CTD reported weak Q2 2021 results with revenue of VND2.6tn (USD110.9mn; -36% YoY) and NPAT-MI of VND45bn (USD2.0mn; -71% YoY). These results translate to H1 2021 revenue of VND5.1tn (USD222.6mn; -32% YoY) and NPAT-MI of VND99bn (USD4.3mn; -65% YoY). Q2 2021 gross margin inched up to 5.3% vs 4.7% in Q1 2021 but was lower than 5.9% for full-year 2020. CTD’s gross margin of 5.0% in H1 2021 was pressured by 1) high construction material prices (steel prices) and 2) CTD’s margin being pressured by competition. SG&A expenses as percentage of revenue remained high at 4.8% in Q2 2021 compared to 4.7% in Q1 2021 and 4.5% in 2020, which continued to weigh on EBIT. 

At today’s analyst meeting, management shared that CTD signed VND14.0tn (USD609mn) worth of total signed contract value in H1 2021 and that it is confident regarding its 2021 newly signed contract value target of VND21.7tn (USD943mn; 21% higher than our full-year forecast). Although H1 2021 newly signed contract value fulfilled 78% of our full-year forecast of VND18tn (USD783mn), we expect CTD’s construction progress and therefore revenue and profit recognition in H2 2021 to be delayed due to recent disruptions caused by COVID-19 on construction activities in some provinces/cities. 

As CTD's H1 2021 results fulfilled 36% and 29% of our full-year revenue and NPAT-MI forecasts, respectively — and in addition to the recent disruption caused by COVID-19 — we anticipate downside risk to our earnings forecast for CTD as noted in our last Update Report, CTD [MARKET PERFORM +0.5%] - High material costs, competition to hinder recovery, dated May 27, 2021, pending a fuller review.