VHM Update – BUY

VINHOMES JSC (VHM VN)

A moderate 1H2024 result was due to variance in project delivery timing. However, we adjust 2024 NPAT up by 2% to VND35.1 trn mainly thanks to higher profit from Vinhomes Royal Island. We revise target price down by 11% to VND54,600 mainly due to adjustment in gross margins of Green Ha Long and Can Gio projects. Reiterate our Buy rating.

VHM posted a moderate 1H2024 result with net revenue of VND36,587 bn (-41% YoY) and NPAT of VND11,620 bn (-46% YoY) mainly due to variance in project delivery timing. Revenue mainly came from Ocean Park 1 (VND6.8 trn), Ocean Park 2 (VND6.5 trn), Ocean Park 3 (VND5.6 trn) and Golden Avenue (VND1.9 trn). Profit shared from BCC projects was recorded at over VND6.5 trn (+561% YoY) which mainly came from a bulk sales transaction of 1,550 units to a foreign buyer at Vinhomes Royal Island project incurred in 3Q2023.

Presales in 2Q2024 and 1H2024 posted solid growth mainly thanks to the launch of the new project Vinhomes Royal Island in Hai Phong in March. The company sold 3,300 units with a total value of VND35.5 trn (+120% QoQ) in 2Q2024 and 6,000 units (flat YoY) with a total value of VND51.7 trn (+27% YoY) in 1H2024. The hottest project Vinhomes Royal Island accounted for 81% of 1H2024 presales value. At the end of 2Q2024, VHM accumulatively launched over 6,400 low-rise units out of a total of 8,300 low-rise units and sold 95% of the launched units (incl. both retail and bulk sales).

Vinhomes Global Gate (formerly known as Vinhomes Co Loa, with a total area of 385ha in Hanoi, over 4,100 low-rise units and 12,600 high-rise units) is receiving bookings and is expected to be a key contribution in 2H2024 presales. Because average selling price of Vinhomes Global Gate is 64% higher than our estimation and there are two potential bulk sales transactions with a total value of ~VND40 trn which are near the finalization stage, we adjust 2024 presales up by 23% to VND118 trn. 

VHM continued to maintain a stable debt ratio. During 1H2024, net debt increased by VND10.9 trn to VND49.6 trn mainly because the company issued VND12.5 trn of corporate bonds. Net debt/Equity ratio increased from 21.2% to 24%, but still lower than the industry median of 26.7%.

Because revenue of Vinhomes Royal Island, construction revenue and financial expenses in 1H2024 were higher than our expectation, we adjust 2024 revenue up by 20% to VND85.6 trn (-17% YoY) and NPAT by 2% to VND35.1 trn (+5% YoY). Using the NAV method, we suggest a target price of VND54,600/share for VHM, 11% lower than the previous target price mainly due to adjustment in gross margins of Green Ha Long and Can Gio projects. Reiterate our Buy rating for this stock.