KDH Update – OUTPERFORM

KHANG DIEN HOUSE TRADING AND INVESTMENT JSC (KDH VN)

1H2024 NPAT declined mainly due to a lower gross margin, fines and compensation costs. However, we revise up 2024 NPAT by 14% to VND925 bn (+27% YoY) after including realized profits from sales of land lots occurred in 1H2024. The 2025F prospect is much brighter with 13% YoY in revenue and 73% YoY in NPAT thanks to the contribution of Clarita, Emeria and Le Minh Xuan expansion IP. Rolling forward target price to VND41,800/share at YE2025 (+19% compared to our latest target price for 2024). Change rating from Neutral to Outperform.

In 1H2024, KDH recorded revenue of VND979 bn (-4% YoY) and NPAT of VND344 bn (-25% YoY), completing 25% and 44% of company targets, respectively. A decline in 1H2024 NPAT was mainly due to a lower gross margin (68.9% vs 84.2% in 1H2023) and VND56 bn of fines and compensation costs. We estimated that the company delivered around 10 units at Classia project and sold some undisclosed land lots in 1H2024. The selling of land lots in 1H2024 was beyond our expectation. 

2024 business result is mainly generated from Classia and Privia and both projects are on track with the company’s target. At the end of 2Q2024, Classia project has been sold 97% and delivered 95% accumulatively. Privia project with estimated total revenue of ~VND3.5 trn will start delivering from October 2024. Key highlight of legal progress in 1H2024 was that KDH paid land use fees for Solina project – Phase 1 (13ha) and Le Minh Xuan expansion industrial park (IP) – Phase 1 (89ha) which was highly appreciated amid the current slow legal approval process in HCMC. We expect that KDH will launch the low-rise components of Clarita and Emeria projects at the end of 2024. 

To accelerate land use fee payment and land clearance processes before the new land price table applied on Jan 01st 2026, KDH increased net debt by VND2,552 bn to VND5,159 bn in 1H2024, leading to an increase in Net debt/Equity ratio from 16.8% to 32.6% which was higher than the industry median of 26.7%. Besides, KDH successfully raised VND3 trn from a private placement of 110mn share at the average price of VND27,250/share in July.

We adjust estimated 2024 revenue up by 18% to VND4,573 bn (+119% YoY) and NPAT up by 14% to VND925 bn (+27% YoY) as we include sales of land lots realized in 1H2024 in the forecast. For 2025, we estimate revenue at VND5,147 bn (+13% YoY) and NPAT at VND1,599 bn (+73% YoY) mainly thanks to the contribution of Clarita, Emeria and Le Minh Xuan expansion IP. However, 2025 NPATMI may go sideways and reach VND920 bn (-0.1% YoY) because of significant minority interest realized when KDH distributes 49% profit of Clarita and Emeria projects to Keppel. Using NAV method, we achieve a target price of VND41,800/share at YE2025, up by 19% compared to 2024 target price mainly thanks to a lower WACC (11.5% vs 12.8%) and increases in compensation rate and selling prices.  Change rating from Neutral to Outperform.