• GEX announced Q1 2024 revenue of VND6.7tn (+4% YoY) and reported NPAT-MI of VND109bn vs a net loss of VND92bn in Q1 2023, fulfilling 21% and 11% of our respective full-year forecasts. Adjusted/Recurring NPAT was VND108bn, completing 18% of our 2024 projection. The divergence between the reported top line and bottom line was mainly due to (1) higher financial income (+109% YoY, chiefly from a VND93bn gain from securities investment vs none in Q1 2023), (2) lower financial expense (-31% YoY, due to no provision for trading securities vs VND145bn in Q1 2023 and reversal of VND21bn from the previous provision), and (3) surging gross profit margin (GPM) of industrial parks leasing to 51% from 38% in Q1 2023. (4) These outweigh significantly lower GPM from electrical equipment, construction materials, and utilities at 9%/7%/37% vs 13%/13%/45% in Q1 2023, respectively. 
• We foresee insignificant changes in our 2024 earnings forecast for VGC and GEX, in addition to slight downside risk for GEE, pending a fuller review. This is following the stronger-than-expected industrial park leasing, which may offset weaker-than-expected earnings from construction materials. In addition, we expect CAV’s GPM to improve in following quarters to support 2024 earnings of the electrical equipment segment. We also note that GEX has not recorded potential gain from the divestment of its 245-MW power portfolio, which we estimate to be VND950bn. This should help GEX accomplish our full-year forecast with revenue of VND32tn (+7% YoY) and reported NPAT-MI of VND1.0tn (+3.0x YoY).
• We currently have a MARKET PERFORM rating for GEX with a target price of VND23,400/share.

IP leasing & services segment posted 35% YoY gross profit growth in Q1 2024, completing 28% of our full-year forecast. The GPM from IP leasing & services surged from 38% in Q1 2023 to 51% in Q1 2024, which supports our forecast for an average 2024 GPM of 49% for this segment. In Q1 2024, VGC leased 40 ha (flat YoY) while ASP was also flat YoY (~VND2.7mn/m2 vs our forecast for 2024 ASP to decline 13% YoY). According to GEX, the leasing price increased slightly across VGC’s industrial parks in Q1 2024, but the structure of additional leased areas leaned toward tier-2 IPs (Yen My & Tien Hai) in this quarter vs the higher shares of tier-1 IPs (Yen Phong 2C) in Q1 2023. This explains the flat YoY ASP while the leasing price generally edged up. The higher GPM from IP leasing & services is mainly due to lower costs of 18% YoY potentially associated with the lower land clearance costs of additional tier-2 leased areas while the leasing price increases.

Construction materials gross profit was VND99bn (-50% YoY) in Q1 2024, achieving 8% of our full-year forecast, mainly due to a significantly lower GPM of 7% vs 13% in Q1 2023. We attribute this lower GPM to (1) lower demand and selling price, (2) higher input material prices, and (3) higher depreciation expenses due to the operation of new production lines. We foresee downside risks to our 2024F earnings forecast for the construction material segment following lower-than-expected sales volume and lower GPM, pending a fuller review.

Electrical equipment revenue was VND3.6tn (+12% YoY) and gross profit of VND332bn (-20% YoY) in Q1 2024, achieving 21%/18% of our respective full-year projections, mainly due to significantly lower GPM of 9% vs 13% in Q1 2023. Top line growth was mainly from the strong revenue growth of CAV (the cable company posted 23% growth in its revenue). We attribute the decline in GPM to (1) aggressive discounts for CAV’s sales in the central and northern markets during the initial stage of market expansion; (2) CAV’s higher sales to the project channel which has a lower margin vs the agent channel; (3) higher contributions from CAV and CFT- the copper rod producer which has a lower margin vs other electrical equipment companies. However, in its recent AGM, GEX stated its expectation for CAV to maintain its historical four-year high GPM in 2023 to 2024, reaching 10.9% (vs our forecast of 10.8%). As of mid-March 2024, CAV has won 703 bidding packages with a total contract value of VND6.3tn, achieving 58% of our 2024 revenue forecast. Therefore, we expect a stronger recovery of electrical equipment in H2 2024 – led by CAV - to accomplish our full-year forecast. 

Power and water recorded revenue of VND389bn (-3% YoY) and gross profit of VND145bn (-20% YoY), completing 32%/33% of our respective full-year forecasts. The divergence between revenue and gross profit growth was mainly due to the lower GPM of 37% vs 45% in Q1 2023 as there was a heavy depreciation expense from Song Da Water JSC’s (VCW) doubling capacity. According to GEX, VCW’s additional capacity is to be operational in 2025, in line with our forecast.

GEX’s Q1 2024 results

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

VGC: Q1 2024 NPAT achieves decent growth due to industrial park business

• VGC announced Q1 2024 revenue of VND2.6tn (-5% YoY) and reported NPAT-MI of VND206bn (+7% YoY), fulfilling 20%/18% of our respective projections. The YoY increase in earnings can be primarily attributed to the robust IP leasing & services segment outweighing weak profit from the construction materials segment.
• We see insignificant changes in our earnings forecast for VGC’s 2024 as the potential for a slight upside from IP leasing & services may offset the slight downside from construction materials, pending a fuller review.

GEE: Q1 2024 NPAT strong due to plunge in financial expense

• GEE announced its Q1 2024 revenue of VND3.7tn (+9% YoY), NPAT-MI of VND105bn (+46% YoY), and recurring NPAT of VND95bn (+34% YoY), fulfilling 21%/12%/16% of our respective full-year forecasts. The divergence between top line and bottom line growth was mainly due to the lower financial expense (-48% YoY, primarily due to VND101bn lower interest expenses), outweighing GEE’s lower GPM of 10% vs 14% in Q1 2023. We expect GEE to record ~VND380bn divestment gain in coming quarters to help its earnings achieve our full-year forecast.

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