REE Flash New – OUTPERFORM

REE CORPORATION (HoSE: REE)

REE reported +3.4% YoY in revenue to VND2,029 bn in Q3/2024, accompanied by  +6.9% YoY in NPATMI to VND480 bn. Cumulative 9M2024, NPATMI reached VND1,316 bn, -21.8% YoY, fulfilling 55% of the 2024’s company target and 54% of our forecast. Although the results fell short of our projections, we maintain our forecast for REE, given anticipation a strong rebound in Q4/2024, driven by the energy segment as the La Nina phenomenon intensifies towards the year-end, with a target price of VND 70,400/share.

REE’s revenue +3.4% YoY in Q3/2024, driven by growth in real estate segment (VND282 bn, +5.6% YoY) due to the commencement of Etown 6; and the energy segment (VND1,008 bn, +12.6% YoY) supported by favorable hydrological conditions as the ENSO cycle shifted towards Neutral and La Nina phases. NPATMI reached VND480 bn, +6.9% YoY, benefiting from improved gross margin to 33.9% from 33.3% in Q3/2023 and a decrease in finance expenses (Q3/2024: VND185 bn, -33.0% YoY; with interest expenses -20.6% YoY to VND 181 bn).

For 9M2024, revenue -7.0% YoY to VND6,047 bn, primarily due to -17.6% YoY in the energy segment (VND3,569 bn) as a result of the El Niño phenomenon in the first two quarters, and most REE’s energy mixed is hydropower. The gross margin contracted to 34.9% from 42.9% in 9M2023, leading to -21.8% YoY in NPATMI to VND1,316 bn.

Quick conclusion: While REE’s 9M2024 performance fell slightly short of our expectation, we remain optimistic about a rebound in Q4/2024, supported by the La Nina cycle which is expected to benefit the hydropower segment, enabling REE to meet both its 2024 plan and our forecast. Therefore, we maintain our forecast and valuation for REE with a target price of VND70,400/share, representing total expected return of 10.7%.