KBC Update – BUY

KINH BAC CITY DEVELOPMENT HOLDING CORPORATION JSC (KBC VN)

3Q2024 result grew strongly YoY but 9M2024 result was disappointing due to low industrial park area delivered. Adjust 2024 profit forecast down by 60% to VND586 bn. Expect high growth in 2025 when Trang Due 3 industrial park is approved. Target price at YE2025 is VND39,000/share, down by 9% compared to YE2024 target price due to the delay in handover of industrial park projects. 

Kinh Bac reported strong growth in 3Q2024 with revenue of VND950 bn (+284% YoY) and NPAT of VND201 bn (+986% YoY) mainly thanks to:

(1) Industrial park (IP) leasing revenue increased 23 times YoY, to VND585 bn from the handover of 14.4 ha at Nam Son Hap Linh IP (12.4 ha) and Quang Chau IP (2 ha) while 3.9 ha was delivered at Nam Son Hap Linh IP in 3Q2023,

(2) Residential property revenue increased nearly 4 times YoY to VND196 bn from the handover of 13,800 m2 at the social housing project in Nenh town, Bac Giang province while 3,900 m2 was delivered at Trang Due Urban Area in 3Q2023.

In 9M2024, KBC announced revenue of VND 1,994 bn (-58% YoY) and NPAT of VND397 bn (-81% YoY), completing 10% of the profit target and 30% of our forecast. The decrease was mainly due to:

(1) IP leasing revenue decreased by 76% YoY to VND1,117 bn due to lower area delivered (29.7 ha at the Nam Son Hap Linh and Quang Chau IPs in 9M2024 compared to 131.8 ha at Nam Son Hap Linh, Quang Chau and Tan Phu Trung IPs in 9M2023) and

(2) Gross margin decreased from 69% to 45% as gross margin of IP leasing segment fell from 72% to 53% given an adjustment of cost of goods sold at the Nam Son Hap Linh IP. 

As IP area delivered in 9M2024 was lower than expected, we revised down the total area delivered for the whole year of 2024 from 77ha to 44ha. Therefore, estimated 2024 revenue is adjusted down by 35% to VND2,718 bn (-52% YoY) and NPAT down by 60% to VND586 bn (-74% YoY). 

We expect Trang Due 3 IP to be approved and recorded revenue in 2025. Estimated 2025 revenue is VND4,030 bn (+48% YoY) and NPAT is VND973 bn (+66% YoY), mainly generated from the Nam Son Hap Linh, Tan Phu Trung and Trang Due 3 IPs. The target price at YE2025 is VND39,000/share, down by 9% compared to YE2024 target price due to the delay in handover of IPs. Reiterate Buy recommendation.