- HDG’s Q2 2021 NPAT-MI slumped 93% YoY to VND33bn (USD1.4mn), which was mainly driven by an absence of real estate handovers for the Ha Do Centrosa project and booking of selling expenses for the recently launched Charm Villas project.
- The above negative developments were partly offset by HDG’s robust energy portfolio thanks to strong hydropower volume, a full-quarter contribution from the 2020-installed Infra 1 solar farm (50 MWp) and profits from HDG’s office leasing & hotel segment that incurred losses in Q2 2020.
- HDG’s H1 2021 NPAT-MI fell 44% YoY to VND355bn (USD15mn) and completed 27% of our full-year forecast. We continue to anticipate that earnings will improve significantly in H2 2021 vs Q2 2021 thanks to (1) secured handovers for the Charm Villas phase 1 (90 of 165 units sold) now that construction is complete, according to the company, and (2) a contribution from three new energy projects. Nevertheless, we see slight downside risk to our 2021F earnings forecast regarding interest expenses as they will likely ramp up in H2 2021 vs H1 2021 after several new energy projects come online, pending a fuller review.
- Despite the recent resurgence of COVID-19 in Vietnam that could lead to delays in the construction and handover process of the remaining 75 of 165 units sold at the Charm Villas project, we see little downside risk in our forecast as our NPAT-MI forecast for the Charm Villas in 2021F is already ~20% lower than management’s guidance.
- The energy segment tracked well with our expectations as (1) HDG’s solar power portfolio achieved our expected load factor (~25%) despite EVN’s solar power curtailment, (2) HDG’s hydropower portfolio delivered robust earnings growth thanks to favorable weather conditions, and (3) HDG completed the installation work for 10 of 12 wind turbines at the 7A wind farm and is on track to bring this project online before the feed-in tariff deadline of October 31, 2021.
- The office leasing & hotel segment beat our expectation. The occupancy rate at HDG’s Ibis Hotel improved to 90% in Q2 2021 (80% in H1 2021) vs 54% in 2020. Moreover, the occupancy rate of HDG’s office leasing space edged up to 94% in H1 2021 vs 92% in 2020.

Operating cashflow jumped in Q2 2021. HDG generated VND1.3tn (USD59mn) and VND1.6tn (USD70mn) of operating cash flow in Q2 and H1 2021, respectively. This robust cash generation performance was mainly driven by successful presales for the Charm Villas real estate project in Q4 2020 and Q1 2021 (165 units sold) and contribution from HDG’s energy portfolio. Per HDG, while the construction work for the Charm Villas project is temporarily suspended due to Hanoi’s tightened social distancing measure, the company sold 90 units in the first presales launch (Q4 2020) that will be ready for handover in H2 2021. In addition, after social distancing measures ease (which we expect to happen in September 2021), the company will be looking to launch its third and fourth presales events in Q4 2021 and early 2022, respectively, for the remaining 211 units at this project.