VHM – Stand out in the midst of sector difficulties – Update

• 3Q22 net profit (NP) grew 29.8% yoy mainly thanks to the start of product handover at Vinhomes The Empire and bulk sales transactions. 9M22 NP (-27.3% yoy) fulfilled 56.5% of our full-year forecast.
• We lowered FY22-24F NP by 10.8%-42.4% as presales might be hit by multi macro headwinds.
• Reiterate Add with lower RNAV-based TP of VND82,000.

Strong NP growth in 3Q22 thanks to The Empire handovers and bulk sales

VHM posted 3Q22 results with VND17.8tr (-13.9% yoy) in revenue and VND14.5tr (+29.8% yoy) in NP. The strong NP growth was primarily driven by the delivery of 1,300 units at The Empire thanks to accelerated construction, the pre-tax gain of VND8.9tr from bulk sales transactions at The Empire and The Crown and ongoing handovers at Ocean Park, Grand Park and Smart City. Thereby, 9M22 NP (-27.3% yoy) fulfilled 56.5% of our FY22F forecast; however, the continuing delivery at The Empire is expected to be strong in 4Q22, together with handovers at other ongoing projects, driving the whole FY22’s NP target.

Multi headwinds weigh on presales outlook into 2023

We see increasing headwinds weighing on sector outlook into 2023, including: 1) tightening bank loans into property sector and stricter supervision in corporate bond issuance will limit developer’s raising fund possibility; 2) rising mortgage rates will hinder the housing purchasing decisions; 3) uncertainties from Land Law 2013 amendment might cause the cautious sentiment of both developers and home buyers. Property market will likely experience a harsh winter in 2023F before a reversal in monetary policy, in our view. Thus, we forecast VHM’s presales value will decrease by 33.8% yoy in FY23F.

We are cautiously lower FY23-24F earnings forecasts

We revise VHM’s FY22F/23F/24F revenue and net profit down by 44.7%/ 28.6%/40.9% and 10.8%/34.6%/42.4%, respectively from previous forecast, underpinned by lower presales growth and delay at Co Loa and Wonder Park vs. previous projection.

Reiterate Add with lower TP of VND82,000

We lower our RNAV-based TP by 28.7% following FY23-24F EPS downward, presales slow down and higher WACC. In our view, VHM is among a few developers that have strong balance sheet (net debt/equity: 17.3% at end-3Q22) and ample liquidity (VND15.9tr cash & cash equivalents at end 3Q22). Though we are not positive about the property sector outlook in 2023, VHM is still attractive for long term investment regarding its position and brand name. Potential re-rating catalyst is a reversal of monetary policy that supports property market. A downside risk are delays in obtaining permits for new launches and higher mortgage rates may dent VHM’s presales.

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