NVL – Fair valuation, more positive in longer run – Update

• In 2Q21, NVL’s net profit (NP) rose 48.2% yoy to VND1,321bn. 1H21 NP grew 53.2% yoy, fulfilling 45.4% of our full-year forecast.
• We raise FY21/22/23F NP forecasts by 7.7%/39.9%/13.9% due to the adjustment in the revenue bookings of key projects.
• Reiterate Hold with higher revalued net asset value (RNAV)-based target price (TP) of VND107,700.

Strong 2Q21 NP growth thanks to a surge in property handover value
In 2Q21, NVL’s net revenue increased 258.4% yoy to VND2,544bn thanks to strong project delivery of VND2,173bn (+506.9% yoy). Of which, hospitality projects (NovaWorld Ho Tram, NovaHill Mui Ne, NovaWorld Phan Thiet) contributed nearly 70% of handover revenue, HCMC’s central business district (CBD) project (Saigon Royal, Victoria Village) accounted for more than 25% and the rest delivered from very first units in Aqua City. Consequently, 2Q21 NP increased 48.2% yoy to VND1,321bn, bringing 1H21 NP to 53.2% yoy of growth, fulfilling 45.4% of our full-year forecast.

2Q21 presales strongly bounced despite the social distancing
In 2Q21, NVL sold 2,569 units (+134.0% yoy), which is equivalent to US$1,226m (~VND28,110bn) from Aqua City, NovaWorld Phan Thiet and NovaWorld Ho Tram. Cumulatively in 1H21, presales volume and value recorded 4,388 units (+141.1% yoy) and US$1,977m (+204.2% yoy), respectively. We believe presales growth continues to do well in 2H21F and the FY21 presales target of 10,000 units is achievable.

Revise FY21, 22, 23F NP up by 7.7%, 39.9%, 13.9%
We increase FY21-23F by 7.7%-39.9% by adding VND860bn in handover revenue from Saigon Royal and Victoria Village in FY21 revenue and postponing VND780bn handover of Grand Manhattan from FY21F to FY22F. Additionally, we raise Aqua City’s ASP by 7% vs. previous forecast.

Reiterate Hold with a higher TP of VND107,700
We apply a DCF method to calculate the value of under-development projects and reassess future land bank portfolios in this update. Our new RNAV-based TP is VND107,700, which leads us to reiterate coverage on NVL with a Hold rating. We believe NVL stock has closed to its fair value as the stock surged 123% ytd. Re-rating catalysts are 1) a better-than-expected presales, and 2) legal bottlenecks resolution. Downside risks to NVL stock are 1) long regulatory stumbling blocks, 2) more complicated pandemic in cities where NVL’s hospitality projects are located, and 3) dilution from convertible bonds.

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