HDG – Power portfolio gradually bearing fruits – Update

• Charm Villas project is the key driver for net profit growth during FY22-23F.
• We expect power segment to deliver 38.4% yoy growth in FY22F revenue with full-year operation of three renewable power plants.
• We reiterate our Add call with a higher TP of VND55,100 following an 11.1% – 50.2% FY22-23 EPS upgrade.

The buoyant power segment to offset sluggish property in 1Q22
HDG posted VND685bn in 1Q22 revenue (-49.1% yoy) and VND244bn (-24.2% yoy) in 1Q22 net profit, fulfilling 14.2%/29.7% of our forecasts. Power segment revenue grew 97.9% yoy thanks to (1) 152% yoy hydropower output regarding to the influence of La Nina and (2) new contribution of three renewable power plants, contributing 70% to total revenue. On the other hand, residential property revenue dropped 86.4% yoy due to a small contribution from Charm Villas project vs last year’s high base with the Hado Centrosa project. We believe the weak performance of property segment in 1Q22 was just a blip as the handovers of the Charm Villas is likely peak in 2Q22F and 4Q22F.

Launching to sell Charm Villas phase 3 with higher average prices
HDG is launching to sell Charm Villas phase 3 with 130 units in 2Q22F. The company will finalise the selling prices for Phase 3 after doing some market research. Based on our market research, average selling prices of nearby projects have rocketed 40-45% yoy in 1Q22. Thus, primary selling prices of Phase 3 is likely 35% higher than our previous forecast. This prompts us to make an 18% upward adjustment on Charm Villas‘ gross development value (GDV) to VND5,200bn. We expect this project will contribute 41% of HDG’s total revenue over FY22-23F.

We raise FY22-23F net profit forecasts by 11.1%-50.2%
Our earnings revision reflects: (1) higher-than-expected average selling price of Charm Villas Phase 3; and (2) higher-than-previous average competitive generation market (CGM) prices over FY22-23F. We estimate that the power segment revenue will grow 38.4% yoy in FY22F on the back of full-year contribution of three renewable power plants, accounting for about 48% total revenue. Consequently, net profit will grow healthily 13.8% yoy, delivering a solid ROE of 26.3% in FY22F.

Reiterate Add with higher TP of VND55,100
We raise our sum-of-the-part TP by 31.5% to VND55,100 following a valuation rollover to FY22 and 11.1%-50.2% FY22-23F EPS upgrade. Re-rating catalysts include the operation of new power plants and the booking of real estate projects. Downside risks include: (1) unfavorable weather conditions affecting the performance of power plants and (2) inefficient sales at Charm Villas project.

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