VHM – Solid 3Q20 results – Earnings Flash

• Solid 3Q20 earnings growth on the back of 142.8% yoy surge in topline.
• 9M20 net profit grew 6.6% yoy, and formed 65.6% of our full-year forecast.
• Reiterate Add with an unchanged RNAV-based TP of VND104,300.

3Q20: solid earnings growth driven by strong handovers

• Vinhomes JSC (VHM) reported a 3Q20 topline of VND26,483bn, up 142.8% yoy. The strong growth was driven by a 154.8% yoy surge in project delivery revenue to VND25,458bn, mainly due to the delivery of c.10,800 units from three mega projects including Vinhomes Ocean Park, Grand Park and Smart City.
• 3Q20 gross margin narrowed 27.6% pts yoy to 34.4% due to lower portion of bulk sales transactions from Ocean Park.
• 3Q20 financial income fell 52.2% yoy to VND1,990bn due to the decreasing property handover of business cooperation contract (BCC) projects (-91.3% yoy).
• Overall, 3Q20 net profit increased 10.7% yoy to VND6,058bn.

9M20 net profit in line at 65.6% our full-year expectation

• 9M20 revenue increased 31.2% yoy to VND49,378bn, making up 61.9% of our full-year forecast, thanks to apartments handed over from Ocean Park (VND13.4tr), Grand Park (VND11.6tr), Marina (VND5.7tr), and Smart City (VND 4.7tr).
• 9M20 gross margin normalised to 37.4% (-8.6% pts yoy) due to lower contribution of bulk sales transactions and lower margins from office complex sales at Vinhomes Metropolis recognised in 9M20 (GPM of about 30%).
• Consequently, 9M20 net profit rose 6.6% yoy to VND16,337bn, forming 65.6% our full-year projection. We deem the 9M20 results in line as we expect a large revenue boost from more than 11,000 units to be delivered in 4Q20F.

Strong presales momentum likely to continue in 4Q20F and 2021F

• As of 14 Oct 2020, more than 4,500 units of The Origami have been sold with an absorption rate of 92% and ASP of c.US$2,000/sq m. We believe presales growth will remain strong in 4Q20F and 2021F, driven by the launch of Vinhomes Wonder Park. VHM’s total number of pre-sold units reached 25,000 units, which were valued at VND46.6tr at the end of 3Q20.

Reiterate Add with a TP of VND104,300

• We reiterate our Add rating with an RNAV-based target price of VND104,300. We believe it is worth accumulating VHM stocks, given its strong presales and unbilled bookings of VND83tr as of 30 Sep 2020 which translate into a promising outlook for FY21-22F.
• Potential re-rating catalysts include faster bulk sales and the launch of new projects. A downside risk is a surge in mortgage rates that may dampen VHM’s condo presales.

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