KDH – Cautiously optimistic outlook for FY22-23F – Update

• 1Q22 net profit (NP) increased by 46.0% yoy to VND299.5bn on one-off gains, making up 20.4% of our full-year forecast.
• We forecast FY22/23F earnings up by 22.4%/23.9% yoy to VND1,471bn/ VND1,823bn on one-off gain and strong property handovers.
• Reiterate Add with a lower target price (TP) of VND52,400.

1Q22 witnessed a contrast between top-line and bottom-line growth

KDH reported 1Q22 revenue down by 82.9% yoy to VND142.7bn due to lower property handovers. However, 1Q22 net profit (NP) surged by 46.0% yoy to VND299.5bn thanks to a VND308bn one-off income from revaluation at Doan Nguyen House business investment Ltd, making up 20.4% of our full-year forecast.

We see increasing headwinds weighing on property sector outlook in 2022

We see increasing headwinds weighing on sector outlook, including: 1) rising interest rate to effect on housing purchasing decisions, 2) material prices hike that could drive up housing prices and 3) tightening bank loans into property sector and stricter supervision in corporate bond issuance. However, we believe that KDH will still enjoy stable earnings growths over FY22-24F given large number of available-for-sale property units and healthy balance sheet.

Lower FY22-23F NP to reflect lower-than-expected presales

KDH planned to launch Classia project (176 landed units) in FY21 but the COVID-19 outbreak restricted construction activities and caused delays in this project launches. KDH’s unbilled booking value as of May 2022 secures only 5-10% the property handover revenue which we forecasted for FY22F in previous projection. Coupled with increasing headwinds on property market, we cautiously revise down FY22-23F NP forecast by 13.8%/23.2% vs. old forecast to VND1,471bn (+22.4% yoy)/VND1,823bn (+23.9% you).

Reiterate Add with a lower TP of VND52,400

We revise our TP for KDH down by 4.4% to reflect lower-than-expected presales. KDH stock has dropped c.30% from its peak in early 2022; trigger an opportunity to accumulate a property developer with healthy balance sheet and stable earnings growth prospects. Potential upside catalysts in the short term could come from higher-than-expected average selling price for Classia, Clarita and 158 An Duong Vuong projects; our mid- to long-term investment thesis is dependent on whether KDH can clear legal hurdles to start its Tan Tao project. Downside risks are 1) delays in obtaining permits for new launches and 2) continuous upward trend in construction material prices.

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