial property sales (+198.4% yoy to VND144.7bn).
● 4Q21 gross profit margin expanded by 24.1% pts to 64.0% thanks to a 10%-15% yoy increase in land rental prices at Chau Duc IP.
● As a result, SZC’s 4Q21 net profit soared by 186.7% yoy to VND68.1bn.
FY21 net profit beats our forecast
● D2D rented 22ha industrial land at Chau Duc IP and planned for corporation investment 40 townhouses at Sonadezi Huu Phuoc.
● SZC has signed the capital contribution agreements in Sonadezi Huu Phuoc project with internal and related persons, each agreement is equivalent to value of one land lot (175-196qsm). The company received a capital contribution of VND220.6bn at this project in FY21.
● Sonadezi Huu Phuoc and Chau Duc golf course projects have completed the basic infrastructure, but the construction progress and legal procedures are slower than expected due to COVID-19, so these projects have not been recorded revenue in FY21 as planned.
● Toll collection business freezed in FY21 due to lack of electronic toll collection system. The management has not provided further information on the status and timeline at this project.
● FY21 revenue rose by 64.7% yoy to VND713.2bn, driven by industrial property sales at Chau Duc IP (+ 98.1% yoy to VND702.1bn).
● FY21 gross profit margin expanded by 9.3% pts to 63.2% thanks to a 10%-15% yoy increase in land rental prices at Chau Duc IP.
● As a result, SZC’s FY21 net profit soared by 74.0% to VND323.6bn, coming in at 118.2% of our full-year forecast.
● SZC’s total debt kept increasing to VND2,199.6bn (+32.9% yoy), causing the company’s debt/equity ratio was 1.5x, higher than the 1.3x seen at the end of FY20.
FY22F outlook: We expect another stellar year for SZC
● We expect SZC to record VND140.0bn of prepayment from its clients, Rich Base Vietnam and Viet Nhat steel production trading in FY22F revenue.
● We expect SZC continues to open for sale Sonadezi Huu Phuoc phase 2 in FY22F, after selling out phase 1 in FY21.
● We estimate FY22F revenue/NP to grow 43.9% yoy/41.0% yoy to VND1,026.4bn/VND456.2bn, driven by a rise in revenue from the industrial property and residential projects.
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