KDH Update – BUY

The orientation focusing on the development of affordable commercial housing and the strictly controlled credit limits allocated to the real estate sector are unfavorable factors for KDH’s mid-to-high-end segment projects. Although KDH is a company with good project legal status and still maintains access to capital sources, its growth momentum has also been significantly reduced. Therefore, we revise down 2026/2027 presales by 27%/19%, respectively. Consequently, 2027 NPAT is revised down correspondingly to VND1,799 bn (-24% compared to the old forecast). KDH’s target price for 2027 is VND23,000/share (-33% compared to 2026 target price). However, we maintain a Buy recommendation as the share price has declined 26% since the last update report.

Downward adjustment of presales due to unfavorable market conditions. KDH owns a landbank of over 620 ha in inner Ho Chi Minh City and focuses on developing mid-end apartment and high-end landed property products. In the 2026-2027 period, KDH focuses on developing a project cluster in Binh Trung and Cat Lai wards with a total area of nearly 40 ha, including more than 600 townhouses/villas priced from VND200 mn/sqm and 4,000 apartments priced from VND83 mn/sqm. Due to the government’s orientation for the real estate market during this period, we believe that KDH’s mid-to-high-end segment projects will be affected in 2026-2027. On a conservative view, we revise down 2026F/2027F presales by 27%/19% to VND4,300/6,400 bn (estimated presales in 1H2026: VND300 bn).

Leverage ratio continues to rise despite the company actively executing project equity transfers. The company plans to accelerate the transfer of a portion of equity in some projects (Binh Trung – Cat Lai ward project cluster, 11A residential area, and Le Minh Xuan expandsion Industrial Park) for cooperation, joint ventures, and associations to leverage foreign capital and reduce medium-term financial pressure. KDH transferred 51% equity in Binh Trung Moi, reducing its ownership ratio to 48.95% and recording financial profit of VND896 bn in 2Q2026. However, in 1H2026, the company’s net debt still increased by nearly VND6,400 bn to VND16,659 bn. Consequently, the Net Debt/Equity ratio increased from 34.9% to 68.9% and Net Debt/EBITDA increased from 3.4x to 8.0x, significantly higher than the industry medians of 28.9% and 1.9x, respectively. The average borrowing cost in 1H2026 increased to 10% (from 9.7% at the end of 2025).

Expansion into BT project. KDH established Khang Phuc An Investment Limited Co., with a charter capital of VND2,500 bn and 100% owned by KDH. The newly established company aims to implement the BT contract for the urban revitalization project of Ma Lang and Cho Ga – Gao area in Ho Chi Minh City with a scale of 4.2 ha and total investment capital of nearly VND16,400 bn, expected to commence construction in 3Q2026 and complete construction in 4Q2028. With the expansion into the BT project, we think KDH’s leverage ratios are expected to remain high in 2026-2027.