SZC – The best is yet to come – Update

• SZC posted VND68bn in 4Q21 net profit (NP) (+186.7% yoy). Consequently, FY21 NP soared 74.0% yoy to VND324bn, above 18.2% our forecast.
• We expect FY22F NP to grow 81.7% yoy, driven by a rise in revenue from the industrial property (IPs) and residential projects.
• Reiterate Add with a higher target price (TP) of VND90,800, following prices surge in both residential property and IPs in BR-VT.

Solid 4Q21 NP fueled by robust landlease and surging rental prices
SZC’s 4Q21 revenue surged by 108.9% yoy to VND147.7bn, mostly from IPs sales (+198.4% yoy to VND144.7bn). 4Q21 gross profit margin expanded by 24.1% pts yoy to 64.0% thanks to a 10-15% yoy increase in rental prices at Chau Duc IP. Thus, 4Q21 NP soared 186.7% yoy to VND68.1bn. Consequently, FY21 NP surged 74.0% yoy to VND324bn, above 18.2% our forecast.

Positive outlook for FY22-24F IPs sales remain intact
We believe the prices uptrend at Chau Duc industrial park (IP) will continue in 2022F given the high demand and accelerating infrastructure development in Ba Ria – Vung Tau (BR-VT). We stay positive on FY22-24F IPs sales with a CAGR of 22.5% thanks to leasing out c.40-60ha of industrial land area per year and the average rental growth of 10-15% p.a to US$75-95 psm per lease term.

Residential property business is ripe for the picking in FY22-24F
SZC delayed land lot handovers at Sonadezi Huu Phuoc project to FY22F due to COVID-19. However, SZC still recorded resilient presales and received a capital contribution of VND220.6bn at this project in FY21. We expect residential property will contribute 30-35% in FY22-24F revenue. In addition, SZC has completed feasibility study at Chau Duc urban area project with estimated GDV of c.VND14,500bn in early-2022. We believe SZC will boost the legal procedures at this project, after ten-year delay, to enjoy residential prices uptrend in BR-VT.

Raise FY22-24F NP to reflect land prices surges
Given the reinstatement of the delayed land lot handovers in FY21 and faster-than-expected shophouse implementation at Sonadezi Huu Phuoc project, we raise our FY22-24F NP forecast by 28.9%/24.5%/20.0% to VND588bn (+81.7% yoy)/VND765bn (+30.1% yoy)/VND980bn (+28.2% yoy), respectively.

Reiterate Add with a higher TP of VND90,800
We reiterate Add with a higher SOTP-based TP of VND90,800. Upside catalysts are 1) a better-than-expected IPs and residential land sales, 2) faster land clearance, which will speed up project implementation. Downside risks are 1) prolonged 4th COVID-19 outbreak which could restrict sales and investment activities, and 2) delays in residential and golf course launches.

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