- We upgrade our rating for ACG from OUTPERFORM to BUY and raise our TP by 8% mainly because of higher projected profit margins, which are partly offset by our exclusion of ACG’s land-use rights in Thai Hoa Ward from our valuation and a higher house risk-free rate assumption. 

- For 2022-2024, we increase our aggregate NPAT forecast by 9% as we raise our projected EBIT margin from 13.7% to 16.4%, which is partly offset by a 4% reduction in our aggregate sales forecast. ACG’s profit margins beat our expectation in H1 2022 — especially for exports. However, exports account for the downward revision in our sales forecast as we are more pessimistic about furniture demand from developed economies in 2022-2024.

- We exclude the aforementioned land-use rights from our valuation because of limited visibility into (1) the authority’s schedule of converting the land to non-industrial uses, (2) ACG’s cost of relocating the factories currently located on the land lot, which could substantially offset the existing land value, and (3) ACG’s plan to develop a residential property project on the land lot.

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