KDH Update – BUY

1Q2026 profit increased sharply mainly thanks to a goodwill gain of VND285 bn from the acquisition of the An Lap project. We adjust our projected NPATMI upwards by 18% to VND1,489 bn (+42% YoY) to reflect the aforementioned profit. The target price is adjusted up by 2% to VND34,100/share, mainly thanks to the addition of the An Lap project, partially offset by an increase of VND4,130 bn in net debt. Reiterate our Buy recommendation.

KDH recorded mixed 1Q2026 business results with net revenue decreasing by 60% YoY to VND 281 bn, but NPATMI increasing by 131% YoY to VND 281 bn. Revenue decreased due to fewer units delivered (1Q2026 delivery of 5 low-rise units at the Gladia project, while 1Q2025 delivery of over 400 apartments at the Privia project). Profit increased mainly thanks to:
(1) Goodwill gain of VND285 bn from the 99% acquisition of An Lap Real Estate Development JSC for VND2,553 bn. This is the developer of the An Lap project, which has a scale of 8.2 hectares in Cat Lai Ward, HCMC, located near the Gladia and Binh Trung expansion projects with over 200 low-rise units, thereby increasing the total land area of the project cluster in Binh Trung – Cat Lai Ward to nearly 40 hectares with a total of ~4,000 apartments and ~600 low-rise units.
(2) Gross profit margin increased from 44.3% to 68.2% because the low-rise section of the Gladia project has a higher profit margin than Privia.

Gladia is a key sales project and a major revenue contributor in 2026. By the end of 1Q2026, KDH accumulatively sold approximately 60% and handed over more than 30% of the total 226 low-rise units at the Gladia project. The company commenced construction of the high-rise section with over 600 apartments in January 2026 and expects to launch sales in 3Q2026 and hand over in 4Q2027.

Leverage ratios are higher than the industry median. In 1Q2026, total outstanding debt increased by nearly VND5,200 bn to VND15,348 bn, mainly due to an additional VND2,100 bn loan for the acquisition of the An Lap project and VND2,678 bn for investment in the Le Minh Xuan Industrial Park expansion Phases 2 and 3, the 11A residential area – Phase 2, and the Tan Tao urban area. The Net Debt/Equity ratio increased from 34.9% to 53.5%, and the Net Debt/EBITDA ratio increased from 3.4 times to 5.6 times, respectively higher than the industry median of 30.4% and 1.9 times. We think KDH’s leverage ratio will improve by the end of 2026 as the company accelerates sales activities at the Gladia project and sells a portion of its stake in three projects (Binh Trung Dong Expansion, 11A, and Le Minh Xuan Industrial Park Expansion) to form partnerships/joint ventures/associates.

Inventories increased due to the acquisition of the An Lap project. In 1Q2026, inventories increased by 25% YoY to over VND29,000 bn, accounting for 73% of total assets, mainly due to the addition of the An Lap project valued at VND5,445 bn.

The real estate market is facing many challenges such as high interest rates and tight credit, affecting buyer sentiment in the short term. However, in the long term, we believe that KDH’s projects will achieve favorable absorption rates thanks to their good locations, strong brand name, transparent legal status, interest-support-packages and the impetus from transportation infrastructure projects such as the My Thuy intersection, Cat Lai bridge, Binh Tien bridge and road, etc.