KBC Update – OUTPERFORM

KBC reported a decline in 4Q2024 with revenue of VND781 bn (-5% YoY) and NPAT of VND63 bn (-60% YoY) mainly due to a lower revenue proportion of the highest-margin-segment, Industrial park (IP), which led to a decline in gross margin from 59% to 49%. In 4Q2024, IP revenue dropped by 88% YoY, to VND78 bn from the handover of over 3 ha at Nam Son Hap Linh IP (1.9 ha) and Tan Phu Trung IP (1.4 ha). Conversely, residential property revenue increased nearly 19 times YoY to VND488 bn from the handover of over 29,000 sqm at the social housing project in Nenh town, Bac Giang province.

In 2024, KBC announced revenue of VND2,776 bn (-53% YoY) and NPAT of VND460 bn (-80% YoY), completing 11% of its profit target and 78% of our forecast. The decline was mainly due to:

(1) IP leasing revenue decreased by 77% YoY to VND1,195 bn due to lower area delivered (33 ha at the Nam Son Hap Linh, Quang Chau expansion and Tan Phu Trung IPs in 2024 compared to 150ha at these IPs in 2023) and

(2) Gross margin decreased from 67% to 46% as the revenue proportion of the IP segment, which had a margin of 68%, dropped from 89% to 43% while revenue proportion of the residential property segment, which had a margin of 12%, rose from 2% to 33%.

Trang Due 3 IP with a total area of 653 ha in Hai Phong and total investment capital of nearly VND8.1 trn was finally approved in Jan 2025. This IP attracts many huge electronic tenants such as LG and will be the key growth driver for KBC in 2025-2026.

Given a delay in industrial land area delivered from 4Q2024 to 2025, we adjust 2025 revenue up by 20% to VND4,839 bn (+74% YoY) and NPAT by 19% to VND1,157 bn (+152% YoY), mainly generated from the Nam Son Hap Linh, Tan Phu Trung and Trang Due 3 IPs. YE2025 target price is VND32,700/share, down by 16% compared to the previous target price as net debt increased by nearly VND5.3 trn in 4Q2024 and additional land use fee for Trang Cat urban area may increase by VND2-3 trn. Change our rating from Buy to Outperform.