- In 1H21, BCG’s net profit (NP) is 19.8 times higher than the same period last year, fulfilling 49.3% of our full year forecast.

- We raise our forecast for FY21/22/23F NP by 32.3%/33.2%/13.4% vs. previous projection, respectively, due to the adjustment of property handover revenue.

- Reiterate our Add call with higher target price (TP) of VND24,000/share.

Market Price: VND17,800

Target Price: VND24,000

Dividend Yield: 4.49%

Rating: Add

Sector: Conglomerate

1H21 net profit exceeded our expectation

In 2Q21, BCG’s net revenue raised by 56.0% yoy to VND814bn thanks to strong growth in goods production (+76.2% yoy) and construction segment (+37.5% yoy). Thereby, 2Q21 net profit surged by 1,285.9% yoy to VND218bn, resulting in 1H21 net profit growth of 1,866.7% yoy, fulfilling 49.3% of our full year forecast and 59.3% company guidance. This result is better-than-expected as 2H21 revenue will continue to increase strongly given the handover of VND3,497bn from Malibu Hoi An and King Crown Village projects.

Property remains as growth engine in FY21-22F

We estimate that BCG will hand over 67 villas and 601 condotels at Malibu Hoi An project, along with all 12 remaining villas at Thao Dien project in 2H21, contributing VND3,479bn in BCG’s FY21F revenue and VND756bn in FY21F net profit. In FY22F, we expect the company to record revenue of VND4,300bn and net profit of VND621bn from property segment.

Renewable energy (RE) is the core strategy in the long term

Currently, BCG is completing 500MW of wind power projects and 164MWp of solar power. At the same time, BCG is implementing rooftop solar power projects with a total capacity of 50MWp. We expect that the total capacity to come into operation in FY21F is 520MW and by FY23F it will be nearly 1.4GW. We forecast that BCG’s RE segment will record a slight profit of VND75bn in FY21F and will gradually increase to VND750bn by FY23F when interest expense pressure decreases, helping to improve cash flow and capital structure for property and RE projects in the future.

Reiterate our Add call with higher TP of VND24,000/share

We reiterate our Add rating and raise TP to VND24,000/share based on SOTP valuation on three main segments including property, RE and other businesses. Re-rating catalysts are (1) better-than-expected presales in hospitality property projects, (2) more favorable new Feed-in Tariff (FIT) prices than expected after national PDP8. Downside risks including (1) the slow growth of the hospitality real estate market due to the pandemic, 2) the failure to complete the schedule to enjoy incentives for renewable energy projects, and 3) the risk of dilution due to huge capital needs.

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