REE Flash News – NEUTRAL

REE Corporation (HoSE: REE)

REE reported Q2/2024 revenue of VND2,181 bn, +0.3% YoY, whereas gross profit was VND680 bn, -22.7% YoY and NPATMI reached VND355 bn, -27.4%YoY.  Accumulated 6M2024, NPATMI achieved VND836 bn, -32,3% YoY, completing 34.7% REE’s 2024 plan and 34.1% ACBS’s forecast. 

REE’s Business Performance by Segment:

Energy: reported Q2/2024 revenue of VND911bn, -19.0% YoY, and VND106 bn in NPATMI, -55.8% YoY.  For 6M2024, revenue was VND1,933 bn, -27.7% YoY, and VND344 bn in NPATMI, -53.3% YoY. This poor performance was primarily attributed to (1) reduced hydropower output due to the El Nino, which has higher profit margin compared to other segments, and (2) a decrease in average electricity selling prices, leading to an overall decline in profit margin. In detail, for 6M2024, Thac Ba hydropower output decreased by 14.0% YoY, resulting in -19.1% YoY in revenue and  -55.1% YoY in NPAT.  In addition, Vinh Son – Song Hinh hydropower output decreased by 47.9% YoY, leading to -50.9% YoY in revenue and -90.7% YoY in NPAT.

Mechanical and Electronic (M&E): achieved VND933 bn in revenue in Q2/2024, +21.8% YoY, while NPATMI remained unchanged at VND11 bn. For 6M2024, revenue attained VND1,481 bn, +12.8% YoY, and VND35 bn in NPATMI, +29.6% YoY, reflecting the overall economic recovery.

The real estate: attained VND330 bn in Q2/2024 revenue, +25.0% YoY, with VND154 bn in NPATMI, +3.4% YoY. For 6M2024, revenue was VND593 bn, +12.1% YoY, and VND286 bn in NPATMI, +2.5% YoY, driven by improved occupancy rates.

The Water Production and Distribution: experienced a -65.0% YoY in Q2/2024 revenue to VND 7 bn, while NPATMI -22.4% YoY to VND59 bn. For 6M2024, revenue -59.3% YoY to VND 11 bn, and NPATMI -32.4% YoY to VND125 bn.

Quick conclusion: Q2/2024 results were negatively impacted by the sunny season and the El Nino, which affected average annual precipitation and hydropower output. Furthermore, a loss of accumulated VND22 bn in 6M2024 compared to a profit of VND38 bn in the same period last year from Song Da Clean Water Investment JSC (VCW) contributed to the weaker Q2 and 1H2024 performance. While the outlook for 2025 remains largely unchanged from our previous report, the poor first-half performance makes it challenging to achieve the 2024 target. We are reviewing REE’s earnings forecast and valuation model and will provide updates in our next report.