We upgrade our rating for SZC to BUY from OUTPERFORM but cut our target price (TP) by 34% to VND39,400/share.

Our lower TP is mainly due to (1) our 3.2-ppt high WACC assumption, (2) our newly applied 20% discount on our RNAV valuation for SZC to reflect the increased risks surrounding the residential real estate sector — to which SZC has high exposure — and (3) our less positive forecast for deliveries at SZC’s Huu Phuoc residential project in 2023-2024F. Our decreased TP is partially offset by the positive effect from rolling our TP horizon forward to end-2023.

We cut our 2022F NPAT-MI forecast by 7.5% following lower-than-expected GPM in 9M 2022. Additionally, we cut our 2023F and 2024F NPAT-MI forecasts by 17% and 11%, respectively, mainly due to our less positive forecasts for deliveries at the Huu Phuoc residential project.