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DPR – Compensation from Tien Hung 2 drives strong Q2 profit growth

• According to estimates, the average selling price (ASP) reached VND 43 million per ton (+26% YoY) with a sales volume of approximately 2,800 tons (+4% YoY) in Q2. Combined with compensation from the Tien Hung 2 project, DPR's consolidated revenue is estimated at VND 191 billion (USD 8mn; +31% YoY) and net profit at VND 90 billion (USD 4mn; +212% YoY) in Q2 2024. For the full year 2024, DPR's consolidated revenue is expected to reach VND 1,117 billion (USD 44mn; +7% YoY) and net profit at VND 257 billion (USD 10mn; +24% YoY). Corresponding EPS is VND 2,962.
• After Decision 227/QĐ-TTg, several new details have emerged regarding the conversion of rubber land related to DPR’s area in Binh Phuoc province, including: (1) Although the land allocation target for industrial parks by 2025 for the Bac Dong Phu Ext. and Nam Dong Phu Ext is smaller than the planned area of these two projects, the area acquired and corresponding compensation will still be 100% of the planned area, immediately after the project receives investment policy approval; (2) the compensation price is being negotiated for an increase (potentially up to VND 1.3 billion per hectare); (3) the Suoi Giai Lake Tourism Urban Area and Tay Ho Ba Mu projects are feasible for DPR to receive compensation, in addition to the new urban area in Dong Xoai City.
• Based on the Sum-of-the-Parts (SOTP) method, the target price has been adjusted up to VND 53,300 per share, as we: 1) Adjust the progress of compensation receipt for the two new industrial park projects to an earlier schedule instead of in two phases (50% in the first year and the remaining 50% after 2025 when additional allocation targets are granted); 2) The maintenance cost of the rubber segment is lower than expected. Combined with a 12-month forward cash dividend of VND 1,500 per share, the total expected return is 26.1% based on the closing price on July 5, 2024.