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HDG – Anticipating Recovery in the Second Half of 2024

• In Q2/2024, HDG reported revenue of VND 560 billion (-1% YoY), with hydropower revenue remaining low at VND 205 billion (-1% YoY, -16% QoQ). Gross profit reached VND 282 billion (-24% YoY, -25% QoQ). However, by reducing selling, general & administrative expenses (SG&A) and financial costs (continuing from restructuring debts to reduce interest expenses), NPAT-MI reached VND 74 billion (+111% YoY, -69% QoQ).
• For 2024, we maintain our expectation that the energy segment will see a slight recovery, particularly from Q3/2024, with the probability of La Niña increasing significantly during August-September. Along with the company's reduction in SG&A expenses and interest costs, we estimate that the NPAT–MI for H2/2024 and the entire year will be VND 405 billion (+24% YoY, +37% HoH) and VND 700 billion (+5% YoY, equivalent to 90% of the company's business plan)
• In a recent meeting with HDG, the company shared updates on its current projects. Renewable energy projects are awaiting regulatory guidance on pricing negotiation mechanisms to officially launch. Regarding residential real estate projects, the company plans to proceed with sales of the Charm Villa project – Phase 03 by the end of 2024, but will assess market absorption levels to develop a suitable sales strategy.
• Using the Sum-of-the-Parts (SoTP) valuation method, we maintain a target price of VND 28,300 per share (total expected return of +6% compared to the closing price on August 12, 2024, including a cash dividend of VND 500 per share), corresponding to an ACCUMULATE recommendation for HDG shares. We expect HDG's real estate and energy projects to potentially restart in 2025, with regulatory guidance on the pricing negotiation mechanism serving as a basis for determining the value of the company's pending renewable energy projects.