IDC Update – NEUTRAL

IDICO CORPORATION – JSC (IDC VN)

Positive 1Q2024 business results. Adjust 2024 forecast mainly due to a reduction in industrial park land area delivered. Change recommendation from Outperform to Neutral with an almost unchanged target price of VND64,500/share because the stock price has increased by 13% since our last update report in Feb 2024.

IDC’s 1Q2024 business results were positive with revenue doubling YoY to nearly VND2.5 trn and PBT rising nearly 5 times YoY, to nearly VND1 trn, completing 29% and 40% of its targets, respectively. Gross margin also increased to 44.5% compared to 26.5% in 1Q2023 thanks to an increase in revenue proportion of industrial park (IP) – the highest-gross-margin segment. This impressive result was mainly thanks to:

(1) delivering over 34ha of IP land area in 1Q2024 with revenue of over VND1.3 trn (+533% YoY) at Phu My 2 IP (20ha), Huu Thanh IP (12ha) and Que Vo 2 IP (2ha) and

(2) delivering a 1.45ha land lot in Long An province to Aeon with a revenue of VND268 bn. The remaining land plot of about 7,300 m2 with a value of ~VND170 bn will be handed over to Aeon and recorded revenue after completing legal procedures.

IDC signed 10 leasing contracts with a total area of 26.2 ha in 1Q2024, completing 18% of its full year rental plan of 145 ha (-15% YoY), including 12.1 ha at Huu Thanh IP, 12ha at Que Vo 2 IP and 2ha at Phu My 2 IP. Average rental price reached USD134/sqm/remaining term, a slight increase of 3.9% QoQ, of which Que Vo 2 IP had the fastest growth rate of 14% QoQ, reaching USD136/sqm/remaining term. The total remaining leasable area of the 5 IPs was 554ha and the average occupancy rate was over 60% at the end of 1Q2024 (See Figure 1).

Power revenue increased slightly by 7% YoY, to VND688 bn in 1Q2024 mainly thanks to higher volume distributed in IPs. However, segmented gross margin decreased sharply to 5.1% compared with 11.9% in 1Q2023 due to drought and water shortage at two hydropower plants Dak Mi 3 and Shrok Phu Mieng, leading to a low average power selling prices of VND800-900/kwh based to contracted prices signed with EVN.

IDC maintained a good financial position with net debt reducing by over VND300 bn in 1Q2024 to VND964 bn and Net Debt/Equity ratio was recorded at 14.9% compared to 20.6% at YE2023.

We adjusted IP land area handed over in 2024 by 24% to about 122 ha, but it is still higher than the company’s plan of 100 ha because we think that official signing time and delivery schedule of some 2023 MOU contracts will be postponed. Therefore, we adjusted total revenue down by 12% to ~VND8.5 trn (+17% YoY) and PBT by 28% to ~VND2.6 trn (+28% YoY). Change recommendation from Outperform to Neutral with an almost unchanged target price of VND64,500/share at YE2024 because the stock price has increased by 13% since our last update report in Feb 2024.