IDC Update – OUTPERFORM

IDICO CORPORATION – JSC (IDC VN)

2023 business results are in line with ACBS’s forecast. Reiterate our OUTPERFORM recommendation with a target price up by 16% from the previous target price to VND62,600/share at YE2024 mainly thanks to Tan Phuoc 1 Industrial Park added to our valuation.

IDC’s 4Q2023 business results are positive with revenue of VND2,239 bn (+85% YoY) and PAT of VND623 bn (+170% YoY). Growth mainly came from industrial park rental revenue reaching nearly VND1,100 bn while 4Q2022 recorded -VND762 bn as the company adjusted 4Q2022 rental revenue at Phu My 2 Industrial Park (IP).

For 2023, IDC recorded revenue of VND7,237 bn (-3% YoY) and PBT of VND2,056 bn (-21% YoY), equivalent to 105% of ACBS’s forecast and 81% of IDC’s target. The decline in profit was mainly due to gross profit margin decreasing by 7.4% to 33.5% as gross margin of the IP segment decreasing by 19.9% to 52.3%. In 2023, the unrealized revenue recorded when changing the accounting method from annual to one-off is lower than in 2022 (2023 recorded ~ VND470 bn at Que Vo 2 IP while 2022 recorded ~VND2.4 trn from Nhon Trach 5, Phu My 2, Phu My 2 expansion and My Xuan B1 IPs).

IDC exceeded its 2023 leasing plan of 127ha with nearly 170ha signed (+28.8% YoY), of which Huu Thanh IP was the leader with more than 62ha, followed by Phu My 2 with ~54ha (see Figure 1). The average occupancy rate at YE2023 was 58.3% and the average rental price was USD129/sqm/remaining term (+4.9% YoY) (see Figure 2). In 2023, IDC delivered 106ha in Phu My 2, Huu Thanh, Que Vo 2 and Cau Nghin IPs, of which 73ha from one-off revenue (including 29ha signed in 2022 and 44ha signed in 2023) and 33ha from unearned revenue when changing the accounting method from annual to one-off at Que Vo 2 IP.

For the Power segment, 2023 revenue was over VND2.9 trn VND (+1.6% YoY) mainly thanks to an increase in electricity selling prices while distributed electricity volume in IPs decreasing to 1,389 mn kWh (-7.3% YoY) when tenants cut back on production due to fewer orders. Segmented gross margin improved to 12.2% (+4 pps YoY) mainly thanks to Dak Mi 3 hydropower plant resuming operation from October 2022 after a long period of maintenance due to floods.

IDC maintained a good financial status with net debt remaining at around VND1.3 trn in 2023 and Net Debt/Equity ratio at 20.6% (-1.2 pps YoY).

Because IP’s 2023 rental area was higher than our forecast, we adjusted 2024 revenue up by 11% to ~VND9.6 trn (+33% YoY) and PAT by 24% to ~VND2.9 trn (+78% YoY). Growth was mainly thanks to IP area delivered increasing by 53% to ~160 ha and a transfer transaction of 2.2 ha to Aeon with an estimated revenue of VND437 bn. Reiterate our Outperform recommendation with a target price of VND62,600/share, an increase of 16% compared to the previous target price mainly thanks to Tan Phuoc 1 IP added to our valuation.