GEX - Higher-than-expected divestment gain, significant electrical equipment GPM expansion to drive earnings jump; upside evident – Earnings Flash
  • 2024-08-01T00:00:00
  • Company Research
  • GEX announced Q2 2024 revenue of VND8.3tn (+3% YoY), reported NPAT-MI of VND850bn (+165% YoY), and recurring NPAT-MI of VND192bn (-45% YoY). We attribute the 3% YoY revenue increase to 42% YoY higher revenue from electrical equipment (due to sales from cables for the third 500kV line), which outweighs (1) a 51% YoY decline in IP leasing revenue due to a lower IP sales area, (2) 11% YoY lower revenue from construction materials, and (3) a 21% YoY decline in revenue from utilities mainly due to no solar revenue recorded after divestment. The strong earnings were supported by a VND996bn divestment gain from its wind and solar projects as well as doubling gross profit from the electrical equipment segment.
  • For H1 2024, GEX recorded revenue of VND14.9tn (+4% YoY), reported NPAT-MI of VND958bn (+3.0x YoY), and recurring NPAT-MI of VND301bn (-14% YoY), completing 47%/112%/67% of our respective full-year forecasts. We attribute the 14% YoY decline in recurring NPAT-MI to 9% lower gross profit and 6% higher G&A expenses. Lower gross profit is due to (i) 28% YoY lower gross profit (GP) from IP leasing due to a lower leased area, (ii) 11% GP down from construction materials following lower YoY revenue, and (iii) 22% lower utilities GP due to no longer recording revenue from divested solar and wind projects in Q2; these factors outweigh 40% higher GP from electrical equipment due to GPM expansion from 11.2% to 12.2%, as well as higher revenue.
  • We see upside risk to our 2024 reported NPAT-MI forecast, mainly due to (1) an estimated 15% higher-than-expected divestment gain, and (2) higher-than-expected GPM from the electrical equipment segment, pending a fuller review.
  • We currently have an OUTPERFORM rating for GEX with a target price of VND26,200/share.

VGC: Construction materials improve QoQ to offset weaker IP leasing business, in line with our forecast

  • VGC announced Q2 2024 revenue of VND2.7tn (-31% YoY) and reported NPAT-MI of VND158bn (-73% YoY). The YoY plunge in earnings can be primarily attributed to (1) an 81% YoY plunge in IP leased area outweighing a 72% YoY ASP increase due to full tier-1 IP leasing this year vs tier-2 leasing last year, (2) a 3% lower GPM from IP leasing & services, and (3) a 38%% YoY surge in G&A expenses.
  • For H1 2024, VGC recorded revenue of VND5.4tn (-20% YoY) and reported NPAT-MI of VND364bn (-54% YoY), completing 44%/39% of our respective full-year forecasts. The construction materials segment recorded a stronger-than-expected GPM of 12.9% vs our projection of 9.9% mainly due to the construction glass rebound from a loss in Q1 2024 to profit in Q2, while the other categories’ GPM also saw improvements. Additionally, adjusted NPAT-MI  fulfilled 42% of our 2024F forecast, broadly in line with our expectation as we anticipate further recovery from real estate in H2. 
  • We see insignificant changes in our VGC’s 2024 earnings forecast as lower-than-expected interest expense and potential slight upside from construction materials may offset the slight downside from IP leasing, pending a fuller review. 

GEE: Strong electrical equipment margin and divestment gain boost earnings growth

  • GEE announced its Q2 2024 revenue of VND5.3tn (+38% YoY), reported NPAT-MI of VND516bn (+5.0x YoY), and recurring NPAT of VND266bn (+14.0x YoY). Strong revenue growth was mainly due to 43% YoY higher electrical equipment revenue, which offset a 55% YoY decline in power revenue as no solar revenue was recorded after being sold to Sembcorp. We attribute the 14.0x surge in recurring NPAT-MI to: (1) significant GPM expansion from 10.9% to 14.6%, due to increased ASP driven by better demand recovery and partly due to a VND59bn provision reversal for doubtful account receivables vs none in Q2 2023 and (2) a 56% decrease in interest expense. In addition, the reported NPAT was further supported by a VND287bn investment gain from solar power divestment vs none in Q2 2023.
  • For H1 2024, GEE recorded revenue of VND9tn (+24% YoY), reported NPAT-MI of VND620bn (+3.0x YoY), and recurring NPAT of VND345bn (+3.0x YoY), completing 49%/76%/69% of our respective full-year projections. 
  • We see potential upside risk to our 2024F adjusted earnings forecast due to electrical equipment’s higher-than-expected GPM, pending a fuller review. 

GEX’s H1 2024 results 

VND bn

Q2 2023

 Q2 2024

YoY

H1 2023

H1 2024

YoY

% of Vietcap 2024F

Revenue

7,996

8,251

3%

14,406

14,911

4%

47%

   Electrical equipment

3,673

5,222

42%

6,886

8,826

28%

48%

   Utilities (power & water)

370

292

-21%

772

681

-12%

56%

   Construction materials

2,166

1,928

-11%

3,704

3,345

-10%

45%

   IP, industrial estate leasing

1,786

730

-59%

2,976

1,956

-34%

44%

   Real estate sales

-6

58

N.M.

37

72

94%

24%

   Others

6

20

221%

29

31

5%

31%

Gross profit

1,688

1,498

-11%

2,956

2,698

-9%

50%

   Electrical equipment

356

744

109%

771

1,076

40%

59%

   Utilities (power & water)

112

85

-24%

295

230

-22%

52%

   Construction materials

269

315

17%

468

414

-11%

56%

   IP, industrial estate leasing

863

334

-61%

1,319

948

-28%

42%

   Real estate sales

81

13

-84%

91

17

-81%

23%

   Others

6

7

14%

13

12

-10%

41%

Selling exp

-298

-316

6%

-535

-547

2%

46%

G&A

-315

-391

24%

-680

-719

6%

44%

    In which: Goodwill amortization

-52

-52

0%

-104

-104

0%

50%

Operating profit

1,074

791

-26%

1,742

1,432

-18%

57%

Financial income

106

1,086

925%

185

1,251

576%

107%

   Interest income

66

34

-48%

119

82

-31%

38%

   FX gain

10

25

152%

30

42

39%

N.M.

   Gain from securities investment

20

10

-52%

20

103

404%

N.M.

   Others

11

1,018

9453%

15

1,024

6576%

108%

Financial expense

-332

-495

49%

-940

-913

-3%

55%

    Interest expense

-350

-273

-22%

-694

-576

-17%

47%

    FX loss

-10

-43

333%

-30

-87

189%

N.M.

    Loss from securities investment

0

-6

N.M.

0

-9

N.M.

N.M.

    Others

28

-172

N.M.

-216

-241

11%

57%

Income from JVs

40

-4

N.M.

47

-12

N.M.

N.M.

Other income

-17

7

N.M.

-19

12

N.M.

N.M.

Profit before tax

870

1,385

59%

1,014

1,770

75%

87%

NPAT before MI

652

1,104

69%

686

1,357

98%

88%

Minorities interest

-331

-254

-23%

-457

-399

-13%

59%

NPAT-MI, reported

321

850

165%

229

958

319%

112%

NPAT-MI, adjusted (*)

346

192

-45%

349

301

-14%

67%

Source: GEX, Vietcap, (*) Adjusted for one-off items and goodwill amortization expenses

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