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Ha Do Group: Profits exceed FY 19 plans; awaiting 2020 catalysts

    Duong Lai
    Duong Lai

    Real Estate, Building Materials

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    Rong Viet
    13 February 2020
    Published byRong Viet

    Ha Do Group announced its business results for 2019 with revenues of VND4,327bn (+ 34%yoy) and net income of VND842bn (+ 33%yoy). The company exceeded profit plans for the year by 26%. The major contribution to the results in 2019 was still the real estate segment, with an estimated share of 80%. The remaining came mainly from the energy segment. Specifically, the key drivers were the contribution from new operational plants, namely Hong Phong 4, and the acceleration in deliveries of the Centrosa Garden project. Generally, the results were in line with our estimates.

    In 2020, we expect the the catalysts to be: 1) The launch of residential project Charm Villas in An Khanh An Thuong, Hanoi city in March; and 2) A new operational hydropower plant Song Tranh 4 with designed capacity of 48MW since June 2020.

    Sectors

    Real estate: The company is expected to launch its first sale in March 2020. There are 376 low-rise unsold units, equivalent to a total commercial land are of about 6ha. We estimate that the ASP will be VND40-45mn psm (including both land and house price), equivalent to VND7.5bn per unit. The project will generate VND2,500-2,800bn, with the estimated GPM of above 50%, thanks to low land cost.

    Energy: Two under-construction hydropower projects, namely Song Tranh 4 and Dak Mi 2, are on track with their development plans. It is expected that the projects will go into operation in June 2020 and March 2021, respectively. The total designed capacity of these two projects is 198MW, equivalent to 114% of the current capacity of Ha Do's plants. This will be a significant expansion in the energy sector over the upcoming two years.

    The launching of the Charm Villas project will be a good catalyst for HDG, creating cash flow for the company in the next two years. Longer term, the energy segment is HDG’s best bet as the company is still acquiring as well as developing new plants, especially in the renewable sector. However, the current downside risk depends on the government’s policies. HDG is still our favorite stock with a P/E and P/B forward 2020 at 4.0x and 1.2x.