Company Report: ELC - EXPECTATIONS OF INTELLIGENT TRANSPORT TO SUPPORT GROWTH
“ELC technology communications corporation is a competitive enterprise in the field of Intelligent transport, with experience in implementing many high-value bidding packages on providing solutions, installing ITS system equipment in Smart Urban areas and on highways.
In the medium and long-term, the East North-South Expressway is a critical project of the Government, the roads will implement the Intelligent Transport System (ITS), thanks to the digital transformation trend to monitor and operate traffic in the city and on expressways. This includes the installation of surveillance cameras and non-stop automatic toll collection. The total investment for the North-South expressway project is VND 265,000 billion, of which we estimate the total investment for ITS can be up to VND 9,500 billion. While the progress of the expressway projects is a factor to be closely monitored, we expect that the large scale of investment will be an opportunity for ELC to increase revenue and profits for the Intelligent transport segment significantly. This segment will be the main growth driver for ELC from 2022.
For ELC, we expect the Telecommunications and National Security segments to bring a steady revenue of VND 400 – 500 billion in the coming years due to the recurring nature of the services provided. Meanwhile, the growth potential of the Telecommunications segment in the long term will come from the next investment cycle of carriers as 5G coverage plans in Vietnam become clearer.
Therefore, we expect total revenue/PAT for 2022F to reach VND 908 billion (+38%)/VND 58 billion (+20% YoY). For 2023F, revenue/ PAT is expected to be VND 970 billion (+6% YoY)/VND 63 billion (+10% YoY)/VND 1,201. We also forecast three years CAGR of PAT in 2022F-25F of 9%.
Using the FCFF cash flow discount method (50%) and the target P/E factor of 15x (50%), we arrive at a fair value per share of VND 16,100, equivalent to an expected return of -3% (including an expected cash dividend of VND 600) based on the closing price on Aug 18th, 2022. We recommend to ACCUMULATE the stock.”
Electronics Communications Technology Investment Development Corporation is a Vietnam-based company primarily engaged in the telecommunications and information technology sector. The Company manufactures and distributes telecommunications and information technology (IT) devices and equipment; develops and implements solutions for various industries, including value added telecommunications solutions, smart traffic management, IT infrastructure, systems integration, security and intelligence, as well as high tech agriculture. The Company also provides customized software solutions, automation consultation and office spaces for lease.
Viet Dragon Securities belongs to top 20 biggest securities companies in terms of chartered capital in Vietnam. With a qualified, dedicated and professional team, a widespread network, advanced technology, diversified products and services, and good relationship with local and foreign institutions, we provide a wide range of services and products to our clients both individuals and institutions, both local and foreign. We commit to provide our clients with promising investment opportunities and a comprehensive and professional financial investment services.
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